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The Rhetoric of Opportunity Cost

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  • William J. Polley

Abstract

A well-known survey of economists revealed that many of them could not correctly answer a basic question on the concept of opportunity cost. In this paper, I connect the concept of opportunity cost to the familiar apparatus of marginal analysis—the equality of prices and marginal rates of substitution at the margin. When opportunity cost is understood this way, it forces one to be clear about units and about the difference between discrete and continuous variables. A more general understanding of opportunity cost can link basic principles-level examples with more advanced technical examples and improve the stories that make up the rhetoric of basic economics instruction.

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  • William J. Polley, 2015. "The Rhetoric of Opportunity Cost," The American Economist, Sage Publications, vol. 60(1), pages 9-19, May.
    • Handle: RePEc:sae:amerec:v:60:y:2015:i:1:p:9-19
    DOI: 10.1177/056943451506000102
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    References listed on IDEAS

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    1. Ferraro Paul J & Taylor Laura O, 2005. "Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-12, September.
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    6. Daniel F. Stone, 2015. "Clarifying (Opportunity) Costs," The American Economist, Sage Publications, vol. 60(1), pages 20-25, May.
    7. Hansen, W Lee, 1991. "The Education and Training of Economics Doctorates: Major Findings of the Executive Secretary of the American Economic Association's Commission on Graduate Education in Economics," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1054-1087, September.
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    9. Rod O'Donnell, 2010. "Opportunities Lost and Regained in the Land of Opportunity Cost," Working Paper Series 163, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Joel Potter & Shane Sanders, 2012. "Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance or an Arbitrary Concept?," Southern Economic Journal, John Wiley & Sons, vol. 79(2), pages 248-256, October.
    11. William Polley, 2014. "Do students recognize an opportunity cost when they see one? Evidence from introductory economics," Economics Bulletin, AccessEcon, vol. 34(3), pages 1550-1556.
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    Cited by:

    1. Daniel F. Stone, 2015. "Clarifying (Opportunity) Costs," The American Economist, Sage Publications, vol. 60(1), pages 20-25, May.
    2. Frank G. Sandmann & Julie V. Robotham & Sarah R. Deeny & W. John Edmunds & Mark Jit, 2018. "Estimating the opportunity costs of bed‐days," Health Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 592-605, March.
    3. Zhiping Lin & Jing Peng & Jia Wang, 2023. "The cash flows in push and pull supply chains under supply disruptions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1191-1202, March.

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