6 Ideas about Opportunity Costs

Six ideas about trade-offs and opportunity costs when making decisions, from The Paradox of Choice by Barry Schwartz:

• We feel uncomfortable making decisions that involve trade-offs. However, most decisions involve trade-offs. Thinking about opportunity costs is an essential part of decision making.

• The presence of a second option affects our evaluation of either one. Adding a second option that introduces a trade-off to a choice creates a conflict. The choice becomes harder, not easier.

• We want to justify our decisions. Difficult trade-offs make it difficult to decide, so decisions are often postponed. Easy trade-offs make it easy to justify decisions. Single options lie somewhere in the middle.

• Phrasing and enunciation of the problem affect the outcome, because they make us focus on different aspects of the decision. (For example, a negative phrasing makes us focus on disqualifying arguments.)

• Positive emotions broaden our understanding of what confronts us, helping us make better decisions. The opposite is also true. The paradox is that making complex decisions induce emotional reactions that may impair the thinking necessary to make a good decision.

• Decisions that seem trivial may become subjectively important if we believe those decisions are revealing something significant about ourselves.