Saturday, February 9, 2013

Nice and Concise article on the concept of Opportunity Cost. I encourage you to read it. Besides, what else do you have to do today?

See what I did there??? :)

Thinking in terms of Opportunity Cost can change how you make decisions.  I believe for the better.  It provides a framework to filter your choices through and may (or may not) help you arrive at a more beneficial outcome.  If nothing else, it causes you to pause and think about a decision from many angles and prevents rash decisions you might regret later.

Here is an excellent (and short) article on this important but lightly stressed concept in Economics by are "real" economist, Emily Oster.

She suggests understanding Opportunity Cost will help you not just in personal decision making, but in how others make decisions regarding THIER opportunity costs relative to YOURS.

""Applying opportunity-cost theory won’t always change your behavior but can simply be a useful tool to understand why things are the way they are. When I was pregnant and visiting my OB every few weeks, I waited for the doctor every single time. Sometimes for as long as an hour. I was furious. Didn’t they know my time was valuable? But consider this: Because of the way appointments like this work—because they are unpredictable in length—someone will have to wait. Either the doctor schedules long appointments and sometimes she waits for you, or she schedules short appointments and sometimes you wait for her. Doctors are very highly paid, and, therefore their opportunity cost is very high. For most of the rest of us, our opportunity cost is lower. If someone has to wait, it’s efficient for it to be the person with the lower opportunity cost. In other words, you.""


 The article has several other example of Opportuntiy Cost(s).  I encourage you to read the whole thing. 



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