Great cost benefit analysis in yesterday’s Wall Street Journal.
How do we decide whether the cost of intensified airport security is worth the benefit?
1. The TSA says that one life saved is worth $3 million spent. That means, though, that we have to prevent 1,150 fatalities per year to make the added expense valid.
2. Instead, let’s consider expense to be time. The estimate is an extra 15 minutes per person. For the vaaction traveler, we could assume the cost is worth it. However, for millions of business travelers, do we want 15 minutes lost? 4 million hours? Will that impact GDP and jobs and recovery?
opportunity cost: the most desirable alternative that is sacrificed when a decision is made. Choosing is refusing.