Tuesday, October 30, 2007

Opportunity cost and grad school

I apologize in advance to everyone who knows this stuff, but I keep writing posts and then realize I need to make sure my audience is familiar with some concepts before posting it.

The opportunity cost is the cost of not doing something
. It is something that is widely ignored and it shouldn't be.

Last June I received my undergraduate degree in Software Engineering. I considered going to grad school but finally decided against it (but I might reconsider that in a few years, we'll see). As I was looking into different universities, I was taken aback at the high cost of the private US colleges as opposed to the Canadian ones. Grad school in Quebec cost about 5,000$ a year for every University. At the MIT, for example, the cost is around 32,000$ a year.

When you quickly look at those numbers, you might think that it would cost me about six times as much to go to the MIT compared to McGill. Well, first of all we need to add in the cost of living, which we can estimate at 10,000$ a year in Montreal and 15,000 a year in Cambridge. We're now at 15,000$ vs 47,000$, still a 3x difference.

Now, let's add the opportunity cost. To go to grad school, I would've had to give up my ability to work a full time job. Let's say I was offered a job at 50000$ a year (after-tax), the cost of going to grad school would now be:
McGill: 65,000$ / year
MIT: 97,000$ / year

The difference is now merely 1.5x. Of course, in absolute term, the money I have to pony up is the same. If you really want to go to a pricey, then don't let money be in the way. The tuition cost will only be a small part of what you'll really pay anyway.

And something else to consider with these numbers. How much do you think a masters or a doctoral degree is worth? In this case, a masters degree at McGill will have to be worth at least 130,000$ to you before you decide to do it.

For some people it is, for others it's not.

P.S. No, I'm not a shill for the MIT, I've never been anywhere near Boston.


Anonymous said...

IL y a un tres bel aquarium a Boston!signe Julien

forty-two said...

No need to go near Boston to receive a fat check by mail. :3

Steve Ballmer said...

Just checking in, How's Liz?

Anonymous said...

what did you end up doing? You also didn't mention the opportunity cost of not going to a renowned insitution such as MIT versus a lesser-known school.

Joshua Smith said...
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