Common Sense Economics: What Everyone Needs to Know about Wealth and Prosperity
Nearly all choices are made at the margin. That means that they almost always involve additions to (or subtractions from) current conditions, rather than “all-or-nothing” decisions. The word “additional” is a substitute for “marginal.” …
For example, when there is a lot of pollution—so much, say, that we are choking on the air we breathe—the marginal benefit of reducing pollution is quite likely to exceed the marginal cost of the reduction. But as the amount of pollution goes down, so does the marginal benefit—the value of the additional improvement in the air. There is still a benefit to an even cleaner atmosphere (for example, we would be able to see distant mountains) but this benefit is not nearly as valuable as protecting our lungs. At some point before all pollution disappeared, the marginal benefit of eliminating more pollution would decline to almost zero.
As pollution is being reduced, the marginal benefit is going down while the marginal cost is going up and becomes very high before all pollution is eliminated. The marginal cost is the value of other things that have to be sacrificed to reduce pollution a little bit more. Once the marginal cost of a cleaner atmosphere exceeds the marginal benefit, additional pollution reduction would be wasteful.
- When you go to an “all you can eat” restaurant, unless you’re Homer Simpson, does the last bite taste as good as the first? What changes? Do you sometimes regret overeating?
- Thinking about pollution, should we try to get rid of all pollution, at any cost? If not, why?
- How does the concept of marginalism help in understanding why we make the decisions we make? What would cause us not to make decisions using marginal thinking?
This reading is an excerpt from Certell’s Common Sense Economics eBook. Certell offers curriculum materials and eBooks free of charge for students and teachers. Click Here to download the Common Sense Economics Materials.
Brainless Tales. 2015 Apr. 22, Maybe Just One More [digital image]. Retrieved from <brainlesstales.com>.