Tuesday, February 19, 2008

Costs vs. Benefits

One of the things that fascinates me about the field of economics is trying to quantify what you don't see. Economics professor Walter Williams gives a wonderful example of this challenge by questioning how much spending is too much when it comes to stopping any possible terrorist attacks in... Wyoming?
Let's apply cost versus benefits to anti-terrorism expenditures. Wyoming has two major cities: Cheyenne, its capital, with 53,000 population; and Casper, with 50,000. Federal and state homeland security anti-terrorism expenditures in 2007 totaled $6,673,910. What is the risk of Wyoming being a terrorist target and, if so, what is the expected cost in terms of human lives and property...?

The effect of spending too much is less obvious because the victims are invisible. For example, purchase prices for new dump trucks for snow and ice removal range between $140,000 and $160,000. How many Wyoming lives could have been saved had some of the anti-terrorism expenditures been spent on additional dump trucks to clear streets and roads of snow and ice...?
The rest of the article can be read here.

It can be very difficult for my puny brain to think in that many dimensions. I'm glad Dr. Williams is around to help me out!

Good Day to You, Sir

No comments: