1 00:00:00,505 --> 00:00:01,957 ♪ [music] ♪ 2 00:00:03,456 --> 00:00:05,686 - [Tyler] Back to ideas of two words -- 3 00:00:05,686 --> 00:00:09,885 opportunity cost, another central economic idea. 4 00:00:11,494 --> 00:00:16,391 Even when something good happens, there's a tradeoff, right? 5 00:00:16,657 --> 00:00:18,427 Sometimes I think this is more important 6 00:00:18,427 --> 00:00:19,566 than "incentives matter." 7 00:00:19,566 --> 00:00:22,818 I'm torn, incentives matter, opportunity cost, tradeoffs -- 8 00:00:22,818 --> 00:00:23,816 I don't know -- 9 00:00:23,816 --> 00:00:27,227 but it's in the top three or four ideas of economics. 10 00:00:27,559 --> 00:00:30,480 It doesn't mean you shouldn't make an investment, 11 00:00:30,480 --> 00:00:34,154 but it does suggest always look at what is the cost. 12 00:00:34,154 --> 00:00:35,453 Do the best you can. 13 00:00:35,453 --> 00:00:37,626 What is the tradeoff involved? 14 00:00:37,976 --> 00:00:40,153 This actually relates back to my point 15 00:00:40,153 --> 00:00:41,923 about not always knowing. 16 00:00:42,266 --> 00:00:45,523 Because if you're considering a choice -- what school to go to, 17 00:00:45,523 --> 00:00:46,915 whether you should marry, 18 00:00:46,915 --> 00:00:48,953 whether you should buy ping pong balls, 19 00:00:48,953 --> 00:00:50,672 where to take your next vacation -- 20 00:00:51,092 --> 00:00:53,162 you're giving up something else. 21 00:00:53,162 --> 00:00:56,371 You generally don't see in any direct way 22 00:00:56,371 --> 00:00:58,044 what it is you're giving up. 23 00:00:58,167 --> 00:01:01,426 So there's an element of built-in agnosticism here. 24 00:01:01,426 --> 00:01:03,277 Of course, you have to make a choice. 25 00:01:03,277 --> 00:01:05,998 You should use the evidence and reasoning as best you can. 26 00:01:06,162 --> 00:01:08,472 But we don't always know. 27 00:01:08,472 --> 00:01:10,942 An implication of tradeoffs everywhere 28 00:01:10,942 --> 00:01:15,022 is you're comparing a seen to an unseen, 29 00:01:15,022 --> 00:01:18,442 and you should not always be totally completely confident 30 00:01:18,442 --> 00:01:21,122 in your ability to know what the unseen is like. 31 00:01:21,122 --> 00:01:23,793 So any policy you favor -- republican, democrat, 32 00:01:23,793 --> 00:01:27,064 progressive, libertarian, left, right, whatever, conservative -- 33 00:01:27,064 --> 00:01:31,592 I think the main point is not to be for or against it, 34 00:01:31,592 --> 00:01:35,152 but to be able to spell out like under what conditions 35 00:01:35,152 --> 00:01:39,002 would my idea be a bad idea? 36 00:01:39,494 --> 00:01:41,282 And that's a bit of a stretch, 37 00:01:41,282 --> 00:01:43,613 but if you can teach your students that. 38 00:01:43,613 --> 00:01:45,972 I'm not saying they can always do it off the bat, 39 00:01:45,972 --> 00:01:49,791 but simply that they should aspire to be able to do this: 40 00:01:49,791 --> 00:01:53,102 "I have some idea under what conditions 41 00:01:53,102 --> 00:01:56,772 is my idea a bad idea." 42 00:01:56,772 --> 00:02:01,162 And if they are asking that question in an earnest, honest way, 43 00:02:01,162 --> 00:02:05,374 I think in policy, in politics, in their lives, whatever, 44 00:02:05,374 --> 00:02:08,263 in education, they will make better decisions. 45 00:02:08,263 --> 00:02:11,612 Not, "Here's the big pile of reasons why I know I'm right" -- 46 00:02:11,885 --> 00:02:14,957 We're actually, mostly pretty good at doing that. 47 00:02:15,054 --> 00:02:17,185 We're like biologically trained to do it -- 48 00:02:17,185 --> 00:02:21,853 but the... "here are the conditions where I would be wrong." 49 00:02:21,853 --> 00:02:24,984 The Great Wall of China -- was it a good idea? 50 00:02:24,984 --> 00:02:28,554 Well, it protected China against invasion from the North, 51 00:02:28,554 --> 00:02:30,983 except, of course, as you probably know, 52 00:02:30,983 --> 00:02:33,304 invasion from the North came anyway. 53 00:02:33,304 --> 00:02:38,857 The Great Wall of China, I am told it is 4,160 miles. 54 00:02:38,857 --> 00:02:42,793 At its peak, 800,000 people worked on it. 55 00:02:42,793 --> 00:02:44,974 It's the longest and biggest wall ever built. 56 00:02:45,426 --> 00:02:48,906 By one estimate it contains 4 billion bricks. 57 00:02:49,425 --> 00:02:53,345 It took two millennia -- not 2 years, not 200 years -- 58 00:02:53,345 --> 00:02:55,615 two millennia to build. 59 00:02:55,615 --> 00:02:59,376 It has the weight equal to 8 million elephants. 60 00:02:59,846 --> 00:03:02,366 And according to one internet estimate, 61 00:03:02,366 --> 00:03:04,097 which I do not believe at all -- 62 00:03:04,097 --> 00:03:07,925 I've no idea how they converted money across time -- 63 00:03:07,925 --> 00:03:11,296 but it cost, over two millennia, $360 billion. 64 00:03:11,296 --> 00:03:13,276 I've no idea what that means. 65 00:03:13,276 --> 00:03:16,065 But if you think about the Great Wall, 66 00:03:16,065 --> 00:03:19,746 it had some benefits; it had an opportunity cost. 67 00:03:19,746 --> 00:03:23,146 Always think about what are the tradeoffs. 68 00:03:23,146 --> 00:03:26,965 If you put on a tariff, you may create some jobs in one place, 69 00:03:26,965 --> 00:03:29,654 but you're going to lose jobs somewhere else. 70 00:03:29,654 --> 00:03:30,787 ♪ [music] ♪ 71 00:03:30,787 --> 00:03:32,819 - [Narrator] Click here to watch the next episode 72 00:03:32,819 --> 00:03:35,417 of Tyler Cowen's "9 Big Ideas of Economics." 73 00:03:35,665 --> 00:03:37,814 Or, maybe you're not ready to move on 74 00:03:37,814 --> 00:03:40,156 and instead want to learn more about this idea. 75 00:03:40,156 --> 00:03:42,085 Then you should check out this video. 76 00:03:42,085 --> 00:03:45,185 Or, maybe you are dying to attend one of our teacher events 77 00:03:45,185 --> 00:03:46,964 to mingle with other econ nerds. 78 00:03:46,964 --> 00:03:48,685 Click here for info on that.