Opportunity cost strikes again, and again...

Today's ADN offers another episode in the continuing saga over allocation of federal transportation funds. At least one representative, Paul Seaton, is wondering why we have $70 million targeted for the Knik Arm and/or Gravina Island Bridges while the Cooper Landing bypass project is being effectively put on indefinite hold. The debate illustrates beautifully the fundamental economic concept of opportunity cost because in this case 1) the money is already in our state paws no matter what projects we use it for; 2) Due to criticism over the earmark process the money can be reallocated by the state to any valid transportation project; and 3) the money cannot be cashed in. Therefore, we can clearly see that the true cost of the Knik Arm bridge is the Cooper Landing bypass -- or perhaps some other project -- that is given up.

The economist Frederic Bastiat wrote an illuminating little story about all this called the Parable of the Broken Window. It is surprisingly relevant to the way some Alaskans view federal and state spending.