WEBVTT 00:00:09.430 --> 00:00:14.500 - Today, we begin a series of talks on the price system. Not one market in isolation 00:00:14.680 --> 00:00:19.791 with demand in supply but how markets link people and places all over the world. 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 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 00:00:29.550 --> 00:00:33.650 incentive. So we'll be talking about signals, about incentives, about 00:00:33.830 --> 00:00:42.960 speculation and prediction, and much else beside. We're going to begin with markets 00:00:43.140 --> 00:00:47.080 link in the world. We've already talked about the rose as a global product but 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 00:00:52.480 --> 00:00:56.850 designed in California has parts from the United States, from Kentucky, from Texas, 00:00:57.030 --> 00:01:01.220 from New York. The rare earths are from inner Mongolia. Some of the chips are 00:01:01.400 --> 00:01:05.900 produced in Korea and Taiwan. The gyroscope comes from France and from 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 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 00:01:18.700 --> 00:01:22.780 produced by thousands, hundreds of thousands of people all brought together, 00:01:22.960 --> 00:01:29.180 all cooperating in order to produce a product. Now take a look at this picture. 00:01:29.360 --> 00:01:33.830 It shows something utterly familiar but I want you to see it deeper now with new 00:01:34.010 --> 00:01:39.130 eyes. We have here grapes from Chile, pineapples from Brazil, Kiwis from New 00:01:39.310 --> 00:01:43.900 Zealand, all of these within a hand's breath to one another. Think of all the 00:01:44.080 --> 00:01:48.200 farmers, all the truckers, all the airline pilots who have worked together to bring 00:01:48.380 --> 00:01:53.640 this literal cornucopia to you. And what do we call this place? Think of the name 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 00:01:59.620 --> 00:02:04.690 it on television, we're often told about conflict but there's another story, a 00:02:04.870 --> 00:02:09.410 deeper story, a story which is all around us everyday, 00:02:09.590 --> 00:02:16.400 although sometimes it's hard to see and that is a massive, a tremendous amount of 00:02:16.580 --> 00:02:23.560 worldwide cooperation. Hundreds of thousands of people from Kido to Chicago 00:02:23.740 --> 00:02:28.120 cooperated to bring the rose to our handsome young man and they did so 00:02:28.300 --> 00:02:32.560 voluntarily, on the basis of self interest, without central command or 00:02:32.740 --> 00:02:39.840 central direction. This is invisible hand in action. Self interest coordinated 00:02:40.020 --> 00:02:46.940 towards the social good through the use of markets. Even in economics we often focus 00:02:47.120 --> 00:02:54.720 on competition but the deeper story is cooperation, worldwide cooperation. What 00:02:54.900 --> 00:03:01.440 markets do is coordinate the self interest of many different people who ultimately 00:03:01.620 --> 00:03:05.140 have different goals, different preferences, different insights, different 00:03:05.320 --> 00:03:11.040 knowledge, different circumstances. What markets do, they coordinate the different 00:03:11.220 --> 00:03:16.460 interests and knowledge of these different people to produce extensive cooperation 00:03:16.640 --> 00:03:22.804 and mutual gain. That's one of the deep lessons of economics. Thanks. 00:03:24.709 --> 00:03:28.760 - If you want to test yourself, click Practice Questions or if you're 00:03:28.940 --> 00:03:31.509 ready to move on, just click Next Video.