[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:09.11,0:00:11.42,Default,,0000,0000,0000,,
Dialogue: 0,0:00:11.42,0:00:15.89,Default,,0000,0000,0000,,Let me tell you about the island of\NTasmania. It's about 130 miles off the
Dialogue: 0,0:00:15.89,0:00:17.76,Default,,0000,0000,0000,,coast of South Eastern Australia
Dialogue: 0,0:00:17.76,0:00:22.50,Default,,0000,0000,0000,,A long time ago when seas were low Tasmania was\Npart of Australia.
Dialogue: 0,0:00:22.50,0:00:26.94,Default,,0000,0000,0000,,During that time the archaeological\Nrecord documents that Tasmanians fished, and
Dialogue: 0,0:00:26.94,0:00:28.19,Default,,0000,0000,0000,,they used bone tools.
Dialogue: 0,0:00:28.19,0:00:34.09,Default,,0000,0000,0000,,About 10,000 years ago, rising waters cut\NTasmania off from Australia
Dialogue: 0,0:00:34.09,0:00:38.22,Default,,0000,0000,0000,,On at least three at the smaller islands\Nthe isolated human population
Dialogue: 0,0:00:38.22,0:00:41.30,Default,,0000,0000,0000,,died out completely. In Tasmania
Dialogue: 0,0:00:41.30,0:00:44.94,Default,,0000,0000,0000,,the four thousand hunter-gatherers\Nremained with no contact with
Dialogue: 0,0:00:44.94,0:00:49.05,Default,,0000,0000,0000,,the rest of humanity at all. They lost\Ntechnologies they once had
Dialogue: 0,0:00:49.05,0:00:53.70,Default,,0000,0000,0000,,no more fishing no more bone tools, they also missed new inventions such as
Dialogue: 0,0:00:53.70,0:00:57.70,Default,,0000,0000,0000,,stone tools fishing nets and fire\Nthat were adopted in Australia.
Dialogue: 0,0:00:57.70,0:01:01.62,Default,,0000,0000,0000,,When Europeans discovered the Tasmanians\Nin 1642
Dialogue: 0,0:01:01.62,0:01:05.80,Default,,0000,0000,0000,,they found that this extreme isolation\Nhad created the simplest material
Dialogue: 0,0:01:05.80,0:01:07.94,Default,,0000,0000,0000,,culture of any people in the modern world.
Dialogue: 0,0:01:07.94,0:01:12.60,Default,,0000,0000,0000,,Without access to other people, some\Nisland populations shrink
Dialogue: 0,0:01:12.60,0:01:17.08,Default,,0000,0000,0000,,others even vanish. Fortunately for\Nmost of us
Dialogue: 0,0:01:17.08,0:01:20.16,Default,,0000,0000,0000,,human cooperation has expanded over time.
Dialogue: 0,0:01:20.16,0:01:24.94,Default,,0000,0000,0000,,As we saw in the previous videos we\Nenjoy enormous benefits from
Dialogue: 0,0:01:24.94,0:01:26.22,Default,,0000,0000,0000,,specialization and trade.
Dialogue: 0,0:01:26.22,0:01:30.15,Default,,0000,0000,0000,,One reason for this beneficial\Ncooperation is what economists call
Dialogue: 0,0:01:30.15,0:01:35.84,Default,,0000,0000,0000,,comparative advantage. Two things are\Nsurprising about comparative advantage.
Dialogue: 0,0:01:35.84,0:01:39.62,Default,,0000,0000,0000,,First just by rearranging who does what
Dialogue: 0,0:01:39.62,0:01:44.32,Default,,0000,0000,0000,,we can make more stuff through specialization\Nand trade. Even if no one ever gets any
Dialogue: 0,0:01:44.32,0:01:44.81,Default,,0000,0000,0000,,better
Dialogue: 0,0:01:44.81,0:01:49.55,Default,,0000,0000,0000,,at doing any line of work. But the second\Ninsight is my favorite. If you get better
Dialogue: 0,0:01:49.55,0:01:51.80,Default,,0000,0000,0000,,at doing something that obviously\Nbenefits you
Dialogue: 0,0:01:51.80,0:01:56.20,Default,,0000,0000,0000,,but it also benefits me, even though my\Nabilities to produce
Dialogue: 0,0:01:56.20,0:01:59.70,Default,,0000,0000,0000,,haven't changed at all. Let me show you\Nhow this works.
