Constrained Bliss Point

Opportunity cost is what you give up to get something. This is explicit in some cases. Say you buy a bag of oranges at the grocery store: the opportunity cost is what you pay for them. You can’t use that money to buy something else now.

I think the biggest opportunity cost is time. Or at least, when I try to think of examples to illustrate opportunity cost, they all have to do with how you spend your time. When you spend your time doing any one thing, you are implicitly choosing not to do anything else. When you hang out with a friend you can’t be doing homework or cleaning your room  (or maybe you can, but with a loss in efficiency). When you choose to sleep, you can’t be reading or eating or partying.

Opportunity costs loom large even if we restrict our domain to tasks that need to be accomplished. When I choose to work on my econometrics homework, it means I can’t be working on my chemistry homework. If I’m reading an ecological economics paper, I can’t be reviewing the behavioral economics literature.

I think this is a large source of procrastination. Obviously it is easy to procrastinate if you choose to party instead of doing homework. But I have found it easy to procrastinate even when  I set aside a block of time for homework only. I think this is because, when something is not due the next day, I cannot choose which assignment deserves all of my attention. The other assignments nag at my psyche leading to inattentiveness and inefficiency.

Solving the opportunity cost problem is a necessary condition for increased productivity.