I’ve been wondering recently about where to start with teaching economics. If you want someone who is new to the ideas to learn how to apply economic thinking to their everyday life, where do you begin?
My conclusion? Subjective value and opportunity cost.
The fact that different people value different things is relatively easy to understand. I get a chocolate milkshake rather than a strawberry one because I like chocolate better than strawberry. Similarly, opportunity costs are intuitive. We live in a world of trade-offs, and you will always have to forgo one thing for another.
Both of these concepts are inescapable to any individual, regardless of wealth or social status. The fun part about seeing the world through the economic lens is recognizing examples of these concepts all around you.
Consider the realm of professional soccer for women. It seems that attending a Women’s Professional Soccer (WPS) match used to be expensive in terms of opportunity cost. During the league’s three-season existence (2009–2011), the average attendance was around 4,000 fans. Compare that to the 16,000+ fans that attended a WPS match when it was a double-header with a Major League Soccer (the men’s professional league) match, and you can conclude that more people placed value on attendance when it included a match from both leagues.
However, similar to how the equilibrium point between supply and demand curves is just a snapshot in time, tastes and preferences change. For instance, after the 2011 FIFA World Cup, where the U.S. Women’s National team lost in the championship match to Japan, attendance roughly doubled at subsequent WPS matches. Names like Abby Wambach and Hope Solo became better known, and fans started to value the WPS matches more.
Unfortunately, this change in subjective value was too little too late for the WPS, which folded after three seasons, the same number as its predecessor, the Women’s United Soccer Association (WUSA), which shut down in 2001. Subjective value and opportunity cost, while easy to understand, are powerful when it comes to where individuals choose to spend or not spend their money.