Soup or Spagetti?
Ever since childhood, we have all done our best to maximize our personal utility, we just didn’t know it. I am aware that even from a very young age, I have pensively made every decision through weighing the alternatives. Tonight even, I has a very difficult decision to make: spaghetti or soup? Every single teeny tiny choice turns the wheels in our heads from option to option. If I eat the soup, I have to miss out on my mother’s spaghetti. But if I eat the spaghetti, who knows when the next time I’ll get her neighborhood-wide famous minestrone soup will be? Whatever option I choose, I will do so to maximize my utility, and the option I sadly pass on, aka the “next best thing”, will fall into my ever-building pile of opportunity costs.
So that seemed simple enough, but then I had to factor in some other variables. The soup had already been made; if I passed on it tonight it would go to waste. I otherwise like the spaghetti better, but that would require more work for my mother, having to make a meal tonight when there was leftover soup in the fridge. Things like this change our priorities. I in the end chose the soup, as it still maximized my utility, but in a far different way than one would think. One would imagine you pick a dinner because of what sounds better in the moment. However, my utility was maximized because I knew the guilt of asking my mom to cook was a bigger price to pay than sacrificing the tomato-y delight I potentially could have consumed. This is a clear example of how the opportunity costs are not cut and dry, many aspects go into decision making in economics, and sometimes the “next best thing” or the sacrifice is not what you would have suspected it to be.
In the book Naked Economics by Charles Wheelan, the idea of opportunity costs are discussed. We have been weighing options practically since birth, and only now, as students, do we fully understand the potential and importance of every choice. Like Wheelan says on page 5 of his book, there are many measures of progress. This can apply to a single person in the same way it does to the economy. There are many ways to make a decision. The one that makes you the best-off in the end is the one to go with. With the example Wheelan used- although the nation might have less money, we have wiped out numerous dangerous diseases. The money is the opportunity cost here, as having that would be good, but not as incredible as irradiating fatal diseases (which was completed through that surplus of money.) So whether it is a measure of economic progress through money or national health, or even if the situation is deciding between spaghetti and soup, there is always a way to maximize your gain, but it all comes at a cost.
1] Wheelan, Charles J. Naked Economics: Undressing the Dismal Science. New York: W. W. Norton, 2010.