[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.14,0:00:02.90,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:13.76,0:00:16.44,Default,,0000,0000,0000,,- [Don] Let me tell you \Nabout the island of Tasmania.
Dialogue: 0,0:00:16.44,0:00:20.07,Default,,0000,0000,0000,,It's about 130 miles off the coast\Nof southeastern Australia.
Dialogue: 0,0:00:20.87,0:00:24.84,Default,,0000,0000,0000,,A long time ago when seas where low,\NTasmania was part of Australia.
Dialogue: 0,0:00:25.45,0:00:27.21,Default,,0000,0000,0000,,During that time, \Nthe archaeological record
Dialogue: 0,0:00:27.21,0:00:30.58,Default,,0000,0000,0000,,documents that Tasmanians \Nfished and they used bone tools.
Dialogue: 0,0:00:31.94,0:00:33.39,Default,,0000,0000,0000,,About ten thousand years ago,
Dialogue: 0,0:00:33.39,0:00:36.91,Default,,0000,0000,0000,,rising waters cut Tasmania \Noff from Australia.
Dialogue: 0,0:00:36.91,0:00:38.94,Default,,0000,0000,0000,,On at least three \Nof the smaller islands,
Dialogue: 0,0:00:38.94,0:00:42.04,Default,,0000,0000,0000,,the isolated human population\Ndied out completely.
Dialogue: 0,0:00:42.72,0:00:45.91,Default,,0000,0000,0000,,In Tasmania, the four thousand\Nhunter-gatherers remained
Dialogue: 0,0:00:45.91,0:00:48.73,Default,,0000,0000,0000,,with no contact with the rest \Nof humanity at all.
Dialogue: 0,0:00:49.64,0:00:51.68,Default,,0000,0000,0000,,They lost technologies \Nthey once had --
Dialogue: 0,0:00:51.68,0:00:54.12,Default,,0000,0000,0000,,no more fishing, no more bone tools.
Dialogue: 0,0:00:54.12,0:00:55.56,Default,,0000,0000,0000,,They also missed new inventions,
Dialogue: 0,0:00:55.56,0:00:58.50,Default,,0000,0000,0000,,such as stone tools \Nand fishing nets and fire,
Dialogue: 0,0:00:58.50,0:01:00.55,Default,,0000,0000,0000,,that were adopted in Australia.
Dialogue: 0,0:01:00.55,0:01:04.43,Default,,0000,0000,0000,,When Europeans "discovered"\Nthe Tasmanians in 1642,
Dialogue: 0,0:01:04.43,0:01:06.76,Default,,0000,0000,0000,,they found that \Nthis extreme isolation
Dialogue: 0,0:01:06.76,0:01:08.58,Default,,0000,0000,0000,,had created the simplest \Nmaterial culture
Dialogue: 0,0:01:08.58,0:01:10.48,Default,,0000,0000,0000,,of any people in the modern world.
Dialogue: 0,0:01:11.44,0:01:13.21,Default,,0000,0000,0000,,Without access to other people,
Dialogue: 0,0:01:13.21,0:01:16.94,Default,,0000,0000,0000,,some island populations shrink --\Nothers even vanish.
Dialogue: 0,0:01:18.15,0:01:19.82,Default,,0000,0000,0000,,Fortunately, for most of us,
Dialogue: 0,0:01:19.82,0:01:22.62,Default,,0000,0000,0000,,human cooperation \Nhas expanded over time.
Dialogue: 0,0:01:23.70,0:01:25.27,Default,,0000,0000,0000,,As we saw in the previous videos,
Dialogue: 0,0:01:25.27,0:01:28.55,Default,,0000,0000,0000,,we enjoy enormous benefits \Nfrom specialization and trade.
Dialogue: 0,0:01:29.47,0:01:31.25,Default,,0000,0000,0000,,One reason for this \Nbeneficial cooperation
Dialogue: 0,0:01:31.25,0:01:34.93,Default,,0000,0000,0000,,is what economist \Ncall "Comparative Advantage."
Dialogue: 0,0:01:35.70,0:01:38.28,Default,,0000,0000,0000,,Two things are surprising \Nabout Comparative Advantage.
