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Life’s Opportunity Cost

August 29, 2011

In a break from our usual programming, let’s read a little poetry.  Our subject this week in my year one classes is opportunity cost, the sacrifice we make whenever we make a choice of any kind.  This can be demonstrated any number of ways, including production possibilities curves (hooray!).  But let’s save those for class, and instead discuss your life and decision making processes.

Frost’s poem can help us understand opportunity cost quite nicely.  This connection was first pointed out to me many years ago by Jim Spellicy, and extraordinary teacher at Lowell High School in San Fransisco.  I’m grateful to him for sharing it, and my students have enjoyed it ever since.

Let’s start with the poem itself.  By this point in your lives, you almost certainly have seen it before:

The Road Not Taken: Robert Frost

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth.

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same.

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.

Thank you Robert Frost, for keeping it simple: a choice between two paths.  That’s opportunity cost, because we really don’t agonize over all of life’s possibilities, just the tough decisions.  And opportunity cost involves the value of the next best alternative, not all of them. A rational decision maker sees two choices and weighs the alternative.  They know, also, the price of any decision involves linear time, the idea that they won’t really be able to do it over (“Knowing how way leads on to way, I doubted if I should ever come back.”)  Even if they returned, it would be later, and with the experience of having tried the other path originally.   So, in the narrator’s case, their opportunity cost is the road “most taken.”  What would life have been like…?

Application questions:

1. In your life, identify an experience where you made a difficult decision.

2. Explain the costs and benefits of each option.

3.  Briefly, explain the process by which you made the decision, using the language and terminology of opportunity cost concepts. (costs, tradeoffs, rationality)

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17 Comments leave one →
  1. VladC permalink
    August 29, 2011 1:25 pm

    [Opportunity cost example]:
    About a few weeks ago when I started the 11th grade I have to make a choice. Academics vs. Sports. Since the 11th grade is very important in anyone’s life further afflicting where you will go to college one must take it very seriously, thus giving academics a very high importance. On the other hand, sports are important in their own way. They keep you healthy and well fit as well according to a Latin adage: “mens sana in corpore sano”, one must seek to strike a balance between ones mental development one the one hand and one’s physical development on the other. Relinquishing the pursuit of athletic activities, further on focusing on my Academics, might help me in getting into a Ivy League college but I might end up getting out of shape. If I had taken the opposite also known as my “opportunity cost”, I would have a better physical condition but I would probably not have a successful future. In this case the fact that I am forgoing most of my physical activities I am creating a “tradeoff” between academics and sports. This decision was dictated by the inner core of my “rationality”. In terms of costs and benefits, I am likely to have a secure financial status, to live a life free of economic worries. At the same time the cost might turn out to be my deteriorating physical shape.
    [Vlad C]

  2. rshimony13 permalink
    August 29, 2011 2:31 pm

    Yesterday I have experienced a difficult decision making myself. My time is “scarce” and therefore I had to figure out my costs and benefits, and decide. The tradeoffs were to bike from Pipera to Aviatorilor and back or to go home and finish reading Economics and English homework. The opportunity cost was reading Economics and English homework since I choose to go biking. This was a rational decisions because my first block on Monday was study hall and I didn’t have much planned anyway. The cost was postponing my reading which frankly enough was probably more important than biking. The benefits were that I exercised after not doing so for a long time and I enjoyed the final hours of my weekend. Happily, today, I succeeded in completing my homework on time.

  3. Rachel Morris permalink
    August 29, 2011 2:32 pm

    About a year ago, my friend was celebrating her sixteenth birthday. I was invited, but the party was at eleven at night on a Saturday at a club. That was around the time I usually went to sleep during the weekends and if I stayed up late, I would wake up late the next morning and the morning after that. So I had to decide whether to go to my friend’s party or not.

    If I went to the party, I would have the opportunity to spend some time with my friends and increase my social status. However, it would cost me several hours of sleep at night which I would take in the morning, decreasing my time for homework, watching TV, reading, etc. If I didn’t go and decided to sleep that night instead, I would be able to wake up earlier and not be so tired on Monday. However, I would be letting my friend down on her birthday.

