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Trash and Trade

Nov 5, 2010 • Economic Thinkers, International Trade and Finance • 188 Views    No Comments

A WSJ article tells us “Memo to All Staff: Dump Your Trash.” But should they?
According to the article, Texas state workers, Phoenix city workers, and Dartmouth college professors have all been told to take out the trash. Texas, as a result, is saving close to $825,000 on janitorial expenses. Dartmouth says its goal is to increase recycling but also it is saving money.

As economists, we can ask the cost of taking out the trash. With cost defined as sacrifice, we have to consider how trash time would have been used. Would college professors use their time more productively on an alternative endeavor? Correspondingly will society pay because unskilled labor has less work?

The Economic Lesson

For every decision, there is an alternative that we decided not to do. That alternative is called the opportunity cost of the decision. Sometimes, seemingly wise decisions are less optimal when we realize we could have used our time more wisely.

19th century economic thinker David Ricardo based his support of free trade on opportunity cost. He said that everyone will benefit when nations trade because then, by specializing, each nation can use its time and resources optimally. 

 

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