Wednesday, February 14, 2007

Opportunity Cost: Broadly Speaking

Most introductory economics classes begin with the usual principals: 1) Human wants are unlimited, 2) The resources to satisfy the wants are limited, 3) There is an opportunity cost to the way we use our resources. If we go for X, it means we are not going for Y or Z.

Here, the notion of opportunity cost really interests me. It is like a fundamental axiom, applicable in almost any sphere. Lets stretch the model a little further: 1) Human life (age) is limited, 2) The ways in which we can spend the life are unlimited, 3) There is an opportunity cost to our actions. If Ram marries Sita, he is not marrying Gita or Mita. If Hante decides to live in Australia, he has to give up life in Burma, Sudan, or any country other than Australia.

Once in a while, in a retrospective mood, we analyze our life in terms of it's opportunity cost. What if I had done this instead of that. Anne Tyler's novel, Back When We Were Grown-Ups, opens with the sentence, "Once upon a time, there was a woman who discovered she had turned into the wrong person." What Tyler is driving at isn't that there is a right person per se, but that among all the possibilities, what she became wasn't what she had once envisioned, she took the wrong turn at the crossroads. In 'The Family Man', Nicholas Cage experiences the opportunity cost of his life as a rich investment broker, the less-alloyed happiness of family and friends. He redeems himself, which makes for a feel-good movie.

Like it or not, every morning we wake up, we face the heartbreaking, beautiful and daunting opportunity costs of life.