    I decided that I wouldn’t go to the party, because I knew staying up that late wouldn’t be healthy, especially for someone as sleep deprived as me, so more sleep at night would be my tradeoff. Besides, I didn’t like going to clubs and didn’t want to see people get drunk. My opportunity cost was celebrating my friend’s birthday and missing out on a party, never knowing if it would’ve been fun. However, I did find it rational to at least buy my friend a present, and she wasn’t mad at me at all.

  4. akumar13 permalink
    August 30, 2011 10:11 am

    During this past summer, my grandparents decided that they wanted me to learn how to drive, so they asked an instructor to come and teach me. Because the legal age in India is 18, the instructor told me that I would have to wake up at 4:30 in the morning and begin driving at 5 so that there wouldn’t be a lot of police on the streets. This left me with a rather difficult tradeoff: to wake up at 4:30 and learn to drive or to sleep in for at least 5 more hours. Being in India in a house with around 8 people, sleep was a scarce resource which I treasure dearly. On the other hand, driving was something new and interesting that I have wanted to do for a long time now. In the end, I decided to spend my time sleeping as at that time sleep was extremely important to me. Sadly, at that moment, I wasn’t thinking very rationally and that impacted my decision. The frustration of having to wake up early because of loud cacophonous noises irritated me to the point that I had forgone something new and interesting for something I can get every night. If I would be given the choice now, I would for sure choose driving over sleeping.

  5. Ofiro13 permalink
    August 30, 2011 3:02 pm

    Few days ago I had to make some kind of a decision.
    I was wondering whether I should throw all the notebooks from last year or not, this decision wasn’t that easy since till last year I used to keep my notebook and I never actually needed them after. However, last year I decided to throw them and two weeks after I was sorry that I threw them.
    The benefits from throwing the old notebooks are great; much more storage space in my room, since I already don’t have that much. However the cost of throwing the notebooks is taking the risk that one day during this year I will need them in order to look back for my notes, and when that day comes I will not have them.
    In order to make a decision I looked back on my experience and realized that I should keep the notebooks, and especially the ones of the most important subjects, and this decision was rational.
    Moreover I solved the problem of storage with buying some boxes from Ikea, as i had to find place to store the old notebooks.

  6. J.Kim permalink
    August 30, 2011 3:46 pm

    I am not sure if I had any moments in my life where I had to make difficult decision regarding money or cost but I think one of the example could be that I had a choice of buying either a puppy or a new laptop as my birthday gift which I believe, was pretty a difficult choice for me since I’ve always wanted a puppy before but at the same time, wanted a new laptop. The cost of a puppy was around 1600Ron and its benefits were that it teaches you to learn several moral lessons such as strengthening responsibility, realizing the values of any type of lives, and ease one’s loneliness, as it always keeps you a company. On the other hand, the cost of a laptop which I wanted to buy, was around 3800Ron and its benefits were that it overall helps you with the assignments from school using several programs like Microsoft Word Office, or Movie/Picture editor, and you can use it in variety of methods for over a long period of time (quite useful). In my case, I actually chose the puppy instead of a laptop which means that my opportunity cost of buying a puppy leaves me with the technical benefits which I would have gotten from buying a laptop but I still got a valuable lesson. In terms of this concept, buying a puppy would be more efficient to use my money since the costs are much cheaper and that makes my tradeoffs as individuals to realize that I have made the right choice in terms of cost value, and fulfilling something which I wanted to get the most. Lastly, it is reasonable or rational to get a puppy rather than a laptop since I already do have a laptop, and that I have chose to have something that I don’t have.

  7. Anonymous permalink
    August 30, 2011 4:15 pm

    This summer I was given two choices, choice number one was to go to an SAT prep camp somewhere in the US, and the other was to learn Spanish for a month in Barcelona. Now as a student entering IB in an American school SAT tests are very important, especially if later in the future I want to apply to college somewhere in the US. On the other hand however this year I’m beginning IB Spanish, which is at a much higher level than what I was taking in the previous years. Weighing in the fact that I will have the opportunity to take some SAT prep quizzes this year and also keeping in mind that this would probably be my last summer vacation before college tours I chose to go to Barcelona. The tradeoff was learning better Spanish and doing better in my IB course, with the opportunity cost of me being less prepared for the SATs.

