Costs is expounded with much formality at the
outset. This doctrine is apt to prove somewhat puzzling, when we have
to deal with it as an apparent exception to the general tenor of
economic theory. Its difficulties disappear when we realize clearly
that the real cost of _anything_ is the curtailment of the supply of
other useful things, which the production of that particular thing
entails.

Sec.2. _The Allocation of Resources_. However strange the above
conception may seem, there should be no doubt that this cost is very
"real." Here the irregularities and maladjustments of the economic
world, the recurrence of trade depressions and the like, do much to
obscure a clear vision of the essential realities. At a time when
there is much unemployment, and much machinery standing idle, it is so
clear to common sense that we _could_ produce more of some particular
thing without diminishing the supply of other things, that any
apparent statement to the contrary may perhaps seem the height of
academic pedantry. But let me ask the reader to consider with an open
mind a familiar parallel. During the recent war there was inevitably
much waste and muddle in the utilization of the military resources of
the Allies. Some regiments would be kept inactive for long periods,
not for purposes of rest or training, but owing to some defect of
organization. In the manufacture of munitions, an insufficient
appreciation of the principles of joint demand led to the piling up of
excessive stores of certain materials, which were useless until
commensurate supplies of the complementary factors could be
obtained. It is unnecessary to multiply examples. The waste of both
man-power and material was immense. But the allocation of these
resources between, for instance, the various theaters of war was none
the less a very real problem, which gave rise to much engrossing
controversy. It was an axiom that the more resources you employed in
Mesopotamia or in Palestine, the less resources remained available for
France. No one thought of maintaining that, as long as there was any
waste of these resources, so long as there remained any men to be
"combed out" of unessential industries, you could pour troops and
munitions into Salonika without stopping to consider the needs of
other theaters of war. Such a notion would have been clearly imbecile,
for the sufficient reason that the sending of armies to Salonika would
do nothing in itself to secure (however muc