===== PAGE 1 =====

Reply to Comment by
William Barnett II

Leland B. Yeager

y lampshade example adequately described the supposed situation.
M Whether the choice “actually” (to quote Professor Barnett) lay be-

tween alternative lampshades or alternative restaurants is a purely
verbal question to which either answer would be as empty and uninteresting
as the question itself. In pressing that question, Professor Barnett shows he
did not grasp the purpose of my example, which was to heap deserved ridicule
on certain sorts of brooding over the concept of cost.

Ever since being exposed (probably back in college) to the notion of cost
as the forgone next-best alternative, I had been vaguely uneasy about it. Only
when working on my article in Review of Austrian Economics, volume 1, and
on my reply to Walter Block in volume 2 did I begin to articulate for myself
just what about that notion made me uneasy.

To focus on the decisionmaker agonizing over his choices trivializes the
analysis of cost. Of course no mere observer can fully enter into the decision-
maker’s mind and soul and share his feelings about the merits of the course
of action that he finally identifies as next best and accordingly rejects. All this
is familiar material and need not be erected into a fundamental insight of
€Conomics.

To ramble on about the ineffabilities of choice obscures what is not so
obvious and what can be understood only through technical economic analysis.
This is the social significance of money cost and the way money cost conveys
abbreviated information to the decisionmaker about circumstances in parts of
the economic system outside his immediate ken, including even information
about subjective circumstances, such as the abilities and preferences of myriad
persons whom the individual decisionmaker could not possibly know. The pro-
spective money costs (as well as prospective money revenues) of alternative lines
and scales of production—and, more generally, the money numbers associated
with alternative courses of action—do not exhaust what a decisionmaker needs
to know, but they are an important part. Economic analysis has the task of
explaining what those numbers signify in the economywide context, including
their role in conveying information and incentives. (Students of F.A. Hayek’s


===== PAGE 2 =====

140 « The Review of Austrian Economics, Volume 3

writings will know what I am alluding to. What I am saying here is compressed,
by the way, and should be read along with the qualifications mentioned in my
original article.)

The way Professor Barnett latches onto one short paragraph in my article
again illustrates a curious trait found in some strands of otherwise admirable
writings. This is a tendency to be diverted from substantive economics into
pointless profundities of methodology and into brooding over merely verbal
issues.