Dialogue: 0,0:01:39.17,0:01:42.28,Default,,0000,0000,0000,,First, just by rearranging \Nwho does what,
Dialogue: 0,0:01:42.28,0:01:45.17,Default,,0000,0000,0000,,we can make more stuff \Nthrough specialization in trade
Dialogue: 0,0:01:45.17,0:01:48.54,Default,,0000,0000,0000,,even if no one ever gets any better\Nat doing any line of work.
Dialogue: 0,0:01:49.20,0:01:51.24,Default,,0000,0000,0000,,But the second insight's my favorite.
Dialogue: 0,0:01:51.24,0:01:54.71,Default,,0000,0000,0000,,If you get better at doing something,\Nthat obviously benefits you,
Dialogue: 0,0:01:54.71,0:01:56.70,Default,,0000,0000,0000,,but it also benefits me
Dialogue: 0,0:01:56.70,0:01:59.91,Default,,0000,0000,0000,,even though my abilities to produce\Nhaven't changed at all.
Dialogue: 0,0:02:00.84,0:02:02.15,Default,,0000,0000,0000,,Let me show you how this works.
Dialogue: 0,0:02:02.75,0:02:04.76,Default,,0000,0000,0000,,It's best seen \Nwith a simple example --
Dialogue: 0,0:02:04.76,0:02:08.24,Default,,0000,0000,0000,,just two people -- Bob and Ann --
Dialogue: 0,0:02:08.24,0:02:11.68,Default,,0000,0000,0000,,who produce just two goods --\Nbananas and fish.
Dialogue: 0,0:02:12.73,0:02:15.51,Default,,0000,0000,0000,,Here's what Bob can do\Nif he spends all of his time
Dialogue: 0,0:02:15.51,0:02:17.23,Default,,0000,0000,0000,,producing only one good.
Dialogue: 0,0:02:17.85,0:02:22.97,Default,,0000,0000,0000,,Bob can either gather 10 bananas\Nor he can catch 10 fish.
Dialogue: 0,0:02:23.71,0:02:28.48,Default,,0000,0000,0000,,Ann can either gather\N10 bananas or catch 30 fish.
Dialogue: 0,0:02:29.26,0:02:30.70,Default,,0000,0000,0000,,So let's say they each\Nsplit their time
Dialogue: 0,0:02:30.70,0:02:32.60,Default,,0000,0000,0000,,between producing \Nbananas and fishing.
Dialogue: 0,0:02:33.20,0:02:35.66,Default,,0000,0000,0000,,Bob and Ann each \Nproduce five bananas,
Dialogue: 0,0:02:36.21,0:02:40.99,Default,,0000,0000,0000,,Bob produces five fish,\Nand Ann produces 15 fish.
Dialogue: 0,0:02:41.71,0:02:45.25,Default,,0000,0000,0000,,In total, they produce \N10 bananas and 20 fish.
Dialogue: 0,0:02:46.36,0:02:47.77,Default,,0000,0000,0000,,You math wizards in the audience
Dialogue: 0,0:02:47.77,0:02:50.20,Default,,0000,0000,0000,,surely see an obvious way\Nto increase this total.
Dialogue: 0,0:02:50.73,0:02:54.50,Default,,0000,0000,0000,,If Bob produces just bananas\Nand Ann produces just fish,
Dialogue: 0,0:02:54.50,0:02:58.10,Default,,0000,0000,0000,,then the total rises \Nto 10 bananas and 30 fish.
Dialogue: 0,0:02:58.10,0:03:00.24,Default,,0000,0000,0000,,So just by rearranging who does what,
Dialogue: 0,0:03:00.24,0:03:01.93,Default,,0000,0000,0000,,we get more total stuff.
Dialogue: 0,0:03:02.85,0:03:03.99,Default,,0000,0000,0000,,Now you might think this outcome
Dialogue: 0,0:03:03.99,0:03:06.28,Default,,0000,0000,0000,,is simply the result \Nof the division of labor
Dialogue: 0,0:03:06.28,0:03:09.41,Default,,0000,0000,0000,,that we covered previously,\Nbut you'd be wrong.
