What is most powerful economic knowledge for individuals to understand to improve their lives? This paper surveyed every economist in Sweden and found the overwhelming choice was... opportunity cost. The paper: tandfonline.com/doi/full/10.10…
So here is a thread on opportunity cost....
So here is a thread on opportunity cost....
Opportunity cost is what you give up when you make a choice. Not just what you didn't buy with the 💰 you spent, but also what you could have done with that 💰 if you saved it for the future. Since you must have chosen the best option, opportunity cost is your next best choice. 2
Except that it often isn't! A lot of research has shown that people neglect opportunity cost when making choices. This leads to consumers falling prey to bad marketing, policy makers making short-sighted decisions, etc. @danariely summarizes this in his interview with Reuters. 3
A few methods research have found work to get people to consider opportunity costs:
🤔List other alternatives you would want to spend money on
⏳Put costs in terms of hours of work
👴Imagine yourself when retired
To be clear, all of these are REALLY annoying, which is the point 4
🤔List other alternatives you would want to spend money on
⏳Put costs in terms of hours of work
👴Imagine yourself when retired
To be clear, all of these are REALLY annoying, which is the point 4
For more, this is a nice summary from the St. Louis Fed on opportunity cost: stlouisfed.org/open-vault/202…
(As a side note, this is turned out to be a super not fun thread, and there isn't really a way to make it fun, which is why financial education is so hard. Back to fun tweets)
(As a side note, this is turned out to be a super not fun thread, and there isn't really a way to make it fun, which is why financial education is so hard. Back to fun tweets)
• • •
Missing some Tweet in this thread? You can try to
force a refresh
