Tuesday, January 6, 2009

Opportunity Costs

Microsoft understands economics...
Phishing is a classic example of tragedy of the commons, where there is open access to a resource that has limited ability to regenerate. Since each phisher independently seeks to maximize his return, the resource is over-grazed and yields far less than it is capable of. The situation stabilizes only when the average phisher is making only as much as he gives up in opportunity cost.

That could have come out of an economics textbook. Report is here.

Yet my grandmother does not. This much was demonstrated over supper tonight when I tried to expound on how foolish it is to consume to the point of sickness in order not to waste food. The food has already been prepared, it's a sunk cost, the opportunity cost of not eating is zero, not positive, as she advocated. Unless, of course, one only remembers to order less next if one gets sick this time.

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