counterfactual thinking Dr. A C Richards

Thought experiment

Someone in front of you drops down unconscious, but fortunately there’s a paramedic standing by at the scene. You could push the paramedic out of the way and do the CPR yourself, but you’ll likely do a worse job. So even if you stop the patient from dying, your (counterfactual) impact is likely small, if not negative, because they would have been saved anyway. This same analysis applies to our choices of career: if you don’t choose to study medicine, the counterfactual is that someone nearly as good as you will; if you don’t start that successful company, someone likely will in the next few years anyway (so your impact is the difference in time).

When we take one action, it precludes another we could have taken in its place. The opportunity cost of a choice is the value of the choice of a best alternative lost while making a decision.

Suppose that you are considering whether to donate ¥40,000 to provide a blind person with a guide dog. Suppose that if you don’t, then you have the opportunity to use the ¥40,000 to pay for surgeries to reverse the effects of trachoma in 2,000 patients elsewhere in the world. In this case, the opportunity cost of choosing the guide dog option is the value of 2,000 patients having their eyesight saved.