Dialogue: 0,0:03:09.99,0:03:12.26,Default,,0000,0000,0000,,The key insight \Nfrom the division of labor
Dialogue: 0,0:03:12.26,0:03:14.49,Default,,0000,0000,0000,,is that workers individually\Nget more productive
Dialogue: 0,0:03:14.49,0:03:15.81,Default,,0000,0000,0000,,when they specialize.
Dialogue: 0,0:03:15.81,0:03:17.57,Default,,0000,0000,0000,,Yet in this scenario,
Dialogue: 0,0:03:17.57,0:03:19.97,Default,,0000,0000,0000,,neither Bob nor Ann\Nhas gotten any better
Dialogue: 0,0:03:19.97,0:03:21.75,Default,,0000,0000,0000,,at producing bananas or fish.
Dialogue: 0,0:03:21.75,0:03:24.41,Default,,0000,0000,0000,,Just by rearranging\Nwhat tasks each does
Dialogue: 0,0:03:24.41,0:03:26.22,Default,,0000,0000,0000,,is what made \Ntotal production increase.
Dialogue: 0,0:03:26.59,0:03:28.51,Default,,0000,0000,0000,,The key to understanding\Nhow this works
Dialogue: 0,0:03:28.51,0:03:30.20,Default,,0000,0000,0000,,is opportunity cost.
Dialogue: 0,0:03:30.72,0:03:33.50,Default,,0000,0000,0000,,Bob has to choose to gather\Nbananas or catch fish.
Dialogue: 0,0:03:33.50,0:03:36.95,Default,,0000,0000,0000,,When he chooses to gather a banana,\Nhe gives up one fish.
Dialogue: 0,0:03:36.95,0:03:39.82,Default,,0000,0000,0000,,In essence, Bob trades with himself.
Dialogue: 0,0:03:39.82,0:03:43.86,Default,,0000,0000,0000,,He can use his time to gather bananas\Nor trade that time to catch fish,
Dialogue: 0,0:03:43.86,0:03:47.41,Default,,0000,0000,0000,,and the cost of that trade \Nis one fish per banana.
Dialogue: 0,0:03:48.06,0:03:49.95,Default,,0000,0000,0000,,That's Bob's opportunity cost.
Dialogue: 0,0:03:50.73,0:03:52.61,Default,,0000,0000,0000,,The same holds true for Ann,
Dialogue: 0,0:03:52.61,0:03:55.51,Default,,0000,0000,0000,,but her cost of producing \None banana is three fish.
Dialogue: 0,0:03:56.17,0:03:59.04,Default,,0000,0000,0000,,In the amount of time that it takes\NAnn to gather one banana,
Dialogue: 0,0:03:59.04,0:04:01.48,Default,,0000,0000,0000,,she could have caught three fish.
Dialogue: 0,0:04:01.48,0:04:04.93,Default,,0000,0000,0000,,She trades with herself \None banana for three fish.
Dialogue: 0,0:04:06.20,0:04:09.54,Default,,0000,0000,0000,,So Bob only has to give up one fish\Nto produce one banana,
Dialogue: 0,0:04:09.54,0:04:12.80,Default,,0000,0000,0000,,but Ann must give up three fish\Nto produce a banana.
Dialogue: 0,0:04:12.80,0:04:15.21,Default,,0000,0000,0000,,Ann's opportunity cost \Nof gathering a banana
Dialogue: 0,0:04:15.21,0:04:16.83,Default,,0000,0000,0000,,is higher than Bob's.
Dialogue: 0,0:04:17.43,0:04:18.83,Default,,0000,0000,0000,,She can improve her situation
Dialogue: 0,0:04:18.83,0:04:21.47,Default,,0000,0000,0000,,if she can get bananas \Nfor less than three fish,
Dialogue: 0,0:04:21.47,0:04:23.11,Default,,0000,0000,0000,,and Bob can improve his situation
Dialogue: 0,0:04:23.11,0:04:25.74,Default,,0000,0000,0000,,if he can get fish \Nfor less than one banana.
