Even some economics professors and graduate students have no grasp of opportunity costs

David Henderson reports:

Suppose that you want to build a house, and you solicit two builders for estimates. Builder A’s eight employees can build the house in three months for $300,000. Builder B’s four employees can build the same house in the same time for just $150,000. Which builder would you choose?

This is not a trick question. You would choose Builder B, right? But Robert Pollin, James Heintz, and Heidi Garrett-Peltier would select Builder A if they employ the
same reasoning they exhibit in their recent monograph The Economic Benefits of Investing in Clean Energy. Pollin is a
respected professor of economics at the University of Massachusetts-Amherst, where Garrett-Peltier is a doctoral student, and the three are staffers at the university’s
Political Economy Research Institute.

Given their expertise in economics, it is surprising that their monograph confuses benefits with costs, counting it as a benefit that a shift to “clean energy”would create lots of high-paying jobs. In this, Pollin, Heintz, and Garrett-Peltier are not alone; many non-economists (especially ones with “Rep.,” “Senator,” or “President” in front of their names) make the same mistake. They regard a make-work project as a good project because, in their minds, it “creates jobs” for people who otherwise would not have jobs. Such thinking ignores a basic economic concept: opportunity costs. Every worker employed could have been employed elsewhere, doing something of value. One of the huge advantages of a free market in labor is that, whether the employer is a private firm or a government entity, it must recognize this opportunity cost in the price it pays for labor. That causes employers, especially for-profit employers, to be careful about how much labor to hire. That is a good thing.