Economic Cost or Opportunity Cost is the value of the best alternative that was not chosen in order to pursue the current endeavour—i.e, what could have been accomplished with the resources expended in the undertaking. It represents opportunities forgone.
If a city decides to build a hospital on vacant land it owns, the opportunity cost is the value of the benefits forgone of the next best thing that might have been done with the land and construction funds instead. In building the hospital, the city has forgone the opportunity to build a sports center on that land, or a parking lot, or the ability to sell the land to reduce the city's debt, since those uses tend to be mutually exclusive. Also included in the opportunity cost would be what investments or purchases the private sector would have voluntarily made if it had not been taxed to build the hospital. The total opportunity costs of such an action can never be known with certainty, and are sometimes called "hidden costs" or "hidden losses" as what has been prevented from being produced cannot be seen or known. Even the possibility of inaction is a lost opportunity. In this example, to preserve the scenery as-is for neighboring areas, perhaps including areas that it itself owns.
If a city decides to build a hospital on vacant land it owns, the opportunity cost is the value of the benefits forgone of the next best thing that might have been done with the land and construction funds instead. In building the hospital, the city has forgone the opportunity to build a sports center on that land, or a parking lot, or the ability to sell the land to reduce the city's debt, since those uses tend to be mutually exclusive. Also included in the opportunity cost would be what investments or purchases the private sector would have voluntarily made if it had not been taxed to build the hospital. The total opportunity costs of such an action can never be known with certainty, and are sometimes called "hidden costs" or "hidden losses" as what has been prevented from being produced cannot be seen or known. Even the possibility of inaction is a lost opportunity. In this example, to preserve the scenery as-is for neighboring areas, perhaps including areas that it itself owns.
Relevance to War
Every investment in war - irrespective of whether they are for defense or offense - have next best alternatives.
As many would argue, spending on poverty alleviation, for example, is the next best alternative to spending on defense by Governments.
There might still be equally many others who counter argue that there is no best alternative to spending on defense by Governments or perhaps, according to them, poverty alleviation is no more a feasible alternative to war.
As a coin has both sides, this argument too has people on both sides.
As many would argue, spending on poverty alleviation, for example, is the next best alternative to spending on defense by Governments.
There might still be equally many others who counter argue that there is no best alternative to spending on defense by Governments or perhaps, according to them, poverty alleviation is no more a feasible alternative to war.
As a coin has both sides, this argument too has people on both sides.
This part of the website engages an active debate on the topic:
"War has Economic Costs or Opportunity Costs"
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