Thoreau: An Intuitive Economist

Henry David Thoreau took an exit from city life for a couple of years, and in 1845 moved to a simple cabin in the Massachusetts woods, where he penned “Walden; Or, Life in the Woods.”

The book is a favorite of mine, as well as a favorite of most folks I’m friends with. Although Thoreau was certainly not an economist in any formal sense of the word, he actually wielded a lot of practical economic intuition.

Thoreau is often described as an “environmentalist,” which isn’t true. Living a simple life in the woods and wanting to be largely left alone isn’t what environmentalism is all about. Most environmentalists are city and suburb dwellers, far too cowardly to live in the wilds, and what we can term “green socialists.” Generally, the greenies (the shaggy men and the saggy women) are scared of nature, and harbor a seething jealousy towards those who are comfortable with it. The shaggies and saggies want Big Government. Thoreau, by contrast, just wanted to be left alone.

Which isn’t the point, exactly, but I can’t mention old Thoreau without trying to clean up that point.

What Thoreau had a grasp of is one of the most important cornerstones in economics: opportunity cost. I’ll quote Ed’s Third Law of Economics for that: “Opportunity cost is what you could be doing if you weren’t doing what you’re doing.”

If you date the blonde on Friday night, the opportunity cost is that you can’t date the brunette. Opportunity costs are invisible–it’s what you can’t have because you chose something else.

Which has implications that are every bit as philosophical as economic. If you spend your life living like a human ant, crawling through life doing meaningless things year after year, working at jobs where you’re paid merely to breathe, only to arrive home to watch television, then you must face the opportunity cost, which is what you could have done if you went for an existence with more gusto. And, since you only live once, choosing the human ant approach may involve the ultimate opportunity cost: life without living.

Which brings us to this quote from Thoreau’s Walden: “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”

In other words, he didn’t want to fritter away his years and confront the opportunity cost of having done so.

Living off in the woods, of course, involved its own opportunity costs. Thoreau sure didn’t get rich out there. It boils down to an issue of priority then. He plainly states his. He’s plainly aware of the costs of making decisions. He is, perhaps without knowing it, speaking to the very heart of economics.

Thoreau is an American legend. Like most legends, his name is invoked far more often that his actions are understood. The fusion of economics and philosophy is largely (though not exclusively) an American trait, and Thoreau’s thoughts from the woods were far more profound than the vapid gibberish being spewed out of modern America’s “enlightened” cosmopolitan society.