Opportunity Costs Everywhere

This post was drafted a while ago.  This blog is as much about gaming as life, and it would be ignorant of me to not point out the sheer insanity going on around us.  It would be further folly to say that this wasn’t the obvious outcome of a seemingly infinite amount of factors.  I’ll come back to this point in a more fulsome view later.

Opportunity cost is where you lose the opportunity to do something while doing something else.  This is, impressively, one of the pillars of society.  You can’t have workers if you don’t have farmers.  You can’t have artists if you don’t have workers.  You can’t have X without Y.  Games like the Anno series are examples of this system of dependencies and plateaus.

At the micro scale, it can be something as simple as the time you spend prepping food vs. buying pre-made meals.  The former is certainly less expensive if you look at it from an ingredient perspective.  Where it gets more complicated is in labour costs.  Even though you may get paid more per hr, odds are the service costs are higher because that takes into account a bunch of overhead costs.  So for argument’s sake, let’s say making a gourmet burger at home costs 8$, picking it up costs $15, and getting it delivered is $20.

The opportunity costs is the time it takes for you to do this, giving 3 cases.

  • Making it yourself : 40 minutes @ $8
  • Ordering and picking it up: 20 minutes @ $15
  • Ordering and having it delivered: 3 minutes @ $20

Then you look at what you could have been doing during this time.  Learning to play guitar.  Spending time with the kids. Washing the car.

Again at the micro level, people see this come up everyday, multiple times.  In my neighbourhood, over half of the folks pay for someone to plow their driveway during the winter, yet none of them have someone mow their lawn (so time is less of value here than effort & comfort).  I could paint my house and spend a week doing it, or pay professionals who will get it done in 1-2 days.

I tend to classify these choices into two categories, the large and small.  The large ones are where I have a choice to not work and do it, or pay someone to do it.  Those choices are much simpler as my pay/hr is motivating.  When I was working part time as a kid, this was even easier as I could do it for cheaper.

The smaller ones at the individual level are actually the hardest to do because they appear to be convenience but often have much larger impacts.  Using the food example above, the one-off is fine as long as it fits in the budget.  Making a habit of it has health impacts (since 95% of ordered food is not healthy choices) and financial ones (since most people are not offsetting the financial impacts of the choice).  Something as simple as a breakfast sandwhich and a coffee before work is $8.  Do that every day in a month and it’s $160, or close to $2,000 a year.  Prepping it at home is closer to $1 per day.

I like to fish, and that costs money for bait.  Worms are $7/18, and plastic baits (with hooks) come out to around $1.50 each.  I can get through the worms in a weekend with the kids, and 10 plastic baits.  Each weekend can therefore cost me $22 in bait.  Breeding my own worms is $40 of material investment, but reaping is nothing for 6 weeks, then a limit per week (to maintain breeding).  Making my own plastic baits is $120 in material investment (then ~50c in material per item) and an hour of effort, but I can’t make hooks.  My napkin math says I’d need to make ~200 baits to get a return on investment – or 20 weekends of fishing (2 seasons).  If I used more bait on a regular basis it would make sense, but for now the costs are entirely manageable.  Right now, it would cost me more in time than it would in money.

I know this isn’t a common viewpoint.  It doesn’t account for the emotional aspects of an activity, the skill growth, the expertise, or the networking benefits.  But if people take a step back and think about why they make certain choices, they will realize that they likely apply this thinking instinctively.  The entire concept of convenience is based on it.

Cause really, I can always make more money, but I can never truly buy back time.

 

2 thoughts on “Opportunity Costs Everywhere

  1. Opportunity cost may have meaning for businesses but for individuals it’s often completely notional. Rather than consider what they could have done with the time saved, people would be far better served to look at what they would have done. In my case, rather than any of the valuable activities suggested, the saved time would almost certainly have been spent doing something like this, posting random comments on blogs. For someone else it would be more time spent raising their blood pressure on Twitter or just having a nap.

    In that sense, I often feel that taking the time to do something myself that I could have paid someone else to do (better) is actually an opportunity to do something more meaningful or substantial. Making that forty-minute burger wouldn’t just save me $12 – it might well also be the most satisfying personal accomplishment of the day – or the week!

    Liked by 3 people

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