  8. Isidoraf permalink
    August 30, 2011 4:16 pm

    This summer I was given two choices, choice number one was to go to an SAT prep camp somewhere in the US, and the other was to learn Spanish for a month in Barcelona. Now as a student entering IB in an American school SAT tests are very important, especially if later in the future I want to apply to college somewhere in the US. On the other hand however this year I’m beginning IB Spanish, which is at a much higher level than what I was taking in the previous years. Weighing in the fact that I will have the opportunity to take some SAT prep quizzes this year and also keeping in mind that this would probably be my last summer vacation before college tours I chose to go to Barcelona. The tradeoff was learning better Spanish and doing better in my IB course, with the opportunity cost of me being less prepared for the SATs.

  9. ssinha13 permalink
    August 30, 2011 4:27 pm

    Before moving to AISB in 2011, I was faced with tradeoffs regarding which school I wanted to spend my next year in between the International British School of Bucharest and the American International School of Bucharest. The opportunity cost of my decision lead to me making new friends and becoming accustomed to a different education system. Some of the costs of this decision were also losing time to spend with my old friends, figuring out the new expenditure amount for transportation (since AISB is farther from my house than IBSB was), and simply leaving an environment I was already comfortable in. However, the benefits were numerous: I was introduced to a higher level of education at AISB, access to facilities of higher standards, and was opened to several other opportunities regarding my academic work and future. I believe the decision I made was a rational one based on the benefits outnumbering the costs I had to give up by choosing AISB. The decision I made to attend AISB will once again require me to face other tradeoffs and evaluate other opportunity costs as I may choose to pursue a certain career.

  10. E-Jamnik permalink
    August 30, 2011 5:45 pm

    I was in 9th grade and it was a week before the end of school. It was Saturday and it was my best friend’s birthday party. Of course I went and I had fun, at the end, this girl told us a scary story and I didn’t feel like walking 5 minutes to the gates in the dark to wait for my dad to pick me up. My friend suggested we all sleepover at her house, and I thought it was a good idea. I faced a tradeoff between free-time which I enjoyed spending with my friends and studying less for my last exams. My three exams were on Monday and Tuesday, and during the sleepover we didn’t go to sleep so we could see the sunrise. I went home on Sunday afternoon and I was really tired and slept in my bed till 4pm. My opportunity cost for sleeping over is that I didn’t study as much as I could’ve on Sunday for the tests. My decision also caused me to sleep a little later on Sunday evening, because the day before I didn’t go to sleep at a normal time. My time was very scarce on Sunday because I had a specific amount of time left to study before going to sleep. My overall decision wasn’t very rational because I got less sleep, but I ended up doing really well on the exams.

  11. Judith R. permalink
    August 30, 2011 5:52 pm

    This summer vacation I had to make a decision about my vacation plans, as time I had left of the vacation was scare. The two tradeoffs were spending an extra week in Belgium or returning to Romania. The benefits of staying in Belgium were spending more time with my family whereas if I returned to Romania I would be able to spend more time with my friends whom I hadn’t seen for a month. The opportunity cost of staying in Belgium was less time with my friends while the opportunity cost of returning to Romania was less time with my family. After rationally weighing the costs and benefits of both decisions I decided to return to Romania as I had already spent the last month with my family whereas I hadn’t seen my friends for an extended period of time. I gave up spending even more time with my family but I was able to see my friends again and catch up on everything that had happened.

  12. AlexM permalink
    August 30, 2011 6:39 pm

    Current Opporunity Cost in my life:

    Being a scholarship student you pretty-much depend on school policies and decisions that I signed when I came to this school in 9th grade; one of them says that I am allowed to travel 2 times in a CEESA Activity per year which, so far, was pretty good for me. But now, there are some important choices to make this year since 11th grade needs to be treated objectively and with care. I am capable of making performance in many activities and, as normal, and I would like to participate in every one of them. They are Film, Math Counts, Robotics and Volleyball from which Robotics will be in Bucharest so it doesn’t count as a travel. So the hard decision is to choose two out of the other three activities: Math, Volleyball and Film. I participated in the first two in 9th and 10th grade so I am quite familiar with them but Film is another passion of mine and I just cannot miss it. I am quite lucky in this case that I have some more weeks to choose the ones I will practice and travel with.
    P.S: I remembered that in 9th grade, I traveled with Math Counts and next I was going to travel to CEESA Tennis but the trip was canceled because I was the only one ready to travel (too few participants). Maybe I can take that trip that is left from 9th grade and add it to this year’s activity travels; this way I will achieve all my goals and avoid choosing only two out of the three choices.
    ~AlexM

