
Judge the value of what you have by what you had to give up to get it - imartin2k
http://timharford.com/2018/05/judge-the-value-of-what-you-have-by-what-you-had-to-give-up-to-get-it/
======
nabla9
Some concepts in economics are so fundamental that they should be part of
philosophy curriculum. _Opportunity cost_ is one of those concepts. _Scarcity_
forces resource allocations and choices to us. If nothing else, we can't be in
two places at the same time (time is scare) so we have to make choices. How to
value the cost of choice is fundamental to everything we do.

~~~
vincentmarle
It would be good to realize that it’s only useful to think about opportunity
costs for future problems ( _opportunity_ is in the name). Once costs have
been made in the past, they should have little weight in future decision
making, hence the concept of sunk cost.

Decision making is also often not as cut and dry as the article suggests: once
you throw probability, randomness and asymmetrical outcomes in the mix, it’s
really hard to determine your true opportunity costs.

~~~
lostctown
I've had my mind on this exact point for a while. But I'm slowly realizing
that I tend towards new shiny things, like many people. And sometimes that
project I've been grinding on for a couple years starts to look less
appealing. So I lean on the argument that, 'hey, I put a lot of time into
this. I should continue.' Continuing to work on the long boring project for
this reason alone technically qualifies as the sunken cost fallacy. Yet it
helps me override my internal *human bug I'm experiencing. That is, we
associate boredom with a lack of progress.

------
aaronchall
That's the cost approach to value, and directly speaking, it's a fallacy, as
what you gave up is now a sunk cost. However, if nothing has really changed
since you made the decision, it certainly establishes a minimum value to
yourself as a revealed preference.

Another is what would others give you for what you have (market value).

I think the best one, that you can uniquely derive for yourself, is what is
the maximum value at which you would have been indifferent to make the trade -
that's the true value to yourself.

~~~
lifeisstillgood
Just on your last paragraph- if I choose between apples and oranges, and am
indifferent at 2 apples or one orange i see that an orange is worth two apples
to me?

is that your meaning?

~~~
aaronchall
Yes. If you would gladly give up one apple for one orange, indifferent at two
apples for one orange, and at three apples, you'd certainly decline to trade -
then an orange, to you, is worth two apples.

------
cimmanom
And this is why so many people born into money have no idea how fortunate they
are compared to everyone else in the world.

~~~
theoh
If they didn't have to give anything up to get their wealth, then it can't be
worth anything? Hardly.

I don't think opportunity cost is really relevant in the case you mention.

~~~
cimmanom
I don't think it's not worth anything. I think they fail to recognize the
value of it because for them there was no opportunity cost. (Whereas for the
parents or grandparents who earned the money, there was typically a cost in
terms of, for instance, time spent with family.)

~~~
theoh
That's just one, very plausible, possible back story.
([https://en.wiktionary.org/wiki/clogs_to_clogs_in_three_gener...](https://en.wiktionary.org/wiki/clogs_to_clogs_in_three_generations))

But some wealth is effectively a windfall.

Tim Harford's point is that we aren't inclined to think about opportunity
cost. It doesn't, in fact, come naturally.

A life of privilege has opportunity costs too: it can be really hard for
someone "well born" to acquire certain competences.

And an (elective?) nerd's opportunity cost is all those things that jocks
enjoy. (A ridiculous example, sorry!)

------
JoeAltmaier
Its very easy to add up everything you don't have, and see that it's larger
than what you do have.

The true 'opportunity cost' is adding up what might have been, _weighted by
the probability_ of it actually occurring. Very hard to calculate. Makes the
advice in the article interesting but largely moot.

Compound it by people being generally terrible at recognizing true
probabilities. "I could have been a famous musician! I gave up on my dreams!"

This failure is responsible for 99% of the folly in life - playing the
lottery, not wearing seatbelts, not committing...

~~~
tvanantwerp
I don't think that's really the point being made here. Opportunity cost is a
useful thought exercise for all kinds of decisions, not just "Should I follow
my passion to become an underwater basket weaver?" type questions. I've found
it very helpful to consider what opportunities I'm giving up whenever I'm
deciding on a course of action, even if it's simple like: "If I go out
drinking with friends tonight, I'm giving up rising early tomorrow and feeling
good."

