Contemporary Debates on Opportunity Cost Theory and Pedagogy
Forthcoming, The Economic Theory of Costs: Foundations and New Directions, edited by Matthew McCaffrey (Routledge, pp. 11-26); ISBN: 9781138670938
24 Pages Posted: 7 Nov 2017
Date Written: 2017
Ferraro and Taylor’s (2005) finding that only 21.6% of economists could correctly answer a question on opportunity cost resulted in renewed debate over a fundamental concept. We review the lines of argument in a symposium on opportunity cost pedagogy and conclude that the confusion is due to the fact that opportunity costs are inappropriately presented alongside production tradeoffs in textbooks. We show that the traditional causal-realist ordinal and subjective conception of opportunity cost provides the desired clarity and consistency with real choice. Objections to the causal-realist opportunity cost concept in Reisman (1998) and Braun (2014) are also reviewed.
Keywords: opportunity cost, Austrian economics
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