Dialogue: 0,0:01:59.70,0:02:02.84,Default,,0000,0000,0000,,It's best seen with a simple example.\NJust
Dialogue: 0,0:02:02.84,0:02:07.33,Default,,0000,0000,0000,,two people, Bob and Ann who produce\Njust two goods:
Dialogue: 0,0:02:07.33,0:02:11.61,Default,,0000,0000,0000,,bananas and fish. Here's what Bob can do
Dialogue: 0,0:02:11.61,0:02:15.54,Default,,0000,0000,0000,,if he spends all it is time producing\Nonly one good.
Dialogue: 0,0:02:15.54,0:02:18.81,Default,,0000,0000,0000,,Bob can either gather 10 bananas or
Dialogue: 0,0:02:18.81,0:02:21.90,Default,,0000,0000,0000,,he can catch ten fish.
Dialogue: 0,0:02:21.90,0:02:25.62,Default,,0000,0000,0000,,Ann can either get a 10 bananas or catch\N30 fish.
Dialogue: 0,0:02:25.62,0:02:30.06,Default,,0000,0000,0000,,So let's say they each split their time\Nbetween producing bananas and fishing.
Dialogue: 0,0:02:30.06,0:02:33.26,Default,,0000,0000,0000,,Bob and Ann each produce five bananas.
Dialogue: 0,0:02:33.26,0:02:37.32,Default,,0000,0000,0000,,Bob produces five fish and Anne produces
Dialogue: 0,0:02:37.32,0:02:40.88,Default,,0000,0000,0000,,15 fish. In total they produce
Dialogue: 0,0:02:40.88,0:02:45.45,Default,,0000,0000,0000,,ten bananas and 20 fish. You math wizards in\Nthe audience
Dialogue: 0,0:02:45.45,0:02:49.91,Default,,0000,0000,0000,,surely see an obvious way to increase\Nhis total. If Bob produces just bananas and
Dialogue: 0,0:02:49.91,0:02:51.13,Default,,0000,0000,0000,,Ann produces
Dialogue: 0,0:02:51.13,0:02:55.40,Default,,0000,0000,0000,,just fish then the total rises to\Nten bananas and 30 fish.
Dialogue: 0,0:02:55.40,0:02:59.32,Default,,0000,0000,0000,,So just by rearranging who does what we get\Nmore total stuff.
Dialogue: 0,0:02:59.32,0:03:03.84,Default,,0000,0000,0000,,You might think this outcome is simply\Nthe result at the division of labor
Dialogue: 0,0:03:03.84,0:03:09.22,Default,,0000,0000,0000,,that we covered previously but you'd be wrong.\NThe key insight from the division of
Dialogue: 0,0:03:09.22,0:03:09.84,Default,,0000,0000,0000,,labor
Dialogue: 0,0:03:09.84,0:03:13.50,Default,,0000,0000,0000,,is that workers individually get more\Nproductive when they specialize.
Dialogue: 0,0:03:13.50,0:03:16.73,Default,,0000,0000,0000,,Yet in this scenario neither Bob nor Ann
Dialogue: 0,0:03:16.73,0:03:21.25,Default,,0000,0000,0000,,has gotten any better at producing bananas or fish. Just by rearranging what tasks
Dialogue: 0,0:03:21.25,0:03:25.49,Default,,0000,0000,0000,,each does is what made total production\Nincrease. The key to understanding how
Dialogue: 0,0:03:25.49,0:03:26.24,Default,,0000,0000,0000,,this works
Dialogue: 0,0:03:26.24,0:03:30.85,Default,,0000,0000,0000,,is opportunity cost. Bob has to choose\Nto gather bananas or catch fish.
Dialogue: 0,0:03:30.85,0:03:34.35,Default,,0000,0000,0000,,When he chooses to gather a banana he gives\Nup one fish
Dialogue: 0,0:03:34.35,0:03:39.33,Default,,0000,0000,0000,,In essence Bob trades with himself. He can\Nuse his time to gather bananas
Dialogue: 0,0:03:39.33,0:03:43.08,Default,,0000,0000,0000,,or trade that time to catch fish and the\Ncost at that trade is
Dialogue: 0,0:03:43.08,0:03:47.51,Default,,0000,0000,0000,,one fish per banana that's Bob's\Nopportunity cost.
