- Was a $1 sub worth the wait?
- What was the Opportunity Cost of your decision?
- Waiting in line is also an economic decision!
What can last week’s Jimmy John’s $1 sub customer appreciation day teach us about economics?
Of course it’s fairly easy to figure out why Jimmy John’s held such an event: A small investment of subsidizing cheap subs for the return payoff of media coverage, name recognition, and new customer acquisition.
And of course it’s easy to figure out why customers would be attracted to the event. The allure of a free lunch is too tempting for many people out there to pass up, and a $1 sandwich is truly the next best thing! So why not stand in line and get your next-to-free sandwich?
Perhaps a quick crash course in economics, however, may help some avoid the endless lines in the next promotional “giveaway” and decide instead to go across the street and pay full price for something else.
To set the stage; first off there was a line that started 30 min -1 hour before the 11am start time at the downtown Raleigh location. This line soon stretched down the block.
Let’s say you were one of the brave souls to stand in line for the $1 sub. Granted, Jimmy John’s are “freaky fast” at making subs, but transactions are the kink in the freaky armor, for they take time. These transactions consist of debit, credit, cash, and/or coin exchanges.
And let us not overlook the chatty Kathy’s in line who insist on asking the employees “Busy enough for ya!?”-My stomach turns just thinking of these people.
At this point in my scenario, the original line waiting for the doors to open that was down the block is even longer, and people continue to join in.
With the reality of this painfully long line, it will probably take 30 minutes to an hour at best for someone to get into the shop and place an order.
Finally, you get your sub – and it only cost one dollar! Was it worth it?
Helping us answer this question is the concept that Frederic Bastiat referred to as the “seen vs. the unseen,” and the main ‘lesson’ from Henry Hazlitt’s book “Economics in One Lesson”: opportunity costs.
We can easily see the $1 sub that you enjoy for lunch; but what else did that sub cost you? In this case, what else could you have done with that 30 minutes or even an hour of your life you spent waiting in line for the sandwich? Perhaps extra work at your job, exercising or a more leisurely dining experience elsewhere. The highest ranking alternative you didn’t select is known as your opportunity cost. This is the “unseen” cost of your action – or the opportunity you chose to forego in order to wait in the long line.
It should be mentioned that the Jimmy John’s sub included in the $1 deal would normally cost $4.75, so you are foregoing these other activities to save $3.75. By choosing to wait in line, you are revealing your preference to save $3.75 on a sub over the next-best alternative.
By extension, this lesson in opportunity costs is especially relevant when looking at the functions of government. Every dollar the government spends is first taxed or borrowed from the private sector. Sure, we can easily see the new bridge or highway the government builds. But what about the ‘unseen’ opportunity costs? What could that money have been used for if actors in the private sector had instead been allowed to spend it themselves?
Society may be one bridge or highway richer, but it is also deprived of something else that may have higher value. And given that government spending is political and not market-driven, it is more likely that private sector projects do a better job of meeting the most highly valued needs of society.
For these $1 sandwich customers, they may end up regretting their decision to exchange $3.75 for 30 min of time. Even if it was a bad choice, the decision only effected one person as opposed to effecting millions when the government poorly appropriates other people’s money to the least valuable choice.
So next time you hear of the mass ‘pandalerium’ of a next to free meal, think about what it will cost you in terms of the ‘unseen’ opportunity costs. Maybe eating across the street at a new restaurant watching the fools in line will be more enjoyable and more worthy of your hard-earned money and time.