The simple, little economic trilogy of scarcity, choice, and cost may well be one of the most useful concept gadgets in your tool bag of decision making. Keep the tool handy and use it a lot.
One of the most interesting aspects of our present consumer culture is our fixation with the printed price tag. What does this item cost? Or, this week we are rolling back all the prices, or, the cost of this item is reduced until Friday. The cost to be considered in the purchase of a product or service is presented to be on the bar code or price tag. But the money you tender to the cashier may not be the cost at all. The retailer, however, has even narrowed the logic of your decision to purchase down to the common denominator of do I have enough money to buy this?
In your lifetime the culture has even erased the criterion of whether you have enough money or not in your pocket to make the purchase by supplying you with a convenient piece of plastic that nullifies the logic and allows you to make the purchase, regardless. You walk away with your purchase fully confident that you did the really smart thing because you simply could not have lived without the item another day at that irresistible price. I actually know folks who will drive all the way across town to purchase their gasoline if the price is one cent per gallon cheaper than the competition. They spend three dollars to get across town to save twenty-four cents at the pump. What was the real cost?
I remember listening to a reporter’s interview with one of the early astronauts. The reporter’s question was, how do you feel, sitting in a spacecraft that has been built by the cheapest bidder? Our thinking regarding price tags or bids sometimes does not consider the real cost.
In the discipline of economics, cost is viewed through a different set of glasses. Cost is not determined by how much money you spent or how many plastic swipes you transacted. Cost is inexorably linked to scarcity and choice. In fact, scarcity, choice, and cost are at the very heart of the study of economics. When a good or service is scarce it means that the choice of one alternative requires that the next highest alternative be given up. The very existence of alternative uses forces us to make choices. The opportunity cost of any choice is the value of the next best alternative that was lost or forgone in making that choice. The true cost of the alternative that you did not choose may or may not have anything to do with money as represented on a bar code or printed price tag.
It would be easy to give lots of illustrations of foregone opportunity cost: the university student who gives up four years of earned income and pays thousands and thousands of dollars to attend university classes he hopes will better his position for the balance of his life; the girl who gives up marrying her childhood sweetheart in lieu of a musical career in London; the farmer who decides to continue farming the old family acreage instead of selling the property to the big box store.
But I don’t have to go farther to find true-to-life examples than to consider some of my friends from the organization that I love so much: Project C.U.R.E. We have over 16,000 volunteers within the United States at our various warehouse operations and collection cities. Every one of those sixteen thousand individuals has a personal story of scarcity, choice, and cost. The stories are packed with drama and passion because they each represent personal desires and values. None has to come and volunteer. But they faithfully come by the scores . . . but at a cost. What was the value of the alternative that was lost when they decided to forego that next highest alternative and choose to volunteer their time and efforts for no money payment?
In 1999, an operating room nurse named Barb Youngberg came with another nurse friend to check out Project C.U.R.E. They had heard at a hospital staff meeting about the humanitarian organization that was functioning out of the huge Continental Airport hangers at the old Denver Stapleton airport. They were intrigued by what they saw and the idea that their efforts were saving lives all around the world. Barb and her friend made a decision to start sorting medical supplies one night a month for Project C.U.R.E.
As Project C.U.R.E. had to move around the city from one donated location to another, Barb followed and began donating more and more of her time. In 2005, she retired from her hospital job but kept volunteering. In 2007, the doctors discovered that Barb had congestive heart failure. To complicate the diagnostic procedures, they found she was allergic to the dye required for the tests. She knew exactly what the surgery entailed because she had scrubbed down and assisted in many such surgeries in the past.
Just hours after the successful diagnosis, the doctors performed open heart surgery that also included the insertion of a pacemaker. As she lay in the recovery room and then spent two and a half weeks in rehabilitation, she knew she had to make a huge decision. She was now realizing that the years of life she had left were a very scarce commodity. What would she do with those years? She had to make a decision. Would she take it easy on some leisure cruises, or relax and stay around home . . . or what?
Barb made her decision. Just as soon as she was able, she returned to Project C.U.R.E. She had decided to give the best of her life for the rest of her life helping other people be better off. Project C.U.R.E. had just moved into its permanent location near Park Meadows, in Centennial. Barb volunteered to take over the entire bio-med tech area and build it into an efficient and successful department. She already possessed the knowledge of the various pieces of equipment. Over the years of her career she had accumulated the valuable experience of working with the medical machines and pieces of technical equipment. Those were her talents. Now she could manage the inventory and lots of other people to help her build and run a successful department.
When the pieces of bio-med-tech equipment, like x-ray machines, defibrillators, e.k.g. machines, ultrasound machines, or anesthesia machines arrive on Project C.U.R.E.’s docks, Barb Youngberg knows exactly what to do to get those valuable, life-saving items ready to be shipped to the targeted hospitals and clinics in over 130 different countries working with Project C.U.R.E. around the world.
Utilizing the economic trilogy of scarcity, choice, and cost can help us make better decisions throughout our lives. In Barb Youngberg’s case, realizing she faced the scarcity of years, and knowing she had to make a choice, she gave up the options of cruises and leisure in lieu of helping to save countless lives of kids and adults around the world. We salute her for her nearly fourteen years of voluntary service at Project C.U.R.E. and her determination to make good choices.
Next Week: A weakness of the economic trilogy
(Research ideas from Dr. Jackson’s new writing project on Cultural Economics)
© Dr. James W. Jackson
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