Economic policies have secondary effects.
That’s the essence of the one lesson that Henry Hazlitt imparted in his staple book: Economics in One Lesson.
Be it the effects of minimum wage or rent control laws, he clarified the unseen costs that are only visible once one takes the time to think them through.
How can you apply this wisdom to your day-to-day decisions? What are the effects of your decisions to be productive, choose a career path, allocate money, call friends, or go to sleep on time? What about activities such as eating sweets, going to the movies, or scrolling social media? Given the inherent scarcity of time, how can you feel calm and confident about your decisions, without second-guessing, regret, or guilt?
This article isn’t about telling you what actions are worth taking or not taking. Rather, it’s about inviting you to think critically and comprehensively so that you may live more consciously, purposefully, and responsibly. Ultimately, doing so may allow you to experience more satisfaction, freedom, and joy.
To achieve this aim, I’ll break down three economic concepts: opportunity cost, time preference, and spontaneous order. I’ll also add psychological concepts around motivation, to perhaps allow you to feel more ease and clarity in personal decisions.
Opportunity Cost
Opportunity cost is the cost of the next-best thing you could be doing with your time, attention, energy, or money.
For example, if you choose to go to college, the cost would be the tuition and the time it takes to complete the degree. But the opportunity cost would be what you could be doing with that time and money (starting a business, learning a skill via YouTube videos, traveling, saving/investing).
It’s not to say one action is inherently better. But being aware of the opportunity cost will give you a comprehensive set of information so that you are not evading the truth of the matter. Being fully honest with yourself about the costs and trade-offs of a decision is a key to living more consciously.
“To live consciously means to be aware of our options and the costs of our choices.”
— Nathaniel Branden, The Art of Living Consciously
See more: How to Make Better Decisions by Understanding Opportunity Costs
Time Preference
Time Preference is the extent to which you prefer a present good, experience, or outcome over future ones. A high time preference means desiring immediate gratification while a low time preference means a willingness to allow the benefits of an experience to arrive later.
An example of this is doing productive, concentrated effort for a single, long-term project. Say it’s a Tuesday morning and part of you wants to make a dent in the project. Yet another part of you has the idea to feel the excitement of watching your favorite social media “influencer” and his entertaining videos.
Do you consume the content or buckle down for the project?
Assuming you’ve clarified the value of the project to you (opportunity to grow skills/career, feel fulfilled, earn money), then here is where time preference kicks in. Do you value the immediate pleasure of the consumptive action (videos), or the delayed gratification of the creative action (project)?
Tuning into your self-interest about the costs and benefits of the choice becomes the decision-making game here.
It could be the case that you’d prefer to enjoy the moment now and watch the video.
It could also be the case that you’d prefer to forgo the videos and go into creative mode.
Again, the point here is not whether consuming the video or creating the project is objectively better or worse. Value is subjective. By building self-knowledge about what you truly desire for yourself, which includes both your Present Self and your Future Self, you have a shot to cultivate intrinsic motivation and operate from a mode of freedom and agency.
Perhaps people in society have told you that you ought to get to work, and that the dopamine hit of a video is a “waste of time.”
But who else can truly know your individual time preference?
What matters is tuning in to your personal values, needs, and preferences, and fully calculating the cost-benefit between two activities. When you do that, you can make a healthy, intentional decision.
You may realize you value the future payoff to the immediate ones. Or vice versa.
The decision is yours, and yours alone.
Spontaneous Order
This is a fun one, and a different one.
Spontaneous Order is the natural self-organization that emerges when individuals are free to create, trade, and respond to genuine market needs without central planning. It’s order and stability without command and control.
Now, how might you cultivate spontaneous order in your personal decision making and everyday life?
This is where the concept of self-trust plays in.
In a free market, individuals trust that needs like security, infrastructure, or education can be met without top-down force. By trusting and forgoing the shortcut of coercion, we allow the creativity and freedom that support spontaneous order.
In your life, how might you trust yourself to allow for healthy decision making and natural motivation, rather than relying on willpower, discipline, self-mandate?
Let’s go to a concrete example. Say you are considering your relationship to your physical health.
You want to feel energized, healthy, and take care of your longevity.
In daily life, this means looking honestly at eating, movement, and sleep.
The common mindset with this is to, say, “make yourself” go to the gym, even if you don’t want to.
Economically, this is akin to making people pay for government schools, even if they don’t want to.
What if there were another way?
Just like trusting that education needs can be filled by entrepreneurs when top-down government regulation is removed, how can you trust yourself to meet your health needs when top-down self-regulation is removed? How can you allow for organic, spontaneous motivation to fill needs in the “market” of your own health and life?
Top-down order: I “should” go to the gym
Spontaneous order: How can I create “profit” for my need for physical health?
In the latter, the “profit” would be seeing the benefits of the behavior to your energy and vitality (short and/or long term). Rather than forcing yourself to go to the gym, you allow yourself to behave more spontaneously, from a place of desire to meet the personal need, just like the entrepreneur desires to meet the market need.
So practically, this could mean instead of going to the gym to get a workout, which you realize would require willpower and discipline, you might choose to go play basketball because it feels exciting, and you have a desire to meet your physical needs.
Like the natural flow of an ecological system, the spontaneous order of an economic system emerges with flowing, bottom-up energy to serve societal life, while the spontaneous order of one’s personal decisions emerge with flowing, intrinsically motivated energy to serve one’s own life.
Here are more examples:
Top-down order: I “must” complete this challenging project, even if I don’t feel like it
Spontaneous order: I desire to build confidence by doing challenging things, and to take care of my family by earning a living
Top-down order: I “have to” save money
Spontaneous order: I’d like to save money so I can feel more secure and free in the future (OR, to allow for imagination, how can I double my income this year?)
Top-down order: I “should” have this difficult conversation with a friend
Spontaneous order: I choose to have this conversation so I can meet my need for self-assertiveness, honesty, and growth
The top-down order doesn’t include self-trust. Self-commands like “should,” “have to”, and “must” are often shortcuts to get yourself to act, but they rely on extrinsic motivation.
The top-down order from a government “services” or regulation doesn’t include trust, either. Monopolistic laws and taxation-based initiatives assume humans wouldn’t create that value otherwise.
Spontaneous order makes the way for the human spirit to step into the driver’s seat to serve both self and others.
Conclusion
You get one life to live. What will you make of it? Integrating the concepts of opportunity cost, time preference, and spontaneous order into your daily life allows you to make more intentional decisions that can bear more fruit, be it in relationships, health, finance, or professional life. Being conscious and conscientious of the costs, benefits, and secondary effects of your decisions fosters your ability to chart your own course in life, and live a life you feel happy with. Here’s to that.
