Tradeoffs

A trade-off (or tradeoff) is a situation that involves losing one quality, aspect or amount of something in return for gaining another quality, aspect or amount. More colloquially, if one thing increases, some other thing must decrease. Tradeoffs can occur for many reasons, including simple physics (into a given amount of space, you can fit many small objects or fewer large objects). To give an everyday example, a person packing her suitcase for a holiday, assuming the airline only allows one suitcase of a maximum size, has to make trade-offs in the items she packs. If her suitcase, in her initial packing attempt, only consisted of clothing, to add toiletries to her suitcase, every toiletry item she adds will lead to a trade-off of less clothing. The idea of a tradeoff often implies a decision to be made with full comprehension of both the upside and downside of a particular choice, such as when a person decides whether to invest in stocks (more risky but with a greater potential return) versus bonds (generally safer, but lower potential returns).

The term is also used widely in an evolutionary context, in which case natural selection and sexual selection act as the ultimate "decision-makers". In biology, the concepts of tradeoffs and constraints are often closely related. In economics, a trade-off is commonly expressed in terms of the opportunity cost of one potential choice, which is the loss of the best available alternative.

An opportunity cost example of trade-offs for an individual would be the decision by a full-time worker to take time off work with a salary of $50,000 to attend medical school, with annual tuition of $30,000. If we assume for the sake of simplicity that the medical school only allows full-time study, then the individual considering stopping work would face a trade-off between not going to medical school and earning $50,000 at work, or going to medical school and losing $50,000 in salary and having to pay $30,000 in tuition.

The concept of a trade-off is often used to describe situations in everyday life. The old saying "do not put all of your eggs into one basket" implies a trade-off with respect to spreading risk, as when one buys a mutual fund composed of many rather than only one or a few stocks that may have a higher expected value of return.

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