There is no such thing as a free lunch.
My high school economics teacher told us that even if you get a “free” lunch, you are spending time and consuming finite resources. What else could you be doing with that time? It’s possible that more value could be gained by eating in different company. Another option would be to work straight through lunch while knocking back a (gasp!) peanut butter & jelly sandwich.
The cost of going to work on any given day is not the cost of gas + your hourly pay. It is both of those plus the cost of not spending your time and energy starting a company, furthering your education, playing with your children, eradicating world hunger… and the list goes on.
Every decision involves an opportunity cost
In government, opportunity costs are exponential and controversial. In a true cost benefit analysis, a dollar value is assigned to everything, including human lives. How much money is one Quality Adjusted Life Year worth? According to this study, $129,000.
Recently, we’ve all been talking about the trade off between flooding some parts of the country to avoid flooding more populated areas and major cities. The rivers are swollen from heavy winter snow and spring rains. If we do nothing, everyone runs the risk of major flooding. If we flood less populated areas, the pressure is reduced and potentially thousands of lives are saved.
This is the situation currently in South Louisiana
The Morganza Floodway, if opened, will displace more than 22,000 residents, seriously harming homes, crops, and a region’s way of life. Without opening the floodway, more than a million residents may be displaced throughout Greater New Orleans and Baton Rouge.
Even if levees hold back the floods, the Coast Guard noted they will likely close the river to vessels if it rises above 18 feet. According to Gary Lagrange of the Port of New Orleans, the national economic impact of closing the port is $295 million per day, and grows exponentially after the fourth day.
The bottom line: damage will be done
Engineers work out exact risk percentages for each possible scenario. Financial economists look at the same scenarios and assign the expected cost of damages and the overall economic impact.
In a perfectly rational and objective world, the decision would be easy. The problem arises when we have incomplete data, and no way to measure certain losses. What is the monetary value of culture? What kind of emotional damage will be done? With a region still physically and mentally scarred from several major disasters, those costs are hard to pinpoint.
So instead of being quick to judge, let’s put ourselves in the shoes of the decision-maker. As a casual observer it can seem like the “right” decision should be obvious. Presented with a large amount of imperfect information, lives at stake, and the pressure of the masses, I imagine it might be a little harder to actually pull the trigger.