Columella: Ancient Romans Thought About Opportunity Costs - Planting a Vineyard

by Geoff Gannon

A Roman named Columella wrote a farming manual 2,000 years ago. In it he mentions opportunity costs.

You need to know 3 things to understand what you're about to read:

1) Sesterces are Roman money

2) A iugerum is two-thirds of an acre, and

3) Vinedressers are slaves.

I…consider a high-priced vinedresser of first importance. And supposing his purchase price to be 6,000 or, better, 8,000 sesterces, when I estimate the seven iugera of ground as acquired for just as many thousands of sesterces, and that the vineyards…with stakes and withes…set out for 2,000 sesterces per iugerum, still the total cost…amounts to 29,000 sesterces. Added to this is interest at six percent per annum, amounting to 3,480 sesterces for the two-year period when the vineyards, in their infancy…are delayed in bearing. The sum total of principal and interest comes to 32,480 sesterces. And if the (farmer) would enter this amount as a debt against his vineyards just as a moneylender does with a debtor, so that the owner may realize the aforementioned six percent interest on that total as a perpetual annuity, he should take in 1,950 sesterces every year. By this reckoning the return from seven iugera…exceeds the interest on 32,480 sesterces…For, assuming that the vineyards are of the very worst sort, still, if taken care of, they will yield…a total of 2,100 sesterces — a sum far in excess of the interest at six percent.

Big, basic ideas last a long time. Opportunity cost is one of them.