Apropos the economics of “higher education”:

When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else. If your next-best alternative to seeing the movie is reading the book, then the opportunity cost of seeing the movie is the money spent plus the pleasure you forgo by not reading the book.

The word opportunity in opportunity cost is actually redundant. The cost of using something is already the value of the highest-valued alternative use. But as contract lawyers and airplane pilots know, redundancy can be a virtue. In this case, its virtue is to remind us that the cost of using a resource arises from the value of what it could be used for instead.

This simple concept has powerful implications. It implies, for example, that even when governments subsidize college education, most students still pay more than half of the cost. Take a student who pays $2,000 in tuition at a state college. Assume that the government subsidy to the college amounts to $5,000 per student. It looks as if the cost is $7,000 and the student pays less than half. But looks are deceiving. The true cost is $7,000 plus the income the student forgoes by attending school rather than working. If the student could have earned $15,000 per year, then the true cost of the education is $7,000 plus $15,000. Of this $22,000 total, the student pays $17,000 ($15,000 plus $2,000).

I think this is one of the main sources of miscommunication with economic illiterates. We think of “cost” and “opportunity forgone” as synonymous. They implicitly think of “cost” and “price” as the proper synonyms.

Cost is a counterfactual concept. It is Bastiat’s unseen. Price is seen.

This week’s A.W.A.D theme — eponyms — is potentially interesting to me for the historical names it might reveal behind words I might know and use, but as it turns out, the eponyms offered aren’t terribly interesting, and I feel unlikely to ever encounter them, let alone use them.

Today’s word is one of the duds:

jarvey (JAR-vee) noun

1. A hackney-coach driver.

2. A hackney coach.

[After Jarvey, a variant of the name Jarvis. Who Jarvey/Jarvis was
is unknown.]

The word hackney is a toponym, after Hackney, a borough of London,
UK, and that’s where the term hack (as in a hack writer) comes from.

But “hackney” … now there’s an interesting word.

And here are some usages cited in the 1913 edition of Webster’s:

1. A horse for riding or driving; a nag; a pony. –Chaucer.
2. A horse or pony kept for hire.
3. A carriage kept for hire; a hack; a hackney coach.
4. A hired drudge; a hireling; a prostitute.