No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Four: Supply 88 JESUS SAYS: COUNT THE COST! Luke 14:28 “For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it?” In the broader passage (Luke 14:25-35) , Jesus is warning potential disciples to subjectively (internally) assess the costs of following him, demanding that in discipleship one must ultimately be prepared to sacrifice all—if that is what the Lord calls for. There will certainly be “costs” later in terms of the consequences of following Him, but the moment of decision is when those costs need to be assessed. The “opportunity cost” of discipleship (the subjective valuation of the forgone next best alternatives) thus appears to determine the supply of disciples! With God’s sovereign grace, we can be sure he will work on our hearts to make sure that everyone He chooses will assess the opportunity cost of discipleship as lower than the rewards of following Him. SUPPLY AND COSTS We began our discussion of supply by showing how every potential demander could be a supplier, and how the decision to sell or hold an item depends on the opportunity cost and associated marginal utility of any decision. This introduction will help each of you avoid some of the fallacies that bedevil economics and public discourse to this day. Our understanding of opportunity costs informs us that costs correspond to choices and associated actions, not to goods. This cost is always subjectively (mentally) assessed and borne by the decision maker at the point of decision. These opportunity costs are always looking to the future—thus they are never objective. There may (and undoubtedly will be) present monetary costs that decision makers include in their expectations as to the cost of future actions. But the true cost is still the “next best alternative” for a supplier as well as a demander. It is by definition a forward-looking assessment of different paths an individual might choose. This doesn’t mean there aren’t consequences that we think of as “costs” later, but they are not the opportunity costs that guide particular decisions today (although they may affect how we make subsequent decisions). Just as the concept of opportunity cost was critical for demand, so it is for supply. When a demander sells an AirPods out of their stock, it is because the marginal utility provided by them is less than what the proceeds of the sale could purchase: the opportunity cost of holding onto them is greater than selling it. Likewise, for entrepreneurs to produce Costs correspond to choices and associated actions, not to goods [and are] subjectively assessed and borne by the decision maker at the point of decision.