Ning contemplates again
I suddenly came out with a theory on my way to camp. I'll post it here and see what you guys think of it.
"The actual cost saved should not be calculated in terms of the cost differentials between actual outlay and the cost of the best alternative rather than the difference between actual outlay and potential outlay."
i.e. to say:
"A better method of calculating how much you have saved is to compare it vis-a-vis the opportunity cost rather than the direct amount saved."
Why do I say that?
Let's say you take MRT to work everyday and the total cost of MRT trips in a month is $65. However, you can buy a monthly concession pass for $50 that allows you to take unlimited MRT trips. The actual cost savings should not be $15 ($65 - $50). Instead, assuming ceteris paribus and overlooking the presence of other factors to facilitate argument, if you can take bus to work for $60/month, the cost you saved should be $10 instead of $15. The counter-argument might be that you are paying for different services and the $5 difference is for a difference in the type of service rendered. However, my argument is that without the concession pass (i.e. if you can't get unlimited trips for $50) you would not have taken train but would have taken bus instead (once again assuming we don't take into account factors such as personal preference or tastes) so instead of paying $65 you would have paid $60. So that amount saved would be the difference between actual outlay and that of the opportunity cost, which is $60.
However by extension, if giving you unlimited trips leads you to take more trips than usual everyday, the costs deprived by the opportunity cost must be taken into consideration. For example, if on the way home you need to use the toilet. Without the concession pass, the choice would be between stopping to go to the toilet and having to pay for another train ticket, or to bear with the urge to go to the toilet until you are home and suffer the agonies of revolting bowels (that was a pun btw). However, the concession pass removes the cost involved in stopping midway through your trip to use the toilet and this cost saved (encompassing both the saved cost of having to buy the ticket home and the cost of having to make a painful decision) needs to be taken into consideration when accounting for the opportunity cost savings. That is to say, any external benefits (or cost) that arises that places a choice into an advantageous (or disadvantageous) position as compared to its next best alternative (i.e. opportunity cost has been altered) must not be omitted when calculating the cost savings in order to achieve a more comprehensive and accurate representation of the cost differentials involved in making a choice.
"The actual cost saved should not be calculated in terms of the cost differentials between actual outlay and the cost of the best alternative rather than the difference between actual outlay and potential outlay."
i.e. to say:
"A better method of calculating how much you have saved is to compare it vis-a-vis the opportunity cost rather than the direct amount saved."
Why do I say that?
Let's say you take MRT to work everyday and the total cost of MRT trips in a month is $65. However, you can buy a monthly concession pass for $50 that allows you to take unlimited MRT trips. The actual cost savings should not be $15 ($65 - $50). Instead, assuming ceteris paribus and overlooking the presence of other factors to facilitate argument, if you can take bus to work for $60/month, the cost you saved should be $10 instead of $15. The counter-argument might be that you are paying for different services and the $5 difference is for a difference in the type of service rendered. However, my argument is that without the concession pass (i.e. if you can't get unlimited trips for $50) you would not have taken train but would have taken bus instead (once again assuming we don't take into account factors such as personal preference or tastes) so instead of paying $65 you would have paid $60. So that amount saved would be the difference between actual outlay and that of the opportunity cost, which is $60.
However by extension, if giving you unlimited trips leads you to take more trips than usual everyday, the costs deprived by the opportunity cost must be taken into consideration. For example, if on the way home you need to use the toilet. Without the concession pass, the choice would be between stopping to go to the toilet and having to pay for another train ticket, or to bear with the urge to go to the toilet until you are home and suffer the agonies of revolting bowels (that was a pun btw). However, the concession pass removes the cost involved in stopping midway through your trip to use the toilet and this cost saved (encompassing both the saved cost of having to buy the ticket home and the cost of having to make a painful decision) needs to be taken into consideration when accounting for the opportunity cost savings. That is to say, any external benefits (or cost) that arises that places a choice into an advantageous (or disadvantageous) position as compared to its next best alternative (i.e. opportunity cost has been altered) must not be omitted when calculating the cost savings in order to achieve a more comprehensive and accurate representation of the cost differentials involved in making a choice.