9:59:59.000,9:59:59.000
♪ [music] ♪

9:59:59.000,9:59:59.000
- [Alex] Today, we begin a series[br]of talks on the price system.

9:59:59.000,9:59:59.000
Not one market in isolation[br]with demand and supply,

9:59:59.000,9:59:59.000
but how markets link people[br]and places all over the world.

9:59:59.000,9:59:59.000
A key part of this whole story[br]is going to be the role of prices.

9:59:59.000,9:59:59.000
Something that you'll be hearing[br]quite often is that a price,

9:59:59.000,9:59:59.000
it's a signal wrapped up[br]in an incentive.

9:59:59.000,9:59:59.000
So we'll be talking about signals,[br]about incentives,

9:59:59.000,9:59:59.000
about speculation and prediction,[br]and much else beside.

9:59:59.000,9:59:59.000
We're going to begin[br]with markets link in the world.

9:59:59.000,9:59:59.000
We've already talked[br]about the rose as a global product

9:59:59.000,9:59:59.000
but it's not just roses of course.

9:59:59.000,9:59:59.000
Take a look[br]at the product around you.

9:59:59.000,9:59:59.000
An iPhone designed in California[br]has parts from the United States,

9:59:59.000,9:59:59.000
from Kentucky, from Texas,[br]from New York.

9:59:59.000,9:59:59.000
The rare earths[br]are from inner Mongolia.

9:59:59.000,9:59:59.000
Some of the chips are produced[br]in Korea and Taiwan.

9:59:59.000,9:59:59.000
The gyroscope comes from France[br]and from Italy.

9:59:59.000,9:59:59.000
It's assembled in China.[br]So where is the iPhone made?

9:59:59.000,9:59:59.000
It's really made here in the world.

9:59:59.000,9:59:59.000
It's a world phone like many[br]of the products we consume today,

9:59:59.000,9:59:59.000
it's produced by thousands,[br]hundreds of thousands

9:59:59.000,9:59:59.000
of people all brought together,[br]all cooperating

9:59:59.000,9:59:59.000
in order to produce a product.

9:59:59.000,9:59:59.000
Now take a look at this picture.

9:59:59.000,9:59:59.000
It shows something utterly familiar[br]but I want you to see it

9:59:59.000,9:59:59.000
deeper now with new eyes.

9:59:59.000,9:59:59.000
We have here grapes from Chile,[br]pineapples from Brazil,

9:59:59.000,9:59:59.000
Kiwis from New Zealand,[br]all of these within a hand's breath

9:59:59.000,9:59:59.000
to one another.

9:59:59.000,9:59:59.000
Think of all the farmers,[br]all the truckers,

9:59:59.000,9:59:59.000
all the airline pilots[br]who have worked together

9:59:59.000,9:59:59.000
to bring this literal[br]cornucopia to you.

9:59:59.000,9:59:59.000
And what do we call this place?

9:59:59.000,9:59:59.000
Think of the name now[br]with a new meaning.

9:59:59.000,9:59:59.000
We call it a supermarket.

9:59:59.000,9:59:59.000
When you read the news[br]or see it on television,

9:59:59.000,9:59:59.000
we're often told about conflict,[br]but there's another story,

9:59:59.000,9:59:59.000
a deeper story, a story[br]which is all around us everyday,

9:59:59.000,9:59:59.000
although sometimes it's hard to see[br]and that is a massive,

9:59:59.000,9:59:59.000
a tremendous amount[br]of worldwide cooperation.

9:59:59.000,9:59:59.000
Hundreds of thousands of people[br]from Kido to Chicago cooperated

9:59:59.000,9:59:59.000
to bring the rose[br]to our handsome young man

9:59:59.000,9:59:59.000
and they did so voluntarily,[br]on the basis of self interest,

9:59:59.000,9:59:59.000
without central command[br]or central direction.

9:59:59.000,9:59:59.000
This is invisible hand in action.

9:59:59.000,9:59:59.000
Self interest coordinated[br]towards the social good

9:59:59.000,9:59:59.000
through the use of markets.

9:59:59.000,9:59:59.000
Even in economics,[br]we often focus on competition

9:59:59.000,9:59:59.000
but the deeper story[br]is cooperation,

9:59:59.000,9:59:59.000
worldwide cooperation.

9:59:59.000,9:59:59.000
What markets do is coordinate[br]the self interest

9:59:59.000,9:59:59.000
of many different people

9:59:59.000,9:59:59.000
who ultimately[br]have different goals,

9:59:59.000,9:59:59.000
different preferences,[br]different insights,

9:59:59.000,9:59:59.000
different knowledge,[br]different circumstances.

9:59:59.000,9:59:59.000
What markets do, they coordinate[br]the different interests

9:59:59.000,9:59:59.000
and knowledge[br]of these different people

9:59:59.000,9:59:59.000
to produce extensive cooperation[br]and mutual gain.

9:59:59.000,9:59:59.000
That's one of the deep lessons[br]of economics. Thanks.

9:59:59.000,9:59:59.000
- [Narrator] If you want[br]to test yourself,

9:59:59.000,9:59:59.000
click "Practice Questions."

9:59:59.000,9:59:59.000
Or, if you're ready to move on,[br]just click "Next Video."

9:59:59.000,9:59:59.000
♪ [music] ♪