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• Foreword
• Preface
• Acknowlegments
• Cost and Choice
• 1.: Cost In Economic Theory
• Classical Economics
• Marginal-utility Economics
• The Marshallian Synthesis
• Frank Knight and American Neoclassical Paradigms
• 2.: The Origins and Development of a London Tradition
• Wicksteed and the Calculus of Choice
• H. J. Davenport
• Knight On Cost As Valuation
• Robbins, 1934
• Mises, Robbins, and Hayek On Calculation In a Socialist Economy
• Hayek, Mises, and Subjectivist Economics
• The Practical Relevance of Opportunity Cost: Coase, 1938
• G. F. Thirlby and “the Ruler”
• Mises’ Human Action
• The Death of a Tradition?
• Appendix to Chapter 2: Shackle On Decision
• 3.: Cost and Choice
• The Predictive Science of Economics
• Cost In the Predictive Theory
• Cost In a Theory of Choice
• Choice-influencing and Choice-influenced Cost
• Opportunity Cost and Real Cost
• The Subjectivity of Sunk Costs
• Cost and Equilibrium
• 4.: The Cost of Public Goods
• The Theory of Tax Incidence
• Costs and Fiscal Decision-making: the Democratic Model
• Costs and Decision-making: the Authoritarian Model
• Costs and Decision-making: Mixed Models
• The Choice Among Projects
• The Costs of Debt-financed Public Goods
• Ricardo’s Equivalence Theorem
• Tax Capitalization
• 5.: Private and Social Cost
• Summary Analysis
• A Closer Look
• Internal Costs, Equilibrium, and Quasi-rents
• An Illustrative Example
• Pigovian Economics and Christian Ethics
• Narrow Self-interest and Alternative-opportunity Quasi-rents
• Conclusion
• 6.: Cost Without Markets
• Prices, Costs, and Market Equilibrium
• Resource-service Prices As Final-product Costs
• Market Equilibrium, Costs, and Quasi-rents
• The Cost of Military Manpower: an Example
• The Cost of Crime: Another Example
• Artificial Choice-making
• Socialist Calculation and Socialist Choice
• Costs In Bureaucratic Choice

The Death of a Tradition?

At the London School of Economics, the ideas on cost developed by Robbins, Hayek, Coase, Thirlby, and others formed a part of a developing oral tradition which included many participants. Modern adherents to this tradition seem scarce, however, and only Jack Wiseman fully qualifies. In two basic papers published in the 1950’s, Wiseman tried as others had earlier tried to apply LSE opportunity-cost logic to the long-discussed problems of marginal-cost pricing, applying this logic both as general criteria for organizing a collectivist economy and as the specific criterion for public-utility enterprise.32

Wiseman shifted from LSE to York in 1963 and Thirlby retired from active academic life in 1962. There remain, no doubt, residues of the opportunity-cost tradition at LSE, but this does not inform the mainstream in either the teaching of economic theory or in the scholarly contributions of staff members. In the United States, the influence of Mises and his latter-day Austrian followers seems peripheral to the modern mainstream of economic theory. The concept of opportunity cost which emerged from both the subjectivist-Austrian and the common-sense approaches—the concept that blossomed for two decades at LSE—seems to have lost in its struggle for a place among the paradigms of modern economics. Along with other conundrums in intellectual history, this is not easy to explain. The arguments have not been refuted, and within their limits they surely remain valid. Hopefully, this book will generate a partial resurrection by delineating the methodological foundations of the two parallel theories of economic process.33

[32. ]Jack Wiseman, “Uncertainty, Costs and Collectivist Economic Planning,” Economica, XX (May 1953), 118-28; and his “The Theory of Public Utility Price—An Empty Box,” Oxford Economic Papers, IX (February 1957), 56-74.

[33. ]The manuscript for this book was completed before I had access to the article on “Cost” by A. A. Alchian in International Encyclopedia of the Social Sciences, III (New York: Macmillan, 1969), pp. 404-15.