Opportunity Costs

Opportunity cost is the alternative benefit foregone. If you have $1, and can either buy a loaf of bread or a piece of fish; opting for bread means you miss out on the fish. On buying bread, the fish becomes the opportunity cost.

In real life choices have complex consequences. Opportunity cost shows the dynamic between limited resources, unlimited wants, and the consequent need to make choices. In 1998, Zimbabwe participated in the DRC war.  This  US$200 million campaign ended up costing the country US$1 BILLION. At the time, Zimbabwe desperately needed infrastructural investment and fuel shortages were disrupting local development. Going to war cost the country more than the direct US$1 Billion costs, for  lenders also cut development aid in frustration. Furthermore, blatant waste demonstrated the state was not serious about developing the country.

Opportunity cost is more complex than a guns and butter trade-off. Some decisions have longer running consequences. Zimbabwe currently has international debts of over $10 Billion. The DRC war represents 10% of this amount, and brought no benefit to the Zimbabwean economy. If money had been put into infrastructure, Zimbabwe's current water and electricity shortages could have been mitigated.