As a complement to high-cost cooperation as assessed in economic games, the concept of social mindfulness focuses on low-cost acts of kindness. While social mindfulness seems quite natural, performed by many most of the time (reaching a level of 60–70 percent), what happens if such acts become more costly, and if costs become more salient? The present research replicates the prevalence of social mindfulness when costs are salient, but low. Yet we show that, with small increments in costs, the vast majority no longer exhibits social mindfulness. This holds even if we keep the outcomes for self high in comparison with the beneficiary. We conclude that the literature on social mindfulness should pay attention to cost. Clearly, if being socially mindful comes with high costs, this is not what most people are prepared to do. In contrast as long as costs are low and not salient, social mindfulness seems natural and normative.

In the United States, over 70% of milk production is priced under Federal Milk Marketing Orders (FMMOs). A primary purpose of FMMOs is to facilitate orderly allocation of milk as a limited, perishable resource among alternative uses. Fundamental to FMMOs are the regulatory prices applicable to milk used in cheese and whey (Class III), and nonfat dry milk and butter (Class IV). This work examines a novel milk pricing method based on the concept of opportunity cost for milk used in cheese and whey. This novel method may improve the functioning of FMMOs and the U.S. dairy industry.

Consensus does not exist for which cost forms (i.e., one accounting solely for explicit cost and the other for both explicit and opportunity costs as in relative opportunity cost) are used in calculating return on investment (ROI) for conservation-related decisions. This research examines how the cost of conservation investment with and without inclusion of the opportunity cost of the protected area results in different solutions in a multi-objective optimization framework at the county level in the Central and Southern Appalachian Region of the USA. We maximize rates of ROI of both forest-dependent biodiversity and economic impact generated by forest-based payments for ecosystem services. We find that the conservation budget is optimally distributed more narrowly among counties that are more likely to be rural when the investment cost measure is relative opportunity cost than when it is explicit cost. We also find that the sacrifice in forest-dependent biodiversity per unit increase in economic impact is higher when investment cost is measured by relative opportunity cost rather than when measured by explicit cost. By understanding the consequences of using one cost measure over the other, a conservation agency can decide on which cost measure is more appropriate for informing the agency’s decision-making process.

In the past few years, empirical estimates of the marginal cost at which health care produces a quality-adjusted life year (QALY, k) have begun to emerge. In theory, these estimates could be used as cost-effectiveness thresholds by health-maximizing decision makers, but prioritization decisions in practice often include other considerations than just efficiency. Pharmaceutical reimbursement in Sweden is one such example, where the reimbursement authority (TLV) uses a threshold range to give priority to disease severity and rarity. In this paper, we argue that estimates of k should not be used to inform threshold ranges. Instead, they are better used directly in health technology assessment (HTA) to quantify how much health is forgone when a new technology is funded in place of other healthcare services. Using a recent decision made by TLV as a case, we show that an estimate of k for Sweden implies that reimbursement meant forgoing 8.6 QALYs for every QALY that was gained. Reporting cost-effectiveness evidence as QALYs forgone per QALY gained has several advantages: (i) it frames the decision as assigning an equity weight to QALYs gained, which is more transparent about the trade-off between equity and efficiency than determining a monetary cost per QALY threshold, (ii) it makes it less likely that decision makers neglect taking the opportunity cost of reimbursement into account by making it explicit, and (iii) it helps communicate the reason for sometimes denying reimbursement in a way that might be less objectionable to the public than current practice.

We explore the economic welfare effects of direct and indirect government-induced changes in employment under varying market conditions. We begin with a discussion of those policy-induced employment changes that seamlessly reshuffle workers among jobs in an efficient (i.e., full-employment, full-information) economy; generally such changes create few, if any, net changes in economic welfare not captured in changes in wage bills. We then turn to the effects of policy-induced employment changes in economies with two market distortions: (1) inflexible wages set by law or custom that result in involuntary unemployment during periods of deficient aggregate demand, and (2) illiquidity resulting from imperfect capital markets that prevent people from borrowing against future earnings. Induced employment changes in these circumstances impose real net social costs or generate real net social benefits beyond changes in the wage bill. We also assess the likely magnitude of the social opportunity cost of labor in the case of involuntary unemployment and imperfect liquidity, and address how the welfare effects of such employment changes should be valued. Based on currently available empirical research, we develop estimates of the opportunity costs of hiring or releasing an employee during periods of high unemployment with and without other market distortions. In contrast to conventional benefit-cost analysis practice, which treats releasing workers as having a negative opportunity cost, we estimate an opportunity cost for firing that is positive and equal to about 73% of pre-firing compensation, primarily because of the “scarring effect” of unemployment. Also in contrast to conventional practice, we estimate an opportunity cost for hiring an unemployed worker that is less than the worker’s opportunity cost of time.

Pairs trading is a trading strategy which is used very frequently in the financial industry. An investment opportunity arises when the spread between two assets, which historically have exhibited autoregressive behavior, deviates from its recent history. In this case, the investor takes a long position in the asset which is expected to outperform going forward and finances this by taking a short position in the other one. If the spread converges, the investor can close both positions to generate a profit. We model the spread between two assets as an Ornstein-Uhlenbeck process and assume a constant opportunity cost. We then study the optimal liquidation strategy for an investor who wants to optimize profit in excess of the opportunity cost. Including this cost is important from an applied perspective, as the performance of any investment is always evaluated relative to the performance of the opportunity set.

Brazil nut collection is key to reconciling sustainable economic development with forest conservation in the Amazon. Whether the activity is profitable, however, remains uncertain due to the paucity of information on spatial distribution and productivity of trees as well as the costs of collection and processing. To fill this gap, this study developed and used a spatially-explicit rent model of Brazil nut production to assess yields and potential profits (rents) from the Brazil nut concessions in Madre de Dios (Peru), under three scenarios of processing and management (unshelled, shelled and shelled-certified nuts). Potential annual production in the region was estimated to be 14.1 ± 2.4 thousand tonnes of unshelled nuts; at 2008 regional sale prices this corresponded to profits of between US$ 3.1 ± 0.5 ha−1 yr−1 for unshelled nuts to US$ 8.4 ± 1.4 ha−1 yr−1 for shelled-certified nuts. Investment of c. US$ 14−17 ha−1 is required to develop certified production in Madre de Dios concessions; this would approximately triple rents in these areas. Such investment could be channelled through REDD+ projects; sustainable management of Brazil nut concessions may contribute to a 42–43% reduction in deforestation in Madre de Dios by 2050.

We develop a model of optimal productivity growth under demand fluctuations. We consider two alternative hypotheses. First, we assume that productivity growth is costly in terms of current production. Second, we assume that the cost of productivity improvements is independent of current production. It is shown that, in the first case, productivity improvements will be countercyclical whereas, in the second case, they will be procyclical. The model then is used to study the impact of the frequency and amplitude of fluctuations on long-run growth. The results corresponding to the first hypothesis are shown to be consistent with recent empirical work.