I’ve taken exactly one course in Economics in my life, and that was in my first semester of college, nearly ten years ago. Somehow I managed to forget nearly everything from the class, but there’s one concept that really stuck with me, probably because it has something to do with a lot more than just economics.
The term is “opportunity cost”. Simply put, it states that when you’re looking at the cost of anything, you must consider more than the direct cost of resources the item will require. You must also take into account all of the other things you could have done with those resources. Let’s say you’re taking a day off work, and you decide to go out for an immense café mocha. The cost of the mocha including the tip you give the server is, say, $4.00. In one sense, all you’ve paid for the mocha is four bucks. Ah, but you also took the day off work. If you don’t get paid for that time, the opportunity cost of the mocha is much higher, because you’ve lost a day’s pay to have the free time you needed to spend your $4.00 for the beverage. If you called in sick that day and get paid for the time, there’s still an associated cost—using up one of your sick days, or vacation time. That doesn’t necessarily mean that going out for the mocha was a bad idea, but when you consider opportunity cost, you get a much better idea of what you’re spending on your purchases.
I see this notion as a universal concept, one that impacts everything in our lives. Consider: would carefully considering the opportunity cost of everything you buy change your spending habits, or at least make you more aware of them? It might not change your life, in that sense, but doesn’t the same idea apply elsewhere? Think of educational choices, for example. What is the true cost of choosing a course of study? There’s an investment of time and money, of course, but it’s equally true that deciding to study economics or philosophy or engineering or modern interpretive dance also means that you’re giving up the opportunity to study any other subject at that moment. This applies to our jobs, our relationships, our financial choices, and our experiences. The opportunity cost of doing any one thing at a particular moment is infinity, minus one.
Richard Bach has a line in his book Running From Safety that sums up the idea beautifully: “I have given my life to become the person I am at this moment. Was it worth it?” He might not use the words, but what he’s talking about is opportunity cost. That’s why the concept strikes me as universal, because asking this question, really considering it, can change the way you look at the world. Every choice becomes important, and the idea of making those choices lightly is frightening indeed.
Daunting concept, isn’t it? Realizing that with every action, we turn away from an infinite number of other paths is enough to make one consider freezing in place entirely, spending more and more time simply considering the alternatives. It’s tempting to turn to that contemplation to the exclusion of all else, to avoid the regrets that would come from realizing that poor choices were made. After all, when every choice literally carries the weight of the world, shouldn’t they be treated as such?
The danger in that line of thinking is that being frozen with that kind of caution can lead to complete inaction. And, of course, inaction carries with it its own opportunity cost. The statistical difference between infinity and infinity minus one is so tiny as to be meaningless. But it’s also the difference between nothing and something, between stagnation and growth, between a life wasted and one truly lived.
5 March 2002