Thursday, June 23, 2011

Opportunity Costs


College is funny like that. Classes you think you will never ever need in real life have a funny way of showing themselves quite relevant.

I'm currently taking an Economics course. Opportunity Cost  (OC) is a significant term that must be understood when dealing with economic policy.

When I first heard the phrase, I thought OC was what something costs in order to experience it. Like, if I want designer jeans that costs $72, (I thought) that price would be my OC.

Well......not quite. 

My OC would really be the purse, earrings, and shoes I am not buying because those jeans are too damn expensive.

In economist-speak the opportunity cost is what you lose or exchange in order to fulfill a need.

For example, if I want a strong marriage, the Opportunity Cost is my pride, protective shell, independence. Meaning what I'll actually be paying into our relationship is my attention, trust, and heart. But what I'll be losing is the pride, etc.

Or if I want to complete my B.A. by May 2013, the Opportunity Cost is much of my free time and my tendency to procrastinate. So the "fee" for my on time degree completion is a social life put on hold, laser-like focus, and tenacity.

But, again, the OC are the hours I'm sacrificing in order to receive said degree.

And ultimately, if I want to ensure my children will receive a solid education while living in a failing school district, the Opportunity Cost is no longer seeing an outfit and grabbing it, hitting up Wendy's on the way home, or driving (using up gas) just to sight-see.

Their rigorous parochial education will be paid directly from our wallets. No more BravoTV or ESPN, we are sponsoring our sons' educational equality with basic cable and Netflix.

Our OC is our extra cash or the time I could be spending doing something other than carpooling and volunteering at their new school.

Everything comes at a price. And everything we love/want has an opportunity cost. The only question is if we are prepared to pay it.  

Tons of enlightenment from Econ101, and I haven't even finished the class yet. Who would have thought I could use economic concepts to understand my real life?

Have you ever taken an "abstract class" that ended up making perfect sense in a different context? Do tell :o)