Milton Friedman, a world renowned Economist once wrote, “There is no such thing as a free lunch.” Though it may sound like a very simple statement. It is actually the best example, when defining “opportunity cost.” In this article, we will analyze the current market trend, which many Ivy League studies have dubbed it as “Twerkanomics.” And how it relates to one’s opportunity cost. To better understand opportunity cost, we should understand John Doe’s Marginal Utility function. (Graph below displays John’s Utilities)
(UC DAVIS) eg.1
On the Y-Axis, We have listed John’s hours spent at work, and on the X-Axis we have listed all hours spent at getting an education. If John were to spend all 40 hour at work (orange star), he will be giving up 40 hours of education. Vice versa, if he were spending 40 hours at school (purple star) he will be giving up 40 hours of work. So what does that translate to? John cannot pick option without facing opportunity cost. If he were to work all hours, he will not be educated. Ceteris Paribas. This will result into John giving up his second best option (education) to earn a full wage. With everything we do, we practice our opportunity cost. If we decide to sleep rather addition hour, we give up another hour of working or either excursing. Which, I repeat again. “There is no such thing as a free lunch” the time we give up to eat that free lunch is the Opportunity cost. In essence because Time=Money, so we actually lose money eating that free lunch.
(University of Penn)
Now that we understand our opportunity cost. This brings us to the key point of this article, “Twerkanomics.” Recent experiment conducted by the prominent Economics department of University of Penn. Displays the potential growth of employment in the entertainment sector (Listed on graph above). Dr. Hermonie Potter of Federal Reserve’s Statistical Bureau delivers “This is the first boom since the real estate market in the 80’s.” What does that mean for the Economy? To simplify everything. We must return back to the definition of opportunity cost. For one to contribute best in the economy, we should try maximize our utility, which is represented by the green star in (E.G 1) for this instance, John works 20 hours and also goes to school for 20 hours. This way he is giving himself a chance to contributing heavily in the economy by inflating our G.D.P and being a functioning law abiding citizen. The dilemma “twerkanomics’ face, is simple. Individuals whom participate in “Twerking” can subside there opportunity cost. Since they make wages above the means of an individual, there is no need for education. It is the first time, Economist have determined something so innovative that it is changing the mere dynamics of Economics. With high volume of human capital deployed in this industry, the cost of twerking will diminish significantly. And as we all know, if price of a good falls, we will have a surplus in stock. Stock= human capital, which means we will have more than 30% employment in the near future. Though twerking may be great for short term gratification, the math shows it will lead to major unemployment in the near future. So my advice to all. Twerk, but do it at a equilibrium.