Richard Cantillon and the Discovery of Opportunity Cost

Opportunity cost is a core, defining concept of economic science. The early Austrian economists are generally credited with the discovery of the concept and its early application. Here, it is shown that Richard Cantillon, the father of economic theory and method, developed and applied the concept of opportunity cost. His “intrinsic value” was not an objective cost approach, but merely an attempt to estimate opportunity cost. This finding exonerates Cantillon from the charge of objective cost theorist and predates the discovery of opportunity cost one hundred and forty years earlier. Had his readers, including Adam Smith, properly understood him, a gigantic cul-de-sac in economic theory—the labor theory of value—could have been avoided.