What is opportunity cost?

Definition

Opportunity cost measures what is sacrificed by choosing one option instead of another. It includes benefits that could have been gained from the strongest realistic alternative, even when no direct payment is involved.

In AI development, delaying a capability may provide more time for safety work but also postpone useful applications, research gains, or economic value. Comparing these outcomes requires explicit assumptions rather than treating either side as cost-free.

ELI5

Opportunity cost is what you miss out on because you chose something else. Every choice uses time or resources that could have supported another option.

For example, spending an extra month testing an AI tool may improve its safeguards, but users also wait an extra month for any benefits the tool could provide.

Frequently asked questions

Is opportunity cost always measured in money?

No. It can include lost time, delayed benefits, reduced flexibility, missed learning, or any other valuable alternative.

Why is opportunity cost uncertain?

It depends on estimating what would have happened under an alternative choice that was not actually taken.

Videos explaining opportunity cost

  1. Nick Saraev, Jack Roberts and Jakub Pachocki with AI safety and compute infrastructure themes