Thought for the Day: Opportunity Costs -- Explicit and Implicit; The Value or Writing Down Your Thoughts

I hate being wrong. No, really; I hate it. I love, therefore, when someone corrects me. Now, to be honest, I try to make that difficult. Here's my trick: I have a lot of data and I base my knowledge and opinions on those facts. Nonetheless, I get things wrong. Recently, in fact, I learned the meaning of opportunity cost. When I say recently, I mean up till and including writing the TftD!

I was recently learning Bava Kamma with a long time chavrusa (I have very few of those; see above); on daf 117b it says, "Why? Let him just say he was joking!" Oh, wait... let's put that in context. The mishna that starts on 116b and bleeds over to 117a has two cases of saving someone else's property at the cost of your own. I said, "Oh! Opportunity cost!" (I was so excited because I had just learned that term.) Actually, it is a bit more complicated than that. Let's take a look.

Case One: Two people, one with a barrel of wine (which is cheap ¢) and one with a jug of honey (expensive 💵). The honey jug cracks and the bloke with the wine wants to help. If he just pours out his wine (which costs him something) and uses his now empty barrel to save the honey, then he cannot recoup his losses; he can only claim the going rate for a worker who pours honey into jugs. (Don't get nervous; the gemara uses the terms jug and barrel interchangeably.) Let's suppose that Winer leads with: "Hey, Honey, I'll save your stuff, but only if you reimburse me for mine." In that case, the one who saved the honey can recoup the cost of the lost wine and also claim the going rate for a worker who pours honey into jugs.

Case Two: Another two people, each has a donkey; one donkey is cheap, the other is expensive.... and a flood of water is coming that threatens to wash away the donkeys; the owner of the cheap donkey is in position to save one of the donkeys, but not both. If the owner of the cheap donkey just runs to save the expensive donkey, then he can only claim the going rate for saving donkeys. Let's suppose, though, that Cheap Donkey says: "Hey, Expensive Donkey, I'll save your donkey, but only if you reimburse me for mine." (You didn't really expect that crude joke, did you? I thought it, but I am not going to say it!) In that case, he can get reimbursed for the cost of his donkey, as well as claim the going rate for saving donkeys.

As I was writing this up, I realized there were still gaps in my knowledge and so I did some research. Long story short; when making a decision about how to proceed, one needs to take into account the expected income and also the expected costs. Those costs are called "opportunity costs" and are of two types, explicit and implicit.

The first case is a perfect example of explicit opportunity cost. Winer can acquire the material he needs to save the honey by pouring out his wine. That is an explicit cost; plain and simple. In the second case, though, Cheap Donkey doesn't need to spend any money or material to save the expensive donkey, he just gives up the opportunity to save his own donkey. No actual cost now, but the loss of something he has already for which he has already invested part of his life to acquire. That is an implicit cost that he incurs by choosing to save the expensive donkey.

The gemara explains why we need both a case of explicit and implicit opportunity cost and opportunity cost on 117a. If only the explicit cost example had been given, I would have thought that since he is dumping out his wine, of course he has a right to be reimbursed even without saying anything; this case says, Nope -- you have to make your claims clear from the beginning. If only the case of losing his cheap donkey were presented, I could have thought that announcing ahead of time that I expect to get reimbursed could be ignored; after all, the loss is happening by itself. This case says, Nope -- once he made the offer to save the expensive donkey and expects to be reimbursed for losses that occur while he is saving your donkey; you have to honor that as a commitment.

My rebbie, R' Dovid Siegel, shlita, told me to write down my questions and and thoughts will learning. The writing process itself brings clarity and avoids the temptation to fool oneself with "oh... I get it... pretty much, anyway." This example comes to say, Nope -- you didn't get it.