Freedom Faces a Price

In Econ 3010, Dr. Tufte has explained optimal input combinations and what is needed for minimizing costs and maximizing output, (profit). Companies can track their profit maximization for each employee by employing each individual until the marginal revenue of a particular employee equals the resource cost of hiring the individual. In other words, if a city has too many police officers to do police work, marginal revenue, (productivity) will be lower than what it could be by having the right amount of police officers to do the same job; marginal revenue equals resource cost.

Imagine being over in Iraq today. Just last week in Iraq, Insurgents attacked another oil pipeline by setting fire to it. Acts like this is preventing Iraq to export oil and generate income. More importantly suicide bombers are still threatening our US troops, and other Iraq government officials, etc… I don’t know how many troops are over at Iraq today, but I do know that more are headed there soon. Maybe instead of more labor, (troops) we should send more capitol, (equipment). Perhaps marginal revenue will then equal resource cost.

1 comment:

Dr. Tufte said...

This is a very thoughtful application of what we do in class.

But ... let me turn this around a bit. Who do you think knows more about the situation in Iraq: the commanders there or Jim. No offense intended, but it probably isn't Jim.

The point of this is that economists prefer not to assume that they understand problems better than others, but rather to assume that the actions of others are explainable with economic reasoning.

Applying that in this situation suggests that if they are asking for more troops, it is because the marginal benefit of them is higher than that of equipment/hardware. This makes sense - they are not fighting people with (say) tanks, but they can use soldiers who speak Arabic.