Dialogue: 0,0:03:47.51,0:03:53.17,Default,,0000,0000,0000,,The same holds true for Ann, but her cost of\Nproducing one banana is three fish.
Dialogue: 0,0:03:53.17,0:03:56.53,Default,,0000,0000,0000,,In the amount of time it takes Ann\Nto gather one banana
Dialogue: 0,0:03:56.53,0:04:00.39,Default,,0000,0000,0000,,she could have caught three fish. She\Ntrades with herself.
Dialogue: 0,0:04:00.39,0:04:06.89,Default,,0000,0000,0000,,One banana for three fish. So Bob only\Nhas to give up one fish to produce one banana
Dialogue: 0,0:04:06.89,0:04:10.13,Default,,0000,0000,0000,,but Ann must give up three fish to\Nproduce a banana.
Dialogue: 0,0:04:10.13,0:04:14.35,Default,,0000,0000,0000,,Ann's opportunity cost of gathering a banana\Nis higher than Bob's
Dialogue: 0,0:04:14.35,0:04:17.70,Default,,0000,0000,0000,,She can improve her situation if she can\Nget bananas
Dialogue: 0,0:04:17.70,0:04:20.88,Default,,0000,0000,0000,,for less than three fish and Bob can improve his situation
Dialogue: 0,0:04:20.88,0:04:25.64,Default,,0000,0000,0000,,if he can get fish for less than one\Nbanana. Let's say Ann trades two fish to
Dialogue: 0,0:04:25.64,0:04:26.62,Default,,0000,0000,0000,,Bob for
Dialogue: 0,0:04:26.62,0:04:31.54,Default,,0000,0000,0000,,one banana. They each gain. If Anne wants a banana,
Dialogue: 0,0:04:31.54,0:04:34.62,Default,,0000,0000,0000,,she can either gather it herself and give up\Nthree fish
Dialogue: 0,0:04:34.62,0:04:37.93,Default,,0000,0000,0000,,Or, she can catch only two fish
Dialogue: 0,0:04:37.93,0:04:42.15,Default,,0000,0000,0000,,and then trade them to Bob. She prefers\Nthe lower cost option
Dialogue: 0,0:04:42.15,0:04:45.66,Default,,0000,0000,0000,,and so she trades. Bob prefers the lower\Ncost option too.
Dialogue: 0,0:04:45.66,0:04:48.96,Default,,0000,0000,0000,,Instead of giving up a whole banana to\Ncatch a fish
Dialogue: 0,0:04:48.96,0:04:53.75,Default,,0000,0000,0000,,he can trade that banana for two fish. Now\Nhe's only giving up a half a banana for
Dialogue: 0,0:04:53.75,0:04:55.76,Default,,0000,0000,0000,,a fish
Dialogue: 0,0:04:55.76,0:05:01.13,Default,,0000,0000,0000,,you can see that even if Ann is better at\Neverything, nothing in this story changes.
Dialogue: 0,0:05:01.13,0:05:04.74,Default,,0000,0000,0000,,She still benefits from trade because the\Nnumber of fish Ann gives up to pick a
Dialogue: 0,0:05:04.74,0:05:06.10,Default,,0000,0000,0000,,banana herself
Dialogue: 0,0:05:06.10,0:05:09.60,Default,,0000,0000,0000,,is greater than the number of fish that\Nshe must catch and give to Bob
Dialogue: 0,0:05:09.60,0:05:14.01,Default,,0000,0000,0000,,in order to get a banana from Bob. Now\Nfor the insight that is really
Dialogue: 0,0:05:14.01,0:05:15.58,Default,,0000,0000,0000,,counterintuitive.
Dialogue: 0,0:05:15.58,0:05:19.21,Default,,0000,0000,0000,,What happens if Ann gets better fishing.\NLet's say that she can now catch
Dialogue: 0,0:05:19.21,0:05:23.01,Default,,0000,0000,0000,,40 fish. Obviously that's good for Ann,
Dialogue: 0,0:05:23.01,0:05:27.03,Default,,0000,0000,0000,,but it also means that bananas just got more\Ncostly for Ann to produce herself.
