From the seen and unseen of Frédéric Bastiat (1850) and the alternative cost of Friedrich von Wieser (1889), named opportunity cost by David I. Green (1894).
Values a choice against the best other use of the same money, time, or people, with that alternative named and estimated.
When to reach for it
Whenever capital, headcount, or executive attention is about to be committed and the real question is what else it could have bought.
How it runs
- Name the resource being committed.
- Name the single best alternative use of it.
- Estimate what that alternative would return.
- Compare the proposal with the alternative.
- Choose the higher value, remembering that doing nothing can win.
Where it sits in SOLVE eX
Go to the source
- Ce qu'on voit et ce qu'on ne voit pas (That Which Is Seen, and That Which Is Not Seen), 1850
- Der natürliche Werth (Natural Value), 1889
- Pain-Cost and Opportunity-Cost, Quarterly Journal of Economics 8(2), 1894