Tuesday, June 23, 2009

Opportunity Costs, Livestock, and Colonial America

Economists enjoy explaining behavior as being dictated largely by opportunity costs (the value of the next best alternative).

Consider the level of care afforded to livestock in Colonial America in the Chesapeake (modern-day Maryland, Virginia) and New England. Both would realize rewards from giving their animals diligent care. New England did so, keeping a careful watch on their animals and providing their animals' needs in abundance. Chesapeake settlers, however, allowed their animals to roam the woods in a state resembling a wild animal. Each spring, it became a tradition to treck into the woods to look for their animals.

The difference? Opportunity costs. Chesapeake settlers had the cash crop called tobacco, which was too valuable to divert their own labor and that of their servants towards livestock. New England settlers could not grow tobacco well, so without this high opportunity costs, they choose wisely to exert much effort in animal husbandry.