I took a couple of economics courses when I was a student at Rutgers, the State University of New Jersey. One of the very few things that has stuck with me since taking the courses is the principle of opportunity cost — that anything you do necessarily has an implied cost based on what you could be doing instead.
If, for example, I have a skill set that allowed me to fix and restore vintage cars, and I spent my Sunday afternoon reading a book instead of fixing a 1956 Mercedes, the opportunity cost is the lost money that I would have made doing the work.
The concept of opportunity cost comes up a lot in life when we are offered something seemingly for free. Whatever the thing is cannot be said to be truly free because of the opportunity cost — the time spent getting to the thing and the time spent waiting to get the thing. Of course, there are exceptions — if you are walking down the street and someone hands you a bottle of iced tea with no strings attached, the opportunity cost is negligible because you only had to slow down for a moment to grab the bottle and (if you were raised well) thank the person.
This last Tuesday was Free Scoop Day at Ben & Jerry’s Ice Cream shops. My wife and children had spent the day with my mother visiting a museum and I met up with them after I got off work. We walked over to the Ben & Jerry’s shop and found that there was a line that went out the door, around the block, and nearly down the entire length of the street. There could not have been fewer than one hundred people in line, by my very rough estimate.
If each person took exactly thirty seconds to step up to the counter, get their ice cream, and then clear the space for the next person, it would take fifty minutes between when we got in line and when we got the ice cream. Since the world in practice is never this perfect, it probably would have taken closer to an hour and a half.
Again — this is for one scoop per person — so Chaim, Elizabeth and I would have each gotten one scoop. It would have “only” cost us an hour and a half of our time. In the store itself, the price of three scoops of ice cream is less than ten dollars. Without even having to look, I can tell you that an hour and a half of my life is worth far more than ten dollars.
Moreover, there was the added cost of having an eleven month old baby and a four year old child with us. Malka would have been pretty restless after half an hour, and Chaim would have been complaining of boredom before then. Is all of this worth it for three scoops of ice cream?
We ended up going to Coffee Bean and Tea Leaf. As we sat there with our drinks (and a promise to Chaim that we would get a pint of Ben and Jerry’s later) one of the baristas gave Chaim a blended chocolate drink on the house. That was definitely worth it.
When you have an opportunity to get something for free, do the math — is it really worth it?