Dialogue: 0,0:04:26.43,0:04:29.76,Default,,0000,0000,0000,,Let's say Ann trades two fish\Nto Bob for one banana.
Dialogue: 0,0:04:30.46,0:04:31.54,Default,,0000,0000,0000,,They each gain.
Dialogue: 0,0:04:32.49,0:04:34.12,Default,,0000,0000,0000,,If Ann wants a banana,
Dialogue: 0,0:04:34.12,0:04:37.15,Default,,0000,0000,0000,,she can either gather it herself\Nand give up three fish,
Dialogue: 0,0:04:37.71,0:04:41.90,Default,,0000,0000,0000,,or she can catch only two fish\Nand then trade them to Bob.
Dialogue: 0,0:04:42.72,0:04:45.55,Default,,0000,0000,0000,,She prefers the lower-cost option\Nand so she trades.
Dialogue: 0,0:04:46.24,0:04:48.12,Default,,0000,0000,0000,,Bob prefers the lower \Ncost option too.
Dialogue: 0,0:04:48.82,0:04:51.15,Default,,0000,0000,0000,,Instead of giving up \Na whole banana to catch a fish,
Dialogue: 0,0:04:51.15,0:04:53.51,Default,,0000,0000,0000,,he can trade that \Nbanana for two fish.
Dialogue: 0,0:04:54.10,0:04:56.76,Default,,0000,0000,0000,,Now he's only giving up\Na half a banana for a fish.
Dialogue: 0,0:04:57.96,0:05:00.78,Default,,0000,0000,0000,,You can see that even\Nif Ann is better at everything,
Dialogue: 0,0:05:00.78,0:05:02.75,Default,,0000,0000,0000,,nothing in this story changes.
Dialogue: 0,0:05:03.39,0:05:04.69,Default,,0000,0000,0000,,She still benefits from trade
Dialogue: 0,0:05:04.69,0:05:06.50,Default,,0000,0000,0000,,because the number \Nof fish Ann gives up
Dialogue: 0,0:05:06.50,0:05:08.20,Default,,0000,0000,0000,,to pick a banana herself
Dialogue: 0,0:05:08.20,0:05:11.71,Default,,0000,0000,0000,,is greater than the number of fish\Nthat she must catch and give to Bob
Dialogue: 0,0:05:11.71,0:05:14.05,Default,,0000,0000,0000,,in order to get a banana from Bob.
Dialogue: 0,0:05:14.71,0:05:17.72,Default,,0000,0000,0000,,Now, for an insight \Nthat is really counter-intuitive.
Dialogue: 0,0:05:17.72,0:05:19.88,Default,,0000,0000,0000,,What happens if Ann\Ngets better at fishing?
Dialogue: 0,0:05:19.88,0:05:22.48,Default,,0000,0000,0000,,Let's say that she\Ncan now catch 40 fish.
Dialogue: 0,0:05:23.47,0:05:25.15,Default,,0000,0000,0000,,Obviously that's good for Ann,
Dialogue: 0,0:05:25.15,0:05:27.43,Default,,0000,0000,0000,,but it also means that \Nbananas just got more costly
Dialogue: 0,0:05:27.43,0:05:29.27,Default,,0000,0000,0000,,for Ann to produce herself.
Dialogue: 0,0:05:29.27,0:05:32.62,Default,,0000,0000,0000,,She now has to sacrifice four fish\Nfor each banana that she gathers.
Dialogue: 0,0:05:33.14,0:05:34.68,Default,,0000,0000,0000,,By becoming a better fisherman,
Dialogue: 0,0:05:34.68,0:05:38.72,Default,,0000,0000,0000,,Ann becomes a comparatively \Nworse banana gatherer,
Dialogue: 0,0:05:38.72,0:05:40.70,Default,,0000,0000,0000,,and this fact helps Bob.
Dialogue: 0,0:05:41.39,0:05:43.90,Default,,0000,0000,0000,,The reason is that Ann is now\Nwilling to trade more fish
Dialogue: 0,0:05:43.90,0:05:46.33,Default,,0000,0000,0000,,for each banana \Nthat she gets from Bob.
