 What's going on here just making a trade a pencil for a phone? Are you insane? A pencil isn't worth as much as a phone is you're right. It's worth more You would really trade a phone for a pencil why I don't know I just like this pencil more than I like that phone That's why I made the trade but but you can't just trade two things that don't have equal value Oh, these two items definitely aren't equal in value people only trade two things that are more valuable than one another what more How is that possible? Don't ruin this for me remember when I explained that economic value is subjective. I wasn't in that video I remember it. Well, this is a similar concept things are worth what people are willing to pay for them The reason I was willing to trade my phone for Sarah's pencil is because I value her pencil more than I valued having my phone And she only wanted my phone because she valued my phone more than her pencil for a trade to work There has to be some kind of gain for both parties involved Otherwise there'd be no reason to trade and if we view the item We already owned is more valuable than what we were asked to trade it for we definitely wouldn't want to trade it So when we choose to trade that means each of us values the thing we got out of the exchange more than whatever We traded it for and that means in a way both of us are actually wealthier than we were before the trade So just by trading we've created wealth that makes sense, but why? Why would you find this trade valuable? It's really bothering you Bob, and I find that enjoyable, huh? But phones cost so much money in pencils are so cheap It's not all about dollars and cents You just don't know why something is worth what it is to another person Maybe I just hated having a phone and happened to need to write something down Maybe my grandfather gave her this pencil before he died or maybe this is some kind of special limited edition pencil signed by Babe Ruth Why would Babe Ruth sign a pencil so people would know it was his Bob? Or maybe the whole reason this trade was worth it to me was so I could make this point about trade creating wealth Either way, you're gonna have to get used to the fact that not everyone values things the way you do. Oh my what a trade What? What an exquisite pencil Told ya Howdy everyone. Thanks for watching for more content like this check out fee.org