1 00:00:09,430 --> 00:00:14,500 - Today, we begin a series of talks on the price system. Not one market in isolation 2 00:00:14,680 --> 00:00:19,791 with demand in supply but how markets link people and places all over the world. 3 00:00:20,500 --> 00:00:25,160 A key part of this whole story is going to be the role of prices. Something that 4 00:00:25,340 --> 00:00:29,370 you'll be hearing quite often is it a price, it's a signal wrapped up in an 5 00:00:29,550 --> 00:00:33,650 incentive. So we'll be talking about signals, about incentives, about 6 00:00:33,830 --> 00:00:42,960 speculation and prediction, and much else beside. We're going to begin with markets 7 00:00:43,140 --> 00:00:47,080 link in the world. We've already talked about the rose as a global product but 8 00:00:47,260 --> 00:00:52,300 it's not just roses of course. Take a look at the product around you. An iPhone 9 00:00:52,480 --> 00:00:56,850 designed in California has parts from the United States, from Kentucky, from Texas, 10 00:00:57,030 --> 00:01:01,220 from New York. The rare earths are from inner Mongolia. Some of the chips are 11 00:01:01,400 --> 00:01:05,900 produced in Korea and Taiwan. The gyroscope comes from France and from 12 00:01:06,080 --> 00:01:12,790 Italy. It's assembled in China. So where is the iPhone made? It's really made here 13 00:01:12,970 --> 00:01:18,520 in the world. It's a world phone like many of the products we consume today, it's 14 00:01:18,700 --> 00:01:22,780 produced by thousands, hundreds of thousands of people all brought together, 15 00:01:22,960 --> 00:01:29,180 all cooperating in order to produce a product. Now take a look at this picture. 16 00:01:29,360 --> 00:01:33,830 It shows something utterly familiar but I want you to see it deeper now with new 17 00:01:34,010 --> 00:01:39,130 eyes. We have here grapes from Chile, pineapples from Brazil, Kiwis from New 18 00:01:39,310 --> 00:01:43,900 Zealand, all of these within a hand's breath to one another. Think of all the 19 00:01:44,080 --> 00:01:48,200 farmers, all the truckers, all the airline pilots who have worked together to bring 20 00:01:48,380 --> 00:01:53,640 this literal cornucopia to you. And what do we call this place? Think of the name 21 00:01:53,820 --> 00:01:59,440 now with a new meaning. We call it a supermarket. When you read the news or see 22 00:01:59,620 --> 00:02:04,690 it on television, we're often told about conflict but there's another story, a 23 00:02:04,870 --> 00:02:09,410 deeper story, a story which is all around us everyday, 24 00:02:09,590 --> 00:02:16,400 although sometimes it's hard to see and that is a massive, a tremendous amount of 25 00:02:16,580 --> 00:02:23,560 worldwide cooperation. Hundreds of thousands of people from Kido to Chicago 26 00:02:23,740 --> 00:02:28,120 cooperated to bring the rose to our handsome young man and they did so 27 00:02:28,300 --> 00:02:32,560 voluntarily, on the basis of self interest, without central command or 28 00:02:32,740 --> 00:02:39,840 central direction. This is invisible hand in action. Self interest coordinated 29 00:02:40,020 --> 00:02:46,940 towards the social good through the use of markets. Even in economics we often focus 30 00:02:47,120 --> 00:02:54,720 on competition but the deeper story is cooperation, worldwide cooperation. What 31 00:02:54,900 --> 00:03:01,440 markets do is coordinate the self interest of many different people who ultimately 32 00:03:01,620 --> 00:03:05,140 have different goals, different preferences, different insights, different 33 00:03:05,320 --> 00:03:11,040 knowledge, different circumstances. What markets do, they coordinate the different 34 00:03:11,220 --> 00:03:16,460 interests and knowledge of these different people to produce extensive cooperation 35 00:03:16,640 --> 00:03:22,804 and mutual gain. That's one of the deep lessons of economics. Thanks. 36 00:03:24,709 --> 00:03:28,760 - If you want to test yourself, click Practice Questions or if you're 37 00:03:28,940 --> 00:03:31,509 ready to move on, just click Next Video.