Dialogue: 0,0:05:47.20,0:05:49.69,Default,,0000,0000,0000,,So, although Bob's ability\Nto produce hasn't changed,
Dialogue: 0,0:05:49.69,0:05:52.99,Default,,0000,0000,0000,,he can now get more fish\Nfor his bananas.
Dialogue: 0,0:05:53.89,0:05:56.27,Default,,0000,0000,0000,,Comparative Advantage \Nis a beautiful thing.
Dialogue: 0,0:05:56.27,0:05:58.18,Default,,0000,0000,0000,,No matter what my talents are,
Dialogue: 0,0:05:58.18,0:06:01.24,Default,,0000,0000,0000,,I can still help you even \Nif you are better at everything.
Dialogue: 0,0:06:01.74,0:06:03.51,Default,,0000,0000,0000,,The more different \Nwe are from each other,
Dialogue: 0,0:06:03.51,0:06:06.27,Default,,0000,0000,0000,,the more we benefit \Nfrom trading with each other.
Dialogue: 0,0:06:07.46,0:06:08.89,Default,,0000,0000,0000,,Let's get back to the real world.
Dialogue: 0,0:06:09.69,0:06:12.56,Default,,0000,0000,0000,,What Comparative Advantage\Npractically means for most people
Dialogue: 0,0:06:12.56,0:06:15.65,Default,,0000,0000,0000,,is that we each spend \Nmost of our working time at a job
Dialogue: 0,0:06:15.65,0:06:18.32,Default,,0000,0000,0000,,that utilizes each \Nof our comparative talents.
Dialogue: 0,0:06:18.92,0:06:20.96,Default,,0000,0000,0000,,How do you know what \Nyou're comparatively good at?
Dialogue: 0,0:06:20.96,0:06:23.29,Default,,0000,0000,0000,,What you get paid \Nfor your job tells you that.
Dialogue: 0,0:06:24.20,0:06:26.49,Default,,0000,0000,0000,,Comparative Advantage \Nis the main force
Dialogue: 0,0:06:26.49,0:06:30.52,Default,,0000,0000,0000,,driving us to use our talents\Nin those jobs that we do best.
Dialogue: 0,0:06:30.52,0:06:32.82,Default,,0000,0000,0000,,It's why people who are good \Nat math tend to become engineers,
Dialogue: 0,0:06:32.82,0:06:34.48,Default,,0000,0000,0000,,and those who have \Ngood graphic sense
Dialogue: 0,0:06:34.48,0:06:35.82,Default,,0000,0000,0000,,tend to go into the arts.
Dialogue: 0,0:06:36.77,0:06:38.54,Default,,0000,0000,0000,,Specialization and trade\Nplay key roles
Dialogue: 0,0:06:38.54,0:06:41.12,Default,,0000,0000,0000,,in the movement \Nfrom poverty to prosperity.
Dialogue: 0,0:06:41.61,0:06:44.18,Default,,0000,0000,0000,,We would be desperately\Npoor without them,
Dialogue: 0,0:06:44.18,0:06:47.52,Default,,0000,0000,0000,,but they alone do not explain\Nthe full extent of our prosperity.
Dialogue: 0,0:06:47.52,0:06:50.38,Default,,0000,0000,0000,,Another feature of the modern \Nworld is important --
Dialogue: 0,0:06:50.38,0:06:52.38,Default,,0000,0000,0000,,"Innovationism."
Dialogue: 0,0:06:52.38,0:06:55.17,Default,,0000,0000,0000,,Our society is \Nan orgy of innovations.
Dialogue: 0,0:06:55.71,0:06:57.10,Default,,0000,0000,0000,,This Innovationism \Nwould be impossible
Dialogue: 0,0:06:57.10,0:06:58.51,Default,,0000,0000,0000,,without specialization and trading,
Dialogue: 0,0:06:58.51,0:07:02.73,Default,,0000,0000,0000,,yet specialization and trade \Ndo not guarantee Innovationism.
Dialogue: 0,0:07:02.73,0:07:05.00,Default,,0000,0000,0000,,This is a topic for a future video.
Dialogue: 0,0:07:05.00,0:07:08.00,Default,,0000,0000,0000,,♪ [music] ♪