Dialogue: 0,0:05:27.03,0:05:30.79,Default,,0000,0000,0000,,She would now have to sacrifice four fish for each\Nbanana that she gathers
Dialogue: 0,0:05:30.79,0:05:34.17,Default,,0000,0000,0000,,by becoming a better fisherman Ann\Nbecomes a comparatively
Dialogue: 0,0:05:34.17,0:05:37.37,Default,,0000,0000,0000,,worse banana gatherer. And this fact
Dialogue: 0,0:05:37.37,0:05:42.77,Default,,0000,0000,0000,,helps Bob. The reason is that Ann is now\Nwilling to trade more fish for each banana
Dialogue: 0,0:05:42.77,0:05:47.46,Default,,0000,0000,0000,,she gets from Bob. So although Bob's\Nability to produce hasn't changed
Dialogue: 0,0:05:47.46,0:05:51.60,Default,,0000,0000,0000,,he can now get more fish for his bananas.
Dialogue: 0,0:05:51.60,0:05:55.81,Default,,0000,0000,0000,,Comparative advantage is a beautiful\Nthing. No matter what my talents are
Dialogue: 0,0:05:55.81,0:05:59.46,Default,,0000,0000,0000,,I can still help you even if you are better\Nat everything.
Dialogue: 0,0:05:59.46,0:06:02.91,Default,,0000,0000,0000,,The more different we are from each\Nother the more we benefit from trading
Dialogue: 0,0:06:02.91,0:06:03.78,Default,,0000,0000,0000,,with each other.
Dialogue: 0,0:06:03.78,0:06:07.58,Default,,0000,0000,0000,,Let's get back to the real world.
Dialogue: 0,0:06:07.58,0:06:10.13,Default,,0000,0000,0000,,What comparative advantage practically means\Nfor most people
Dialogue: 0,0:06:10.13,0:06:13.27,Default,,0000,0000,0000,,is that we each spend most of our\Nworking time at a job
Dialogue: 0,0:06:13.27,0:06:17.52,Default,,0000,0000,0000,,that utilizes each of our comparative\Ntalents. How do you know what you're comparatively
Dialogue: 0,0:06:17.52,0:06:18.17,Default,,0000,0000,0000,,good at?
Dialogue: 0,0:06:18.17,0:06:23.00,Default,,0000,0000,0000,,What you get paid for your job tells you\Nthat. Comparative advantage
Dialogue: 0,0:06:23.00,0:06:27.87,Default,,0000,0000,0000,,is the main force driving us to use our\Ntalents in those jobs that we do best.
Dialogue: 0,0:06:27.87,0:06:30.88,Default,,0000,0000,0000,,It's why people who are good at math tend \Nto become engineers, and
Dialogue: 0,0:06:30.88,0:06:35.49,Default,,0000,0000,0000,,those who have a graphic sense tend to\Ngo into the arts. Specialization and trade
Dialogue: 0,0:06:35.49,0:06:38.48,Default,,0000,0000,0000,,played key roles in the movement from\Npoverty to prosperity.
Dialogue: 0,0:06:38.48,0:06:43.51,Default,,0000,0000,0000,,We would be desperately poor without\Nthem. But they alone do not explain the full
Dialogue: 0,0:06:43.51,0:06:44.83,Default,,0000,0000,0000,,extent of our prosperity.
Dialogue: 0,0:06:44.83,0:06:49.24,Default,,0000,0000,0000,,Another feature of the modern world is\Nimportant: innovationism.
Dialogue: 0,0:06:49.24,0:06:52.65,Default,,0000,0000,0000,,Our society is an orgy of innovations.
Dialogue: 0,0:06:52.65,0:06:55.96,Default,,0000,0000,0000,,This innovationism would be impossible without specialization
Dialogue: 0,0:06:55.96,0:06:56.92,Default,,0000,0000,0000,,and trade and yet
Dialogue: 0,0:06:56.92,0:07:01.30,Default,,0000,0000,0000,,specialization and trade do not guarantee\Ninnovationism. This is a topic for a future
Dialogue: 0,0:07:01.30,0:07:02.10,Default,,0000,0000,0000,,video.
Dialogue: 0,0:07:02.10,0:07:05.60,Default,,0000,0000,0000,,Here's the current leader board of\Nquestions submitted from our viewers.
Dialogue: 0,0:07:05.60,0:07:08.79,Default,,0000,0000,0000,,We're going to pick a few at the top ones to answer\Nwith more videos
Dialogue: 0,0:07:08.79,0:07:15.79,Default,,0000,0000,0000,,So go and vote!
Dialogue: 0,0:07:15.79,0:07:26.40,Default,,0000,0000,0000,,