GAVIN KEETON: Dismal science of economics helps understanding why graft and Brexit exist
Economics has many critics. Nonetheless, its theoretical principles of how the world works, and the way economists think about problems, provide useful tools for understanding issues outside the usual purview of markets, economic growth and finance. For example, economists use the concept of opportunity cost to understand the true price of using resources. Cost is not measured simply in terms of rand spent but in terms of alternative choices. So, the cost must include benefits foregone had resources been used in a more productive way. Opportunity cost is very useful in assessing the long-term effects of corruption. The opportunity cost of the misuse of R1.9bn of deposits at VBS Bank is much greater than a simple accounting measure suggests. The government must refund small depositors with borrowed funds, on which it will pay interest for many years. These funds could have supported education or built infrastructure, for returns that far exceed the initial spending. The government sa...
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