Relative costs
Quick! Answer me this:
The opportunity cost of attending college is likely to be highest for a high school graduate who…*
A. can immediately take over his family’s business.
B. who has access to student loans.
C. who is very intelligent.
D. whose family is extremely wealthy.
The apparent answer is A. The reason being that the person who can make the most money without a college education has the most to lose from the experience of getting one.
Of course, this is only half-true. (And it’s exactly why I’m not a huge fan of value-based tests.)
The kid who has access to student loans might also have access to the financial resources and connections to start his own business. The kid who’s very intelligent might do significantly better dropping out. And the kid who comes from money might someday see that money run out (perhaps as a result of a global pandemic). What’s he going to do with all that college debt then?
Opportunity cost is classically defined as ‘the highest-valued alternative that must be sacrificed when we make a decision.’ But it’s better understood as all the alternative opportunities you pass up by making a choice. Thing is, we’ll never know what all the opportunity costs are for any one choice that we make. And it’s a mistake to assume that—just because the result of one outcome is easier to measure—it’s somehow more costly.
Costs are relative. As is value. So making a decision based on an objective, easily-assessed standard is likely not the best method.
All we can do is make the best decisions we can. Ever mindful of the opportunities we missed, even—especially—the one’s that are hard to quantify.
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*This is actually a real question from a real economics textbook. In fact, it’s searched for so often (about 900 times a month) that it ranks as an SEO keyword. Go figure.