In 1850, a French economist, Frédéric Bastiat, told a short story that became famous. A young rascal breaks a shop window. The neighbours comfort the shopkeeper: "It's not so bad, at least the glazier will have work!" The shopkeeper pays six francs, and the glazier is pleased.
What is seen
The glazier at work, the six francs changing hands. Everyone sees that.
What is not seen
With those six francs, the shopkeeper could have bought a pair of shoes, or a book. Nobody will ever see those shoes, because they were never bought. And instead of having a window and shoes, the shopkeeper only has a window.
That's opportunity cost: what a choice really costs you isn't just its price, it's the best thing you give up to make it. A century later, the economist James Buchanan added an important point: that cost is felt only by the person choosing, at the moment they choose. Nobody else can decide for them what was worth the most.
The hidden cost of everyday life
Opportunity cost is everywhere:
- An hour in front of a screen is an hour less of cycling, reading or sleep.
- A CHF 2 bag of sweets every week adds up to CHF 104 a year. For Buddy, that's a good chunk of the helmet for his future bike.
- CHF 10 a month spent without thinking for 10 years is CHF 1,200. Invested at 4% a year, it could have become about CHF 1,470.
Careful, the point isn't to ban sweets! Sometimes the sweets really are worth more than anything else, and that's perfectly fine. The point is to choose while seeing both sides, rather than only seeing what's shining in front of you.
A superpower for children
Children who learn to ask "what won't I be able to do if I do this?" make better decisions, with money and with their time. They also discover that a choice belongs to them: owning its consequences is the first step towards independence.
Try this tonight with your child
Play "This or that?". Before a small purchase, ask: "With these 5 francs, you could have this… or that. Which do you prefer?" Then go further: "And if you wait two weeks, what could you have?" Let them decide on their own. The game isn't about finding the "right" answer, it's about seeing the invisible thing.
Further reading
- Bastiat, F. (1850). Ce qu'on voit et ce qu'on ne voit pas (That Which Is Seen, and That Which Is Not Seen). Paris: Guillaumin.
- Buchanan, J. M. (1969). Cost and Choice: An Inquiry in Economic Theory. Chicago: Markham.
Teach them to see what isn't seen. Join the Mangosteen Buddy waitlist: Book 1 of the comic is free, and the first 500 families get their first year of Premium on us (worth CHF 150). Save my place