Reflections Between the Lines / 1 The opportunity cost is also applied in personal life

The opportunity cost is also applied in personal life

In economics, a basic concept is the opportunity cost, from which refers to the problem of shortage of resources and the need to choose which production of a good or service is intended, while are reduced those needed for other goods and services.

Paul Samuelson in a classic example, speaks of the need to allocate resources to produce two goods, guns and butter. In reality there are thousands of goods between to be chosen, but the simplified example perfectly illustrates the idea of scarcity and allocation. Resources can be devoted to producing only butter or guns, the ideal solution is not extreme, in reality choose a combination and intensity of each well depends on the orientation of the economy.

Figure 1 illustrates the idea by taking two countries, one chooses the point Pc, where the amount of resources for the production of cannon is dominant. In reality they are ruled by princes or tyrants, why countries have this choice. Before the welfare of the people are interested in security and military power. At the point Pm is located a country where the welfare of the people is important but safety is not neglected.

Without straining the imagination one can identify North Korea as the Pc country Pc, while South Korea is the Pm country. In the first, the factor that guides the opportunity cost considerations are paranoia, bellicose zeal; in the other case, the need to stay on the path of development, which means taking care of human resources as one of the most important to achieve that status.

The resources involved are natural, financial, and even human. In North Korea, people are not required to participate in productive activities; in fact they may be even in the Pc position (on the production frontier), but an internal point Pc'. In the other, people engage in productive activities that increase the chances of being located on the production frontier.

 

When we turn to the personal level, the opportunity cost also involves the allocation of resources among alternative uses. What are the resources? Let's talk about one that is definitely low, you cannot play, it is time. There are two alternatives: the time at work and time for personal life, family. The time at work, dedication, effort and commitment can be indicators of personal success, which can be supplemented with monetary rewards, power, status, fame. On the other hand, leisure activities can be not necessarily generate income, but which contribute to the quality of life set.

Someone who is a “workaholic” can be located in the Pe point where the predominance of time allocated to work and the pursuit of success is seen as the supreme goal; while whom is located on Pf  decides to allocate more time to family, given the success, the benefits it grants but also freed from the pressures involving to get and maintain that condition. Perhaps an intermediate position can be recommended, although varying according to circumstances. Figure 2 shows this situation.

It is necessary to admit that the professional who has achieved success not necessarily located on the production frontier (meaning full life quality), may be in an internal position as Pe'. It must be accepted that success is not free, plus the time, are  required other concessions such as health, low quality family life,  sometimes alienation, madness. And often shortens the time available for further action (premature death). The man who is at the point Pe perhaps not yet born.

Philosophy of life involves the wise use of time and opportunities that life offers to build a better "world", join to bring quality life, based on the balance between satisfying the material and spiritual needs. It is understood that for someone who occupies a high position in an organization, the ability to think and reflect is not excluded from their daily activities, so you can take the time to make an assessment of the personal, professional and family becoming, and decide whether the time spent on each area of life is balanced.

Now, take a moment and decide how you choose to be. You most valuable resource, tour time, is exactly 24 hours a day. Evaluate the pros and cons of seeking only the success or just family life comfortable, smooth or refine an intermediate situation. Definitely will not recommend the Pe point. Money, power, glory not does help you in the underworld.