WEBVTT

00:00:00.505 --> 00:00:01.957
♪ [music] ♪

00:00:03.456 --> 00:00:05.686
- [Tyler] Back to ideas 
of two words --

00:00:05.686 --> 00:00:09.885
opportunity cost, 
another central economic idea.

00:00:11.494 --> 00:00:16.391
Even when something good happens,
there's a tradeoff, right?

00:00:16.657 --> 00:00:18.427
Sometimes I think 
this is more important

00:00:18.427 --> 00:00:19.566
than "incentives matter."

00:00:19.566 --> 00:00:22.818
I'm torn, incentives matter,
opportunity cost, tradeoffs --

00:00:22.818 --> 00:00:23.816
I don't know --

00:00:23.816 --> 00:00:27.227
but it's in the top three 
or four ideas of economics.

00:00:27.559 --> 00:00:30.480
It doesn't mean you shouldn't 
make an investment,

00:00:30.480 --> 00:00:34.154
but it does suggest
always look at what is the cost.

00:00:34.154 --> 00:00:35.453
Do the best you can.

00:00:35.453 --> 00:00:37.626
What is the tradeoff involved?

00:00:37.976 --> 00:00:40.153
This actually relates back 
to my point

00:00:40.153 --> 00:00:41.923
about not always knowing.

00:00:42.266 --> 00:00:45.523
Because if you're considering 
a choice -- what school to go to,

00:00:45.523 --> 00:00:46.915
whether you should marry,

00:00:46.915 --> 00:00:48.953
whether you should buy 
ping pong balls,

00:00:48.953 --> 00:00:50.672
where to take your next vacation --

00:00:51.092 --> 00:00:53.162
you're giving up something else.

00:00:53.162 --> 00:00:56.371
You generally don't see 
in any direct way

00:00:56.371 --> 00:00:58.044
what it is you're giving up.

00:00:58.167 --> 00:01:01.426
So there's an element 
of built-in agnosticism here.

00:01:01.426 --> 00:01:03.277
Of course, you have 
to make a choice.

00:01:03.277 --> 00:01:05.998
You should use the evidence 
and reasoning as best you can.

00:01:06.162 --> 00:01:08.472
But we don't always know.

00:01:08.472 --> 00:01:10.942
An implication 
of tradeoffs everywhere

00:01:10.942 --> 00:01:15.022
is you're comparing a seen
to an unseen,

00:01:15.022 --> 00:01:18.442
and you should not always be 
totally completely confident

00:01:18.442 --> 00:01:21.122
in your ability to know 
what the unseen is like.

00:01:21.122 --> 00:01:23.793
So any policy you favor --
republican, democrat,

00:01:23.793 --> 00:01:27.064
progressive, libertarian, left, 
right, whatever, conservative --

00:01:27.064 --> 00:01:31.592
I think the main point is not 
to be for or against it,

00:01:31.592 --> 00:01:35.152
but to be able to spell out
like under what conditions

00:01:35.152 --> 00:01:39.002
would my idea be a bad idea?

00:01:39.494 --> 00:01:41.282
And that's a bit of a stretch,

00:01:41.282 --> 00:01:43.613
but if you can teach 
your students that.

00:01:43.613 --> 00:01:45.972
I'm not saying they can 
always do it off the bat,

00:01:45.972 --> 00:01:49.791
but simply that they should aspire
to be able to do this:

00:01:49.791 --> 00:01:53.102
"I have some idea 
under what conditions

00:01:53.102 --> 00:01:56.772
is my idea a bad idea."

00:01:56.772 --> 00:02:01.162
And if they are asking that question
in an earnest, honest way,

00:02:01.162 --> 00:02:05.374
I think in policy, in politics, 
in their lives, whatever,

00:02:05.374 --> 00:02:08.263
in education, they will make
better decisions.

00:02:08.263 --> 00:02:11.612
Not, "Here's the big pile 
of reasons why I know I'm right" --

00:02:11.885 --> 00:02:14.957
We're actually, mostly pretty good
at doing that.

00:02:15.054 --> 00:02:17.185
We're like biologically 
trained to do it --

00:02:17.185 --> 00:02:21.853
but the... "here are the conditions
where I would be wrong."

00:02:21.853 --> 00:02:24.984
The Great Wall of China --
was it a good idea?

00:02:24.984 --> 00:02:28.554
Well, it protected China
against invasion from the North,

00:02:28.554 --> 00:02:30.983
except, of course, 
as you probably know,

00:02:30.983 --> 00:02:33.304
invasion from the North came anyway.

00:02:33.304 --> 00:02:38.857
The Great Wall of China, 
I am told it is 4,160 miles.

00:02:38.857 --> 00:02:42.793
At its peak,
800,000 people worked on it.

00:02:42.793 --> 00:02:44.974
It's the longest 
and biggest wall ever built.

00:02:45.426 --> 00:02:48.906
By one estimate 
it contains 4 billion bricks.

00:02:49.425 --> 00:02:53.345
It took two millennia --
not 2 years, not 200 years --

00:02:53.345 --> 00:02:55.615
two millennia to build.

00:02:55.615 --> 00:02:59.376
It has the weight equal 
to 8 million elephants.

00:02:59.846 --> 00:03:02.366
And according
to one internet estimate,

00:03:02.366 --> 00:03:04.097
which I do not believe at all --

00:03:04.097 --> 00:03:07.925
I've no idea how they converted 
money across time --

00:03:07.925 --> 00:03:11.296
but it cost, over two millennia,
$360 billion.

00:03:11.296 --> 00:03:13.276
I've no idea what that means.

00:03:13.276 --> 00:03:16.065
But if you think 
about the Great Wall,

00:03:16.065 --> 00:03:19.746
it had some benefits;
it had an opportunity cost.

00:03:19.746 --> 00:03:23.146
Always think about 
what are the tradeoffs.

00:03:23.146 --> 00:03:26.965
If you put on a tariff, you may 
create some jobs in one place,

00:03:26.965 --> 00:03:29.654
but you're going 
to lose jobs somewhere else.

00:03:29.654 --> 00:03:30.787
♪ [music] ♪

00:03:30.787 --> 00:03:32.819
- [Narrator] Click here 
to watch the next episode

00:03:32.819 --> 00:03:35.417
of Tyler Cowen's 
"9 Big Ideas of Economics."

00:03:35.665 --> 00:03:37.814
Or, maybe you're 
not ready to move on

00:03:37.814 --> 00:03:40.156
and instead want
to learn more about this idea.

00:03:40.156 --> 00:03:42.085
Then you should 
check out this video.

00:03:42.085 --> 00:03:45.185
Or, maybe you are dying to attend
one of our teacher events

00:03:45.185 --> 00:03:46.964
to mingle with other econ nerds.

00:03:46.964 --> 00:03:48.685
Click here for info on that.