A thing I hate: the concept of opportunity cost
28 March 2016
In a series of things everyone else probably hates too.
A common fallacy I hate seeing on the internet, among all the other fallacies on the internet, is misusing the concept of opportunity cost. This commonly crops up in MMORPG discussions, used by people who are obsessed with amassing virtual wealth, and probably read Economics For Dummies or something thinking it’d help them to that end.
If you don’t know what opportunity cost is, it’s the age-old economics adage of “time is money” taken to its logical extreme. It refers to the lost (or gained) potential profit when choosing between actions A and B with different profitabilities. In simple terms, unless you are spending your time doing the most profitable thing possible, you’re wasting your opportunity cost. The fallacy lies in — typically of economics — oversimplifying the situation and assuming that the potential profit is the only thing one should consider when comparing activities.
The typical opportunity cost fallacy in internet context goes something like this:
Guy 1: I can’t figure out how to make money in this game, anyone got any pointers?
Guy 2: Start by doing your dailies for a little bit of easy income. If you need more, level up a gathering profession; even low-level things like Steelium Ore are in high demand and are easy to gather.
Guy 3: NOOOOOOOOOOOO! That’s a complete waste of time! Get at least three extra accounts for max skill crafting mules, and use your crafting profits to buy out all competition at the auction house and relist their goods at a higher price! Alternatively get a minimum wage job at McDonald’s and just buy gold from the Chinese. Think of the opportunity cost!!
Dear Guy 3: stop immediately.
Here are some examples of situations where the concept of opportunity cost is a worthwhile consideration:
- Farmer Joe has a field, and has to choose whether to grow wheat or rye. Rye has 2/3rds the yield of wheat, and sells for a worse price. Thus, growing rye instead of wheat has a certain opportunity cost, which Farmer Joe should take into consideration when making his decision.
- I can’t think of another example
Here are a couple of examples of situations where the concept of opportunity cost is ABSOLUTELY FUCKING DISGUSTING and should be killed forever:
- Pants McSpacecaptain likes playing Eve Online. When he has nothing better to do, he belt rats in his corp’s staging system. Multiboxing Class 6 wormhole sites with a capital fleet is an order of magnitude more profitable. Pants is wasting his time.
- Farmer Joe has a field, and has to choose whether to grow wheat or rye. Investment banking has much better profit margins than farming. Farmer Joe is wasting his time.
A comic to go with the post: