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- Today, we begin a series of talks on the[br]price system. Not one market in isolation

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with demand in supply but how markets link[br]people and places all over the world.

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A key part of this whole story is going[br]to be the role of prices. Something that

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you'll be hearing quite often is it a[br]price, it's a signal wrapped up in an

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incentive. So we'll be talking about[br]signals, about incentives, about

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speculation and prediction, and much else[br]beside. We're going to begin with markets

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link in the world. We've already talked[br]about the rose as a global product but

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it's not just roses of course. Take a look[br]at the product around you. An iPhone

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designed in California has parts from the[br]United States, from Kentucky, from Texas,

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from New York. The rare earths are from[br]inner Mongolia. Some of the chips are

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produced in Korea and Taiwan. The[br]gyroscope comes from France and from

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Italy. It's assembled in China. So where[br]is the iPhone made? It's really made here

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in the world. It's a world phone like many[br]of the products we consume today, it's

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produced by thousands, hundreds of[br]thousands of people all brought together,

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all cooperating in order to produce a[br]product. Now take a look at this picture.

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It shows something utterly familiar but I[br]want you to see it deeper now with new

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eyes. We have here grapes from Chile,[br]pineapples from Brazil, Kiwis from New

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Zealand, all of these within a hand's[br]breath to one another. Think of all the

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farmers, all the truckers, all the airline[br]pilots who have worked together to bring

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this literal cornucopia to you. And what[br]do we call this place? Think of the name

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now with a new meaning. We call it a[br]supermarket. When you read the news or see

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it on television, we're often told about[br]conflict but there's another story, a

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deeper story, a story which is[br]all around us everyday,

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although sometimes it's hard to see and[br]that is a massive, a tremendous amount of

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worldwide cooperation. Hundreds of[br]thousands of people from Kido to Chicago

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cooperated to bring the rose to our[br]handsome young man and they did so

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voluntarily, on the basis of self[br]interest, without central command or

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central direction. This is invisible hand[br]in action. Self interest coordinated

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towards the social good through the use of[br]markets. Even in economics we often focus

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on competition but the deeper story is[br]cooperation, worldwide cooperation. What

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markets do is coordinate the self interest[br]of many different people who ultimately

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have different goals, different[br]preferences, different insights, different

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knowledge, different circumstances. What[br]markets do, they coordinate the different

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interests and knowledge of these different[br]people to produce extensive cooperation

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and mutual gain. That's one of the deep[br]lessons of economics. Thanks.

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- If you want to test yourself,[br]click Practice Questions or if you're

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ready to move on, just click Next Video.