We Get Nothing For Free
This is part 3 of answering the question: How do we make decisions in the real world?
One Takeaway
Every decision comes at the cost of the next best alternative. Even if that cost is invisible.
What Is Opportunity Cost?
Maybe you’ve heard the saying, “There’s no such thing as a free lunch.” It’s not just a clever phrase telling you to be distrustful of free offers. It’s one of the most important ideas in economics. Whenever you choose one thing, you give up something else. That “something else” is called your opportunity cost.
But unlike a price tag, opportunity costs aren’t always clearly seen. They’re often hidden, untouchable, or easy to overlook. They might take the form of time you can’t get back, energy you could have spent elsewhere, or a missed chance you never even considered.
What You Give Up Matters
Imagine you’re offered free tickets to a concert. Sounds like a win, right? But what else could you have done with that evening? Maybe dinner with a friend. A workout you’ve been meaning to get to. Or just a quiet night of rest. The tickets may be free, but your time—and what else you could’ve done with it—isn’t.
The same is true for money. If you spend $50 on a concert, you don’t just lose the $50. You lose whatever else that money could have done for you. A nice meal. A step closer to a savings goal. An online course. That trade-off is your opportunity cost.
Why It’s Easy to Miss
Opportunity cost is often invisible. We don’t usually stop to consider the alternative actions we’re giving up. But just because you didn’t notice a trade-off doesn’t mean there wasn’t one. In fact, many of our worst decisions come from ignoring opportunity costs. From time to time we all spend time, money, or effort on things we may later regret, while giving up things that we wish we had done instead.
Why This Matters
Opportunity cost helps us:
Make better use of our time by asking, “Is this really the best use of my time?”
Spend money more intentionally by considering, “What else could this money do for me?”
Evaluate big decisions—like careers, investments, and education—based on their full range of trade-offs, not just surface-level perks or costs.
This concept also applies to public decisions. When governments spend money on one thing, they can’t spend it on something else. Every bridge, grant, or subsidy comes with an unseen cost such as something else (like maybe your savings account) that didn’t get funded.
The Bottom Line
You pay for everything with something, even if that something is just time, energy, or the road not taken. Opportunity cost reminds us that trade-offs are everywhere. If you want to make better choices, don’t just ask, “What am I getting?” Also ask, “What am I giving up?”