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♪ [music] ♪

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- [Tyler] Back to ideas [br]of two words --

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opportunity cost, [br]another central economic idea.

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Even when something good happens,[br]there's a tradeoff, right?

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Sometimes I think [br]this is more important

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than "incentives matter."

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I'm torn, incentives matter,[br]opportunity cost, tradeoffs --

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I don't know --

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but it's in the top three [br]or four ideas of economics.

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It doesn't mean you shouldn't [br]make an investment,

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but it does suggest[br]always look at what is the cost.

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Do the best you can.

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What is the tradeoff involved?

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This actually relates back [br]to my point

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about not always knowing.

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Because if you're considering [br]a choice -- what school to go to,

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whether you should marry,

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whether you should buy [br]ping pong balls,

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where to take your next vacation --

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you're giving up something else.

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You generally don't see [br]in any direct way

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what it is you're giving up.

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So there's an element [br]of built-in agnosticism here.

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Of course, you have [br]to make a choice.

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You should use the evidence [br]and reasoning as best you can.

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But we don't always know.

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An implication [br]of tradeoffs everywhere

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is you're comparing a seen[br]to an unseen,

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and you should not always be [br]totally completely confident

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in your ability to know [br]what the unseen is like.

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So any policy you favor --[br]republican, democrat,

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progressive, libertarian, left, [br]right, whatever, conservative --

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I think the main point is not [br]to be for or against it,

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but to be able to spell out[br]like under what conditions

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would my idea be a bad idea?

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And that's a bit of a stretch,

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but if you can teach [br]your students that.

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I'm not saying they can [br]always do it off the bat,

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but simply that they should aspire[br]to be able to do this:

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"I have some idea [br]under what conditions

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is my idea a bad idea."

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And if they are asking that question[br]in an earnest, honest way,

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I think in policy, in politics, [br]in their lives, whatever,

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in education, they will make[br]better decisions.

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Not, "Here's the big pile [br]of reasons why I know I'm right" --

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We're actually, mostly pretty good[br]at doing that.

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We're like biologically [br]trained to do it --

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but the... "here are the conditions[br]where I would be wrong."

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The Great Wall of China --[br]was it a good idea?

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Well, it protected China[br]against invasion from the North,

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except, of course, [br]as you probably know,

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invasion from the North came anyway.

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The Great Wall of China, [br]I am told it is 4,160 miles.

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At its peak,[br]800,000 people worked on it.

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It's the longest [br]and biggest wall ever built.

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By one estimate [br]it contains 4 billion bricks.

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It took two millennia --[br]not 2 years, not 200 years --

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two millennia to build.

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It has the weight equal [br]to 8 million elephants.

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And according[br]to one internet estimate,

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which I do not believe at all --

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I've no idea how they converted [br]money across time --

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but it cost, over two millennia,[br]$360 billion.

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I've no idea what that means.

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But if you think [br]about the Great Wall,

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it had some benefits;[br]it had an opportunity cost.

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Always think about [br]what are the tradeoffs.

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If you put on a tariff, you may [br]create some jobs in one place,

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but you're going [br]to lose jobs somewhere else.

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♪ [music] ♪

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- [Narrator] Click here [br]to watch the next episode

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of Tyler Cowen's [br]"9 Big Ideas of Economics."

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Or, maybe you're [br]not ready to move on

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and instead want[br]to learn more about this idea.

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Then you should [br]check out this video.

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Or, maybe you are dying to attend[br]one of our teacher events

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to mingle with other econ nerds.

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Click here for info on that.[br]