I’m all in favour of new thinking. Yes, no ifs, no buts, if there’s something we all need is to indulge in some new thinking. Whether it is testing the upper limits of human endurance or examining the ability of the mind to absorb complex stimuli (e.g. how many more reality TV programmes can one really cope with), we should never dismiss new thought without at least subjecting it to impassive scrutiny. Yes, new thinking never hurt anyone. Agreed, accepting new thinking without thought (think about that!) is a recipe for disaster. But dismissing new thinking without thought can be equally disastrous.

But, I started my new thinking a while ago. Like most children, I was always told that “money doesn’t grow on trees”. And that’s one of the reasons I took up economics. Because I liked money and I wanted to know all about it and, especially, why it didn’t’ grow on trees. So, imagine my shock when in one of my first lessons in economics I was told that economics is NOT about money. And what’s more, money does grow on trees. So, I was definitely in need of new thinking then. And yes, money was – back then – made of paper, so I suppose it was related to trees. OK, it’s not really paper any more; it’s all electronic, so let’s call them virtual trees. But the trees are everywhere, and if needed, more money can sprout from these virtual trees at will.

So, if economics is not about money, then what is it about? Well, for economists its not money that is scarce, it is resources. And one of the central pillars of economics is a concept called opportunity cost. And, in its correct formulation, opportunity cost also has nothing to do with money.

So now, as an economist, I don’t like money at all. And I too provide a first lesson in economics with the phrase “economics is not about money”.

Well then, what is economics about and why is this concept called opportunity cost so central? Without doubt, the fundamental foundation of economics arises from the scarcity of resources. By the term resources I mean things, items or objects that people need for daily survival. For example, air, water, tools and other equipment, fuel and fire, other people and time. The common element of these resources are that they are used to provide (produce, if you like) other goods, commodities and services that are required for daily life – food, clothing, shelter, heat and, for a modern-day term, community well-being.

The fact that these resources are scarce, forces us to make choices. That is, people (and/or communities) have to decide between the many competing uses for the limited set of resources available to them. This is economics. It is about people and communities. It is about how they make these choices, what criteria is used, what influences those choices and whether there is a way people can make more informed choices.

And a corollary of the fact that resources are scarce is that for every choice made regarding the use of the resources there must have been (at least one) alternative use for those resources that has been sacrificed. For if there wasn’t an alternative use, there would have been no need to make a choice or a decision. In other words, for each and every choice, there is an opportunity cost. The opportunity cost is the alternative that has been sacrificed. Note, opportunity cost is not in terms of money or $s, but should be expressed in terms of the opportunity that has been sacrificed – or missed.

So, why the economics lesson? Because I despair when I hear statements to the effect that we can’t do this (or that) because it “costs too much”. Such a statement is usually followed by a dollar figure, inferring that the item/good/service/project is too expensive. Unfortunately, this sometimes results in a cheaper (in $ terms) alternative being chosen. But, in such choices, I query whether the opportunity that has been sacrificed has truly and properly been identified and understood.

Perhaps, if the “costs too much” phrase was regularly replaced by “this decision means this alternative option is to be sacrificed” would make our choices starker. Expressing items in $ terms (and virtual $s at that), risks obscuring our vision as to what are the very real consequences of our choices. Or, is it that $s are dissociated form actual choices? If the choice was phrased “to get a new car, I have to give up (sacrifice) a holiday”, then perhaps the choices will be more stark.

In particular, the obscuring of vision or dissociation is most keenly observed when choices and potential sacrifices occur over a lengthy period of time. Take, as my example, the following.

There have been numerous flooding and other climate-related events across many regions of New Zealand in recent years. Following such events there are, almost inevitably, claims and media stories to the effect that the local or regional council has neglected facilities in the area over the past decade(s) and this has magnified the impact or damage caused. Or, that the council was ill prepared and not ready for such and occurrence. However, amidst claims of excessive council rate bills, there is currently a review of local authority rates.

My argument is that local authorities, in most cases anyway, are now the victims of the collective “we can’t do that because ‘it costs too much’” wisdom of previous choices. Earlier choices to use resources elsewhere and rundown and/or skimp on maintenance of infrastructure carried opportunity costs. Yes, the choice of not doing something still carries a sacrifice. The sacrifice that was chosen then (even if it was implicit or obscured) is now being felt.

It would be reckless if this review of rates is solely focused on $s, as that would be to repeat the mistakes of history. This review has got to address the consequences (sacrifices) of not renewing, upgrading and maintaining New Zealand’s infrastructure. This includes public sector housing, drinking water supply quality, irrigation and drainage, flood protection, transport networks to name but a few items.

I note that over the past few years many regions have instigated strategies for their economic development in order to assist businesses, communities and, indeed, the country to plan their future needs. Infrastructure requirements and the balance between present and future sacrifices are central to these strategies. If these are overcome by the “it costs too much” brigade, then recent gains across almost all regions will no doubt be placed in jeopardy.

Yes, the new thinking is scary. But, perhaps it is time for New Zealand’s business, commercial, community, local and regional leaders to make these stark alternatives or sacrifices crystal clear for all to see. In other words, what is the (opportunity) cost of NOT restoring and looking after New Zealand’s regional asset base? Provide an answer to this and then, perhaps, we will not be so blinded by virtual $s. Only then will informed choices be made.