By: Alper D. Karakas
To swipe or not to swipe, that is the question.
Hey college student, how was your dinner last night? Probably missing a dash of your parents’ love. I for sure miss my mom’s cooking. I’m looking at whether or not I should eat another burger from Burger Studio or if I should just buy another burrito from Chipotle. Maybe I should try to cook something myself. Nothing can match the food you make, so I guess I’ll make that decision based on which one costs less.
Like the onion you may cook with, cost also has layers. In fact, it is calculated differently between an accountant and an economist. The accountant is a simple person: the motto is to just add up the dollars you spent. These are called explicit costs. If you pay 20 dollars on groceries then buying groceries cost you, well, 20 dollars. If after the grocery adventure you went to Joe’s Pizza and bought yourself a plain slice as a simple snack, then however much money you exchanged the pizza slice is the explicit cost of getting that pizza slice. An economist, however, is not quite so simple. The economist will take into account explicit costs as well as implicit costs. These costs are not direct negatives to how much money you have. Implicit costs are the value of something sacrificed when no direct payment has been made. Implicit costs are the value of your opportunity cost: the other choice you gave up by deciding not to do it because you made another choice. So when you go to the grocery store, how much time are you spending there? What else could have been done if you had not decided to go to the grocery store? Studying? Paid work? Watched How I Met Your Mother before it comes off Netflix? An economist includes these sacrifices in the cost calculation with implicit costs.
At NYU, after the first year, it is not uncommon for students to make themselves more independent from NYU’s dining services. Whether or not a student goes on-campus or off-campus as an upperclassman, they will end up with direct access to a kitchen and a normal sized refrigerator. Escaping a mini fridge and a microwave makes students feel it is better to rely less on an NYU Meal Plan because now that they have their own kitchens, cooking and eating out seems to be an option that costs less. Cost, however, is calculated differently between an accountant and an economist.
An accountant will sum up all explicit costs; that is, the amount of money a student will spend on food. To elaborate what the diagram below shows, the NYU Washington Square Park campus default plan is the 225 Flex Plan which costs 2,425 USD per semester. At the NYU Washington Square Park campus, it is given that 75 USD will buy 100 NYU Dining Dollars, so 75 cents equals 1 NYU Dining Dollar. The 225 Flex Plan comes with 200 Dining Dollars and 225 Meals per semester. The conversion shows that 200 Dining Dollars cost 150 USD. After subtracting the cost of Dining Dollars from the total (2,425 USD), 2,275 USD is the cost of 225 meals per semester, and that means that one meal costs a little over 10 USD (10.111 USD).
These are the explicit costs of having the default meal plan; however, an accountant will look those 10 dollars and think, “Well, I could find food for cheaper than 10 dollars,” and that would be right. According to Derek Opel, an NYU student living on-campus but with no meal plan, there are cheaper meals at “the halal carts outside stern and Bagel Bob’s that go for 3-8 USD. ” An accountant will look at those numbers—the explicit value of money being spent—and then compare them to the 10 USD of a meal offered by NYU. So if Derek only pays 3-8 USD per meal then explicitly, his eating costs are lower without the NYU meal plan.
Additionally, some students use a service called Meal Pal for lunch. Bjorn Berntsen, an NYU student living off-campus half an hour away in Brooklyn, uses Meal Pal when he is on campus during lunch hours or in between classes. As Bjorn puts it, “I pay for a certain amount of meals a month and then the night before I pick which restaurant I want and the dish that they offer through the site.” He usually gets five meals a week from any one of the multiple options. His choice depends on what meal the restaurant offers as he cannot pick from their normal menu. The catch is that Bjorn’s lunch only costs him 6 USD, and so compared to the 10 USD per lunch from getting the cheapest meal plan (95 Flex), his explicit costs will be lower with Meal Pal.
An economist, however, looks at costs at a deeper level: not only just explicit costs, but also implicit costs. As explicit costs consist of the money that is paid directly, implicit costs do not refer to actual payments but to what is being given up as an opportunity cost. Bjorn gives up the freedom to choose his food’s quantity. He may get his lunch meals at $6, but he cannot decide himself how much food he gets. In Lipton’s or Weinstein’s cafeteria, one meal swipe will ensure as much food as a student needs in one sitting. Since not every NYU dining hall has this unlimited policy, students with a meal plan do sacrifice only enjoying this luxury with select dining halls. These dining halls though, because they are NYU’s dining services, are dense location-wise. In the map below, offered by Google Maps, it is clear that in such a small area there are many NYU dining halls to choose from. Therefore, if a student intends to buy a meal at the same quantity of food an NYU dining hall would have offered and at a price less than 10 USD, the student will have less options to choose from in the same 1 block radius from Washington Square Park. The student sacrifices the number of options for an affordable meal of the same amount within such a close vicinity of the park.
