DISCLAIMER: Below are my paraphrases (unless actual quotation marks are present) and might contain errors.
Reisman: Contemporary economics propounds mistaken ideas re: imputed income and opportunity cost.
Temple: Mises Institute also puts out mistaken ideas about opportunity cost, ignoring Reisman.
Temple: “They call an opportunity cost “money spent”. From a literal-factual perspective, it isn’t.”
Justin: Right. They initially talk about opportunity cost as “all of the other possibilities we’re giving up in order to obtain that item.” But then they say “The money spent on the new window is not simply the dollar price of his purchase, but of all the goods and services he could have purchased with that money.” But the money spent is not identical to those possibilities. Money, prior to being spent, is a means of acquiring a range of possibilities, and, after being spent, is the means by which you acquired one particular thing.
Justin: It’s weird to equate money spent to opportunity cost, especially since opportunity cost is supposedly about the things you could have gotten but decided not to get, but money actually spent is always spent on the thing you actually got.
Temple: “They also seem to suggest summing every foregone alternative.”
Justin: Good point. I would not have noticed this had ET not pointed this out. But when they talk about considering “all of the other possibilities we’re giving up in order to obtain that item”, that sure does seem to suggest summing.
Justin: I suppose they could also mean considering possibilities separately? Like consider that if you spend $10,000 on a vacation, you can’t also use that $10,000 to buy a car or, separately, a motorcycle, or, separately, put a down payment on a home. Considering each potential possibility or basket of possibilities seems impossible, though (because there are infinitely many). But maybe they mean just consider some top contenders and then figure out the best one, or something.
Temple: They probably meant the best alternative, but they said to consider the cost of all alternatives.
Temple: “And they put Hazlitt’s name all over their errors.”
Justin: Yeah
Per Bylund (Senior Fellow at Mises Institute): Economic cost is the reason you pay the price for a good.
Temple: “This doesn’t make sense. You reason you’re willing to pay a price for a good because of the benefits the good provides, not due to the cost.”
Justin: I agree. Bylund just seems to have a weird conception of cost that contradicts ordinary definitions and common sense.
Bylund: The economic cost of something is not the $100 you give up to purchase it but the value of some other good you give up when purchasing the good you buy.
Temple: No. The cost is the thing you give up in exchange for the goods (the $100).
Temple: Mises Institute…
Hasn’t given counter-args to Reisman re: opportunity cost
