Thinking on the Margin


Decision tactics
to Beat Back Black and White Thinking and decision anxiety
so you can move forward

 

by Madelyn Griffith-Haynie, CTP, CMC, ACT, MCC, SCAC
Another of The Black & White topic articles
from the Challenges Inventory™ Series

Balancing our Books by Thinking on the Margin

Most frequently associated with economic theory, “thinking on the margin” is also a handy concept that can help break the back of black and white thinking for those of us with Executive Functioning Disorders.

It’s an interesting theory of how we make decisions that relates to increasing personal productivity, avoiding an increase of the time we spend on task. It is worth taking the time to understand.

So let’s check it out!

Costs and benefits

Most of us have probably been exposed to the concept of performing a cost/benefit analyses to help us determine whether something is worth doing.

That technique can be simply described as one where we tally up the costs and downsides to an endeavor and compare them to a tally of the benefits and upsides that might be derived if we went forward with something we have been considering.

That’s not exactly what “thinking on the margin” advocates.  Once some basic data has been gathered, this second concept asks us to compare the cost and benefit of any additional action.

It means to think about your next step forward, not ALL possible steps forward.

Lemonade Economics:

Let’s pretend you are an unusually economically savvy kid operating a lemonade stand at the end of an especially HOT summer day.

You’ve done the math and determined that, based on the traffic in your neighborhood and how many cups you expect to sell, you need to get no less than 25 cents each to cover the cost of cups, ice, lemons and sugar – and pay yourself enough for your time to make it worth doing at all.

So you make your sign:
Ice Cold Home Made Delicious Lemonade,
only a quarter a cup!

But once you’ve recouped your costs, the equation changes.  Everything from that point on is profit, right?  So when you are offered a measly dime from the kid next door, you have a different decision to make.

  • Based on the traffic today, how much longer are you likely to have to tend your stand to sell the rest of your lemonade at full price?
  • How much longer before your ice melts?
  • How eager are you to sell it all and get into the air conditioning?
  • Even, how much do you like the neighbor-kid with the dime?

The optimum benefit for you would be where the marginal benefit (what you receive as a result of your decision) equals the marginal cost — which, in this case, is settling for less than what you’d hoped you would receive for every cup of lemonade.

Were you this young entrepreneur, economists who advocate “thinking on the margin” would advise you to accept less than 25 cents a cup exactly when the marginal benefit of selling an additional cup of lemonade at your original cost equaled the point where staying out in the sun much longer was no longer worth it to you — regardless of what the average benefit from your work had been to that point.

They say that, to work smart, we always need to work at the margin.
I say, it’s a good concept to keep in mind for some decisions.

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