------
ukulele
I agree with the sentiment but not the tense.

It should read "Judge the value of what you'll have by what you'll have to
give up to get it." This is actually in line with the example the author
gives.

If it's past tense, then you get yourself into sunk cost fallacies.

------
tvanantwerp
Another, perhaps more depressing, way to think about opportunity costs:
[https://www.smbc-comics.com/comic/potential-2](https://www.smbc-
comics.com/comic/potential-2)

------
jadedhacker
Cheap penicillin is very very valuable but precisely because it is cheap.
Expensive penicillin would be more valuable per individual, but less valuable
overall.

~~~
thaumasiotes
No, expensive penicillin would be less valuable per individual, unless
possession of penicillin turned into a status symbol.

Whether it would be more or less valuable "overall" depends on how you define
overall value.

~~~
jadedhacker
The point I was trying to get across were the different conflicting
conceptions of value and how one is shortsighted.

------
mkempe
A better way to think about personal values is that we are rational animals
and thus do (as we ought to) integrate our actions into long-range, sometimes
life-long plans -- purpose, goals, objectives, i.e. values. _This integration
means that the value of what you do or have is what it enables you to do or
have next._ Think of steps on a ladder. For instance, one visits the grocery
store in order to buy food ingredients so as to prepare a meal (furthering
nutrition, health, sensual pleasure, friendship if you share that meal...).

The higher each of your purposes, the more valuable all the intermediate
steps, actions, and belongings that support your path to it.* Ultimately the
price you must pay for all of your values is your own time, so make the most
of it!

* I think of this as teleological chains, and hold that there is a firm biological basis for this.

------
OceanKing
So by that logic, is my life worthless?

~~~
analog31
Are you a middle manager? ;-)

The middle managers are perpetually faced with the prospect that if they
choose A, they have to give up B, which is of equal value (within reasonable
error bounds). This is a very real part of their lives.

They remind us about opportunity cost, which turns out to be one more thing
that they can't hope to calculate. At the end of the day, the average effect
of their decision making is net zero.

~~~
carlivar
This doesn't account for the time itself to make a decision. Many middle
managers in organizations are not trained or empowered to make decisions
quickly. This has serious opportunity cost of time. Nimble organizations make
fast decisions which may have an eventual zero sum effect but at least gets
there more efficiently, eh?

~~~
analog31
Indeed! Lack of decision making power can cripple a business. When everybody
knows that any decision can be spontaneously vetoed, then people stop making
decisions, and they also stop believing decisions.

And I think part of what cripples decision making is in fact the fear of
opportunity cost, because every decision requires considering an infinite
number of alternatives.

------
timeisbounded
Whenever i purchase something i think about how much time did i have to work
so i can have the money to pay for it? How much time a person in a third world
country would have to spend? I ask the second questions to initiate
perspective shift. Then i ask myself what else can i do with this money and
how much time off could i have if i don’t spend this money. I think asking
these questions largely depends on how deep in debt you are or how deep down
the rabbit hole of “self perceived meaningful consumerism” you have dug down.
Clearly our biases and imagined orders are drivers of our values so our
estimation of opportunity cost is largely affected by those.

------
lifeisstillgood
So my wife is worth ... every other woman on the planet. yeah that's about
right ;-)

------
metabagel
Great article about opportunity cost and trade-offs.

------
insickness
Maybe better to say: People judge the value of what they have by what they had
to give up to get it.

------
the_cat_kittles
for some reason the first thing i think of is how in art this is probably the
worst advice ever.

------
justherefortart
Lol this is nonsense.

Judge the value of what you have by what someone else is willing to pay for
it.

------
thaumasiotes
This title seems like a pretty bold endorsement of the sunk cost fallacy. Does
the article actually reflect that?

Why would something be more _valuable_ just because I paid more for it?

~~~
_rpd
> Does the article actually reflect that?

No, the author is advocating taking opportunity cost into account, which is
good advice.

~~~
ewjordan
Unfortunately the title is misleading, and it makes sense that some would
interpret it as supporting the sunk cost fallacy - the author is actually
advocating for judging how much you should give up to get something by how
much you'll value it, whereas the title has it flipped the other way.