Furthermore, when it comes to options, an NYU meal swipe offers more potential of customization than other options under 10 USD offer. A student can pick and choose which foods they want from the cafeterias, and Dunkin’ Donuts and Burger Studio, for example, allow students to customize their sandwiches, burgers, and sides. Therefore, another implicit cost of not having a meal plan is flexibility to customize.
Another way an accountant can explicitly make meals cheaper is by grocery shopping and cooking. I asked three NYU students with no meal plan about their grocery and cooking expenses: Derek, Bjorn, and Sanda. I asked them how much they spend at the grocery store per week, and how many meals that covers.
|USD spent on groceries per week||Number of meals the groceries cover||USD of one meal cooked with groceries|
Explicitly, the rightmost column states each person’s cost for a meal; therefore, for example, Bjorn and Sanda’s meals at home explicitly cheaper than an NYU Meal (10 USD). Once again, however, these are explicit costs, and from an economist’s perspective these explicit costs are not the total costs of these meals because it excludes the time they spending shopping and cooking which could be used for another activity with utility. An economist will take into account the opportunity cost of going grocery shopping and cooking in calculating the total cost. Notable opportunity cost does not only apply to students who do not have meal plans. When a student waits in line at an NYU dining hall, or any NYU Dining Services location, then the time they are spending on waiting in line for their food could have been used to something else. Students with meal plans could use Tapingo — an app that sends order requests without having to be physically present— then they could continue to study, or do some activity more worth their time than cooking or waiting in line. All in all, the time spent waiting in line to get food, or shopping for groceries, or cooking all have opportunity costs and, therefore, are implicit costs that an economist will take into account.
To give an idea of how to equate values for those implicit costs, I chose cooking (labor) as a demonstrative example. I asked Derek, Bjorn, and Sanda how many minutes, per day, they spend on physically cooking. Then I asked them to assign a value to how much their cooking labor is worth by asking them how much they money it would, realistically, take for them to cook for a random person — a classmate they do not know, for example.
|Minutes spent cooking per meal||USD charged if time was spent cooking for someone else|
Based on these numbers, it is clear how much each person assessed their own value of cooking, so when they cook their own meals it implicitly costs them 0, 60, or 40 USD by cooking rather than spending their time on an activity that would implicitly cost less. Now cooking is only one implicit costs. Derek, Bjorn, and Sanda also have to go grocery shopping which takes them 30, 30, and 60 minutes per week, respectively.
|Minutes spent grocery shopping per week||Number of meals the groceries cover||Minutes of one meal cooked with groceries|
Spending time at the grocery store, too, comes with an opportunity cost which could also have a value assigned to it. Interestingly enough, however, Derek, Bjorn, and Sanda all have different values of cooking labor. For Bjorn, 30 minutes of his cooking is worth 30 USD, but Sanda’s cooking for 30 minutes is worth 40 USD. What this inequality of value means is that different people have different values for opportunity costs. For some people the opportunity cost of waiting in line at an NYU dining hall is higher than the opportunity cost of getting groceries and cooking. For an accountant, or in terms of explicit costs, identical quantities for identical goods will have the same costs, and so it is possible for having or not having a meal plan to be explicitly cheaper.
But, implicit costs vary from person to person which makes the choice between having or not having a meal plan different depending on which student it regards to. An economist will add the explicit costs and the implicit costs to construct total cost. Students without a meal plan will have to pay for their meals and groceries, explicitly, but they will also have to pay for aspects of not having a meal plan that they give up, such as less flexibility to customize meals, time spent at the grocery store, time spent cooking, and possibly more that I have not come up with. A student with a meal plan will have to pay for a meal plan at the beginning of the year, explicitly, but the student with a meal plan gives up the ability to freely eat a meal or cook a meal outside of the NYU Dining Services because there are a certain set of meals that the student has already paid for. A student with a meal plan also gives up complete control over preparing foods that are not immediately ready to be served. When ordering a hamburger from The Grill at Palladium, for example, the amount of time it takes to make is not in the student’s control but in the cooks. Spending time getting to the NYU dining hall could have a significant implicit cost depending on the proximity to a dining hall from where a student lives. The numerical value of these implicit costs is not the same for every person, so as an economist, whether it is cost more or less to have a meal plan from NYU varies from person to person; it all depends on what you’re giving up and how much it is worth.