  13. Julie Brown permalink
    August 30, 2011 7:48 pm

    Last week, we had to choose which activities we wanted to participate in during the Fall Season. The tradeoffs were doing many activities I was interested in while also keeping up with school, sleep, and the work I would have or choose one or two activities and have time to sleep and keep myself academically focused. The benefits of participating in more activities was it would challenge me across more areas and would keep me busy and involved. The opportunity cost of participating in more activities would be my amount of work would increase and the time I have for friends/family, sleep, and schoolwork would decrease. Rationally, I decided to choose to focus on one or two activities so that I could still be involved but also have time to focus on academics, family and friends, and sleeping. This way I would also remain balanced and would not stress myself with too much.

  14. SkippingSchoolforSailing permalink
    August 30, 2011 7:54 pm

    One difficult decision I faced was when my time was scarce because I had to decide between going to practice for a sailing competition or ‘hanging out’ with my brother who was visiting one week for the first time in months from the US. Without considering anything else it seems obvious that I would stay with my brother, and that I would tradeoff going to the Black Sea, but considering that I had been away for a month and that I was sailing with a new helmsman (the guy who steers the boat) it was important to practice before the competition. This seemed rational because although I divided my time and the opportunity cost was that I didn’t get a lot of either I managed to get a bit of both which seemed to be the most time-efficient choice.

  15. Serban dabelea permalink
    August 31, 2011 4:58 am

    This summer i had to make a choice weather i would go to the UK or the States. For a brief travelling history i had been in the states 4 times and the uk twice. I did not know what to choose because both presented themselves as equally weighed opportunities. The benefits of the states was that it was bigger than the uk and there were more things to do or see. The uk is great in histCory and things to do but was not that big in size and there were not enough opportunities. Rationally i chose to go to the states because it presented greater opportunities at the same cost of going to the uk. The uk being an expensive experience.

  16. RobertC permalink
    September 1, 2011 4:58 pm

    Before the Summer Vacation started, I was given the choice between going to Italy to see my uncle and aunt or going to France to the countryside to spend some time with my grandparents who I had not seen for the past two years. the benefit of going to Italy was that I knew that there were many interesting things I could do along with my uncle such as going to one of my favorite water parks called Mirabilandia. However, the cost of doing so would be that I would miss the opportunity to be able to see my grandparents which I missed. On the other hand, I also remembered that most of the time I went to France, I ended up not doing much. And so I decided to go to Italy instead because it seemed like a better option to stay three weeks in a place where there were a lot of thing to do than in a place where I would get bored easily.

    – Robert Canciu

  17. ioana permalink
    September 11, 2011 9:23 pm

    At the beginning of the summer i was given 2 different ways of spending my summer vacation: my first given option was staying one month in Neptun, with many of my friends and with no parents, just having fun and fully enjoying the summer days and then returning to Bucharest and spending the last days hanging out with friends there 🙂 the 2nd option i had was to go in this Goethe Summer Camp, in which i had less freedom (obviously) and a strict program (classes between 9 and 12.45 and we even had bedtime! )
    The tradeoffs of choosing the 2nd plan were doing many interesting and fascinating activities, improving my german, meeting new people from other countries and also having fun. The opportunity cost of going to the Summer Camp was less time with my romanian friends, while the opportunity costs of choosing to stay here in Bucharest and at the seaside were missing the chance to make new friends and visiting new places, maintaining my german constant and being absolutely unprepared for school. In the end, i chose spending my summer vacation in a smart manner, choosing the summer camp. I analyzed the benefits and the opp costs and, unbelievably, but because of this Goethe Summer Camp i now consider summer 2011 the best one so far 🙂

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