Every choice individuals make involves an opportunity cost and this extends to choices made by Governments at a macro level, industrialists, Stakeholders, environmentalists, technocrats, technologists, academia and NGOs just to mention a few in Africa. Two major decision making processes will be addressed to: opportunity cost and cost benefit analysis. It has been proven that smart choices made at any level either at the micro level or macro level in an Economy has determined the economic fate of the countries concerned.
This is particularly relevant because at the level of the individual, time and earnings are insufficient to satisfy all that an individual wants and desires to consume. At the level of a nation, production inputs necessary to satisfy the goods and services citizens want are scarce. Accordingly, nations as well as individuals have to make difficult decisions regarding the use of scarce resources in the production of goods and services that are demanded. Simply put, those Nations that make smart decisions are rewarded economically and those which do not, suffer dire consequences.
The truth is, choices are necessitated because we as individuals and collectively as communities and nations, always want and desire more relative to the availability of resources to satisfy those wants. This takes us to the realm of Technological Engineering efficiency which dictates that the least possible amount of resources should be used in the production of quality goods and services that are geared toward satisfying fully the wants and needs of customers (Economic Efficiency). When waste is avoided in this case, the remaining resources could be used for the production of extra quality goods and services that will benefit consumers as fully as possible (bottom line in marketing).
Cost Benefit Analysis
Cost-benefit analysis is the exercise of evaluating a planned action by determining what net value it will have for the company. Basically, a cost-benefit analysis finds, quantifies, and adds all the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The difference between the two indicates whether the planned action is advisable. The real key to doing a successful cost-benefit analysis is making sure to include all the costs and all the benefits and properly quantify them. It is the fundamental assessment behind virtually every business decision, due to the simple fact that business managers do not want to spend money unless the benefits that derive from the expenditure are expected to exceed the costs. As companies increasingly seek to cut costs and improve productivity, cost-benefit analysis has become a valuable tool for evaluating a wide range of business opportunities, such as major purchases, organizational changes, and expansions. Cost-benefit analysis is a decision support method used to help answer questions that often start with "what if" or "should we."(Inc.com, 2012).
The concept of opportunity cost is important to all decision-making processes. The opportunity cost of a course of action is the forgone benefit from an alternative action. In order for a benefit to be forgone, the chosen and alternative actions have to be mutually exclusive. This means that one cannot do both actions at the same time. Our lives are made up of choices about mutually exclusive actions, from deciding to go to college instead of working full-time for four years, to choosing between coffee and tea during a quick break. Opportunity cost can be computed in terms of anything – including money, ice cream cones, love, life experience, friendship, and “achievement.” The concept of opportunity cost reflects the scarcity of our resources (bottom line in Economics) – especially time and money. When we integrate opportunity cost into our decision-making, we ensure the most efficient use of our scarce resources (educatorblogwordpress.com, 2008).
It should be noted that the decision making process in both Opportunity Cost and Cost Benefit analysis is not only confined to businesses but also to Technocrats, Technologists, Stakeholders, Policy makers, academia and Governments in African countries when it comes to making smart choices in National wealth creation and development in the context of scarce resources in the economy.
The question developing countries in Africa should be asking is: are they making smart decisions to propel their economies to offer a better living standard for their countrymen or they have failed to live up to expectations? On the flip side most African countries are potentially rich with their richness coming from a wide range of natural resources encompassing fantastic climatic and weather systems with a few exceptions, minerals, bio-diversity and fertile lands. On record, the tropical rain forests which are located in Least Developed and Developing Countries support the greatest bio-diversity on Earth. Despite these advantages the paradox is that most of the poorest people on earth could be found today in Africa and other Developing Countries. Have African decision makers lived up to expectations? No!
By Emmanuel Botchwey
Comment on this article!