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As in a post from a couple of weeks ago, something on the proper measure of labor from the Enviromental Economics Blog–

 If people who were previously unemployed choose to work on a project, it must be because the wages paid by the project are greater than the value of their next best alternative. The excess, or the difference between the wage and the value of the next best alternative, is a transfer from the people financing the project to the people it will employ.

I think John makes a mistake when he says that labor is counted as a cost in cost-benefit analysis.

wage = opportunity cost + transfer

Balancing cost and benefits–looks like a zero sum game to me. Of course the transfer will feel like a surplus for most workers, but it is still a cost to the employer.


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