Economics for the Curious

Why Isn’t Good Good Enough?

Scarcity, choice, and the tools for choosing well

9 min read

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Start Here: You Can’t Have It All

Every day you wake up with 24 hours, a limited budget, and more wants than either can cover. That gap between what we want and what we have is scarcity. In 1932 the British economist Lionel Robbins gave what is still the best-known definition of the field: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Notice the last three words. Because the same hour or dollar could go to many uses, choosing one use means giving up the others.

Why Good Isn’t Good Enough

Philosopher James Otteson calls one common mistake the “Good Is Good Enough” fallacy: the belief that if something would do some good, we should do it. In his book Seven Deadly Economic Sins, he points out that this answers only half the question. The other half is what else the same time, money, or effort could have done. A choice that does good isn’t good enough. It has to be better than the alternatives.

The idea is old. The French economist Frédéric Bastiat wrote in the 1800s that “there is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

WATCH Frederic Bastiat on the Seen and Unseen (Marginal Revolution University)

Four Tools for Choosing Well

1 Opportunity cost: What am I giving up?

Opportunity cost is the value of the next best alternative, the thing you would have chosen instead. It includes more than money. Part of the cost of college is the paycheck and free time you give up to attend. “Free” things aren’t free either: a free concert still costs the evening you could have spent another way. Governments face the same logic. A dollar spent on one program can’t be spent on another, and a dollar cut from taxes is a dollar not available for programs. Either choice has a cost worth counting.

2 Trade-offs: What does each option gain and lose?

Few choices are all good or all bad. Most involve trade-offs: more of one thing means less of another. A safer car costs more. A shorter commute may mean higher rent. Stricter rules can protect consumers but raise prices and slow new businesses; looser rules can lower prices and speed new ideas but leave more risk. Thinking in trade-offs replaces “Is this good?” with “Good compared with what, and for whom?”

3 Sunk costs: What can I still change?

A sunk cost is money, time, or effort already spent that can’t be recovered. Since nothing you decide now can bring it back, it shouldn’t drive the next decision. The OpenStax textbook gives the example of a student who pays for a movie and realizes after 30 minutes that it’s terrible. The ticket money is gone either way. The real choice is whether the next 90 minutes are better spent watching or doing something else.

Real people find this hard. In a 1985 study, psychologists Hal Arkes and Catherine Blumer had a college theater sell season tickets at randomly assigned prices: full price or one of two discounts. Over the next six months, people who had paid full price went to more plays, even though everyone held the same tickets to the same shows. The authors traced the difference to a desire not to appear wasteful. Businesses and governments fall into the same trap. The study opens with a 1981 debate over a costly federal waterway, where supporters argued that stopping would “represent a serious waste of funds already invested.”

4 Thinking on the margin: Is one more worth it?

Most decisions aren’t all or nothing. They are about a little more or a little less: one more hour of studying, one more shift at work, one more worker hired. Economists call this marginal analysis. Usually the benefit of each extra unit falls (the third slice of pizza is less satisfying than the first), while the cost of each extra unit rises. Keep going while the extra benefit is bigger than the extra cost, and stop when it isn’t.

WATCH Opportunity Cost and Tradeoffs (Marginal Revolution University)

Five Questions to Ask

Before you decide whether something is worth doing, run through these questions.

Five Questions to Ask: Tool
ToolQuestion to askCommon mistake
Opportunity costWhat is my next best alternative?Counting only the money paid
Trade-offsWhat does each option gain and lose?Looking for a choice with no downside
Sunk costWhat can I still change?Throwing good money after bad
Thinking on the marginIs one more worth it?All-or-nothing thinking
Seen and unseenWho else is affected, and later?Stopping at the visible effect

Fair Challenges

  • People don’t always choose this way (Daniel Kahneman and Richard Thaler). Kahneman shared the 2002 Nobel Prize for showing that decisions under uncertainty can depart from standard economic theory in predictable ways. Thaler won in 2017 for showing how limited rationality, concern for fairness, and lack of self-control shape choices. Thaler argues that public and private institutions should “nudge” people toward better choices while keeping their freedom to choose. Others ask who decides which direction is better, since the people designing nudges have biases too.
  • Some things shouldn’t be priced (Michael Sandel). The philosopher raises two objections to putting a price on everything. The first is coercion: a choice made out of desperate need isn’t truly free. The second is corruption: buying and selling some goods, such as body parts or civic duties, degrades them, even when both sides agree.
  • But choices still have to be made. A safety rule that saves lives costs money that could save lives or do other good elsewhere. The U.S. Department of Transportation uses a value of a statistical life of $14.2 million for 2025 analyses. The EPA stresses that it “does not place a dollar value on individual lives.” The figure reflects how much people are willing to pay for small reductions in risk. Defenders say that refusing to count costs doesn’t remove trade-offs; it only hides them.
  • Who pays and who benefits? A cost-benefit test asks whether total gains exceed total costs. A policy can pass even when some people lose, and gains to one group don’t make up for losses to another unless the losers are actually compensated.
  • Is sticking with it always a mistake? Finishing what you start can build self-discipline, and keeping promises earns trust. Those are future benefits, so they belong in the decision. The lesson of sunk costs isn’t “never persist.” It is “persist for reasons that lie ahead, not behind.”

Notice what can and can’t be settled by evidence. Whether people fall for sunk costs, and how much they will pay to reduce a risk, are empirical questions that studies can test. Whether some things should never be priced, and how to weigh one person’s loss against another’s gain, are questions of values.

What Economics Adds

The Normative Question

Economics can show what each option gives up. It can’t tell you which goods matter most. When two good things compete, such as a new park or lower taxes, or safer cars or cheaper ones, who should decide: individuals spending their own money, or voters and officials spending public money? Should government ever put a dollar figure on reducing the risk of death? And in your own life, is there anything you would refuse to weigh against its cost?

Key Terms in Plain Words

Scarcity
Having fewer resources, including time, than it would take to meet all our wants.
Opportunity cost
The value of the next best alternative you give up when you choose.
Trade-off
Getting more of one thing by accepting less of another.
Sunk cost
Money, time, or effort already spent that can’t be recovered.
Marginal analysis
Weighing the extra benefit against the extra cost of a little more or a little less.
Diminishing marginal utility
Each additional unit of something adds less satisfaction than the one before.
Seen and unseen
Bastiat’s contrast between visible effects and the hidden alternatives given up.
Good Is Good Enough fallacy
Otteson’s name for doing something because it does good, without asking what else could do more.
Value of a statistical life
What people together will pay for small risk reductions that, on average, prevent one death.
Behavioral economics
The study of how real people’s choices depart from the standard economic model.
Nudge
A change in how choices are presented that steers people without removing options.
Positive vs. normative
Questions about what is, which evidence can test, versus what ought to be.

Sources