In 1978, thirty-one years ago, when Lee Iacocca assumed the helm of the Chrysler Corporation, he was surprised to find that Chrysler paid more for its workers’ health care than for steel and rubber combined [searchable page 144]. This was a news story because of which number was bigger, not what any number was. The fact of which number was bigger was sufficient to officially declare an informed emergency. We live in spreads, not hinged to goal posts.
People are concerned with price. It’s understandable. On inspection, however, it appears regularly disserving if not handily misguided. Price is a temporal transaction amount. It’s the dollar amount of your tax assessment; the tag on your new dress—or at least the receipt; the contracted mortgage for your new house; and the bank-wire transaction amount for your child’s tuition. Clean quotable numbers.
More relevant, I would argue, is cost which I believe is (1) confused with price and (2) less discussed than price because it isn’t strictly numeric.
Well enough, Wikipedia gets at the difference—albeit in a secondary definition:
price (pr s) n.
1. The amount as of money or goods, asked for or given in exchange for something else.
2. The expenditure of something, such as time or labor, necessary for the attainment of a goal: “Freedom to advocate unpopular causes does not require that such advocacy be without cost” (Milton Friedman).
Cost is not a strict function of price—of course this is why we can brand. To be assured of something in terms of attributes or quality or service we pay higher prices for brands. They signal to us like trusted flickers of light in the consumption orgy animating the economic domain. What we’ve paid for is not a cold product alone, but of course the warm feeling to which its procurement and consumption is joined. A cheaper generic can have a lower price and a higher cost than a brand. That’s both quantitative and qualitative.
Cost manifests well beyond price. Included in costs may be stress or diminished health profiles; the dead weight loss of foreclosed opportunity for the largest number; increased mortality; underdeveloped and underutilized human capital; and loss of society and enjoyment of life. How important is the price of a baby sitter if she is neglectful of children? Alternatively, what is her cost? How important is the price of a renewable energy investment that pays for itself by knowable time(t)? What is the cost of no investment?
Under American civil law, price translates literally to calculable damages, while cost is captured in damages, interest, punitive awards, the legacy and force of precedent and beyond: deterrence and disruption to society; pain and suffering; and opportunity costs. These distinctions of price and cost are critical to make and, hence, have been made in the civil law for hundreds of years.
That which one must pay—by government or other hand–and does not wish to pay can feel to the payor like a tax at an outlay level even if it isn’t called such. Some declared taxes which one also may not wish to pay can function more as equity investments––dividend-paying and virtually heritable ones, even— in the form of numerous widely utilized public goods, broadly elevated living standards, life expectancies and consequent earning horizons and human potential.
But prices—declared taxes, investments, deficits, surpluses, stimulus packages—lack meaning as numeric isolates. Costs are meaning rich.