Opportunity Cost

From Critical Practice Chelsea

For ResourceCamp at Disclosures

Last year Critical Practice contributed to an event focusing on Value (the Value 'Between' with O+I). It was said that the value of something is the sacrifice one is prepared to make.

I thought this might be useful to our discussion – one's personal economy of time and the time one is prepared to 'give' – so I'm going to introduce the economic notion of Opportunity Cost.

Its not something I know a great deal about but it has potential. Most of the source material comes from Wikipedia:

Opportunity cost is the cost incurred (sacrifice) by choosing one option over the next best alternative (which may be equally desired). Thus, opportunity cost is the cost of pursuing one choice instead of another …it implies the choice between desirable, yet mutually exclusive results.

Financial example: Someone who invests £10,000 in a stock denies themselves the interest that can easily earned by placing that money in a bank account instead.

Obviously the cost need not be monetary. I’m talking explicitly about the subjective value of one use of time over another. I’m wondering if an engagement with the components of the decision to participate or not has anything to offer our objective - why choose to contribute to the egalitarian project instead of doing the other thing (or vice versa)?

Assessing opportunity costs is fundamental to assessing the true cost of any course of action. In the case where there is no explicit accounting or monetary cost (price) attached to a course of action, ignoring opportunity costs may produce the illusion that its benefits cost nothing at all. The unseen opportunity costs then become the implicit hidden costs of that course of action. - Wikipedia

Example of personal utility: What values judgments did I use when I chose to commit to this presentation instead of preparing for the interview I have on Monday?

These ‘costs to the individual’ may simply be a way of allocating an exchange value for intangible work. That cost may not be fixed though – if I don’t get the job on Monday the personal cost of this presentation goes up.

What's not so nice is the idea of value being imposed or defined in relation to something other, rather than for it's own sake. But this is the nature of things

Accounting for the hidden costs of participation is partly what we’re here for I think. It may be quite challenging personally and culturally destructive – perhaps cultural production is demeaned if the practitioner ‘has nothing better to do’? This personal value of time occurred to me because it is something I do not pay so much attention to my ‘career’ or finding a buyer for my skills.

I had hoped someone with experience of managing and valuing volunteers would be able to come, as it relates to this principle I think. Going further to make participation a positive sum by offering travel expenses in addition to skills, experience, contacts…

Paying attention may inform a more conscious and efficient use of time, an emphasis on personal growth, or be a neat way of equalising the relative value of time among individuals. 2 hours in one personal economy may have the same relative value as 2 hours in another.

If one was looking for profit (or utility) it would be a subtraction of the benefits of the various options. This might include the consequences of doing, of not doing, something – since actions have outcomes that affect others. It may dovetail with a consideration for generosity and exploitation - the extent to which one contributes or extracts from a project or event.

The way Opportunity cost applies to material production may also be useful. A producer only has so many resources. You’ve got to make value judgments if there’s more than one ‘opportunity’ in play.

In a small way it also speaks to what Simon Sheikh was talking about yesterday about judgment and fragmentation - about having to edit

...viewed from the prism of opportunity cost, "supply is reverse demand". "The only sense, then, in which cost of production can affect the value of one thing, is the sense in which it is itself the value of another thing. Thus, what has been variously termed "utility" ...or "desiredness", is the sole and ultimate determinant of all exchange values" - http://cepa.newschool.edu/het/essays/margrev/oppcost.htm