Reply To: "All costs are opportunity costs"


Hm, so I get what you’re saying, but it still seems like the actual cost the entrepreneur pays is higher than the opportunity cost. Even though, once demand goes up in one line of production, market demand for factors rises and thus prices for the factors of production increase all around, this new price is higher than the old price. The actual opportunity cost is the value of what would have been produced otherwise – and isn’t that equivalent to the previous cost?

If I’m right about that ^, I guess one possible answer is that the entrepreneur in the line of production where demand has increased, only has to increase his demand by an amount where the price increases to the point where the least valuable production line is making a net income of 0, which would mean the new price is in fact the correct opportunity cost?

What do you think about this? Appreciate your help as always!


Oh, one last thing: so the money costs entrepreneurs pay aren’t really opportunity costs, but instead, our best way of estimating opportunity costs, correct? Would this be something related to what Mises means when he points to the imperfection of money, when he states “The inadequacy of the monetary calculation of value does not have its mainspring in the fact that value is then calculated in terms of a universal medium of exchange, namely money, but rather in the fact that in this system it is exchange value and not subjective use value on which the calculation is based.” (Economic Calculation in the Socialist Commonwealth, p. 10)