The Price of Everything

Economists have this concept that they quite like called "opportunity cost." Only an economist could love such an unwieldy term. Most definitions textbooks give are rather complicated, so I'll provide the simplest one I can think of: the (non-monetary) cost of making a choice. It's the reason some asshole coined "Time is money," namely that his time is valuable because he could be making money at that very second if he wasn't talking to you. By choosing to converse rather than say, calling his broker, he has lost whatever benefit he might have gotten from that call.

The reason that the economists who deal with opportunity cost love it so much is because it is a very powerful explanatory tool. It explains price, for instance. If we could have whatever we wanted, what we wanted would far exceed what there is to go around (another beloved economic concept known as scarcity,) so we have to make decisions about what we actually want. Those who control the resources ration assign a price based on how much people value that resource.

Opportunity cost explains more than just price, though, which is why it's not a number. If it only explained price, you could say "Well I can have coke for $1.00 or water for $0.50, so the opportunity cost of drinking coke is $0.50." If it worked like that, you could also say "Well I can have water for $0.50, or nothing for free, so if I drink nothing I'll save $0.50." True, but you'll also die. Which leads me to my next point, that life is finite. We have a limited time on this planet, so every waking second is spent making decisions. Opportunity cost provides a rudimentary model for the choices we make, namely that we minimize the cost. This often fails in the short term when we do something like drink until we vomit, or in the extreme case that someone drinks until they die, but generally we choose the option that is the best for us.