The notion of opportunity cost is one of the fundamental concepts of economics. If resources are limited, then there is a choice to be made between desirable, yet mutually exclusive, results. The true or opportunity cost of one alternative is the benefit foregone from not being able to have the next best alternative. The concept has been encapsulated in the truism that “there's no such thing as a free lunch,” meaning that things that appear free are always paid for in some way.

The estimation of the opportunity cost of a policy will almost certainly vary depending on the person or persons who are doing the assessing. For example, if a health authority is considering building and staffing a new hospital from public sector funds, the ...