THE STAND-UP ECONOMIST ON WHY CHOICES ARE BAD. I posted here a couple years ago on how thinking in terms of opportunity cost can reduce happiness. (I assumed an invitation to a wonderful party. I said that an invitation to a party that is almost as nice on the same day “may diminish …pleasure because the opportunity cost of going to the first party is now the loss of the second party.”) Yoram Bauman, the Standup Economist, has a wonderful proof of the same point in his deconstruction of Greg Mankiw’s Ten Principles of Economics. (Here is Bauman’s translation of the Ten Principles on the Standup Economist’s blog (scroll up) and here is the same translation on Mankiw’s blog. I have given you two links because both blogs are terrific places to go. Bauman’s has a schedule of future standup gigs around the country.) Principle 2 on Mankiw’s list of ten Principles of Economics is: “The cost of something is what you give up to get it.” Bauman posits a gift to you of a Snicker’s bar worth one dollar to you. Then he adds the scenario of a gift of a choice between a Snicker’s bar worth one dollar to you and a package of M and M’s worth seventy cents to you. It seems that the gift is now worth only thirty cents. And then his stroke of genius. Imagine a choice between two Snicker’s bars.
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