Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, March 31, 2005

An(other) Exercise in Opportunity Costs

We teach our students that people respond to incentives. If you want to attract more resources to a given use, you must offer more to meet or exceed the opportunity costs. It follows that if you offer less, you will attract fewer scarce resources.

I usually illustrate this concept in the classroom by asking how many students would be willing to work for me as a research assistant at various hypothetical wage rates. Invariably the responses trace out a 3rd-degree polynomial that is positively sloped throughout.

This is nothing more than common sense: supply curves are upward-sloping, except in very extreme cases which are more theoretical than real-world.

So why don't politicians and bureaucrats understand this? From Number 2 Pencil:

Hmm, so slashing the pay for substitute teachers results in...a huge dearth of substitute teachers. Who would have thought?

Denver Public Schools is asking parents to fill in as substitute teachers. The school district said it's so short of subs that it's writing to parents in hopes that they'll step in. The shortage comes after daily pay for substitutes was cut from $120 to $81.

School officials say substitutes do not need teaching experience, just a college degree and a special certificate, which can be obtained.

There is no way I would go into a classroom with kids I didn't know (but who knew I was a substitute teacher -- I remember how we treated substitutes when I was a kid) for pay that amounts to not much more than I could earn as a socionomologist flipping burgers or selling coffee at a donut shop. No wonder they are having difficulties finding substitute teachers.

Thanks to BrianF for the pointers.
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