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- [Alex] Today, we begin a series
of talks on the price system.
Not one market in isolation
with demand and supply,
but how markets link people
and places all over the world.
A key part of this whole story
is going to be the role of prices.
Something that you'll be hearing
quite often is that a price,
it's a signal wrapped up
in an incentive.
So we'll be talking about signals,
about incentives,
about speculation and prediction,
and much else beside.
We're going to begin
with markets linking the world.
We've already talked
about the rose as a global product
but it's not just roses of course.
Take a look
at the products around you.
An iPhone designed in California
has parts from the United States,
from Kentucky, from Texas,
from New York.
The rare earths
are from inner Mongolia.
Some of the chips are produced
in Korea and Taiwan.
The gyroscope comes from France
and from Italy.
It's assembled in China.
So where is the iPhone made?
It's really made here in the world.
It's a world phone like many
of the products we consume today,
it's produced by thousands,
hundreds of thousands
of people all brought together,
all cooperating
in order to produce a product.
Now take a look at this picture.
It shows something utterly familiar
but I want you to see it
deeper now with new eyes.
We have here grapes from Chile,
pineapples from Brazil,
Kiwis from New Zealand,
all of these within a hand's breath
of one another.
Think of all the farmers,
all the truckers,
all the airline pilots
who have worked together
to bring this literal
cornucopia to you.
And what do we call this place?
Think of the name now
with a new meaning.
We call it a supermarket.
When we read the news
or see it on television,
we're often told about conflict,
but there's another story,
a deeper story, a story
which is all around us everyday,
although sometimes it's hard to see
and that is a massive,
a tremendous amount
of worldwide cooperation.
Hundreds of thousands of people
from Kido to Chicago cooperated
to bring the rose
to our handsome young man
and they did so voluntarily,
on the basis of self interest,
without central command
or central direction.
This is the invisible hand
in action.
Self interest coordinated
towards the social good
through the use of markets.
Even in economics,
we often focus on competition
but the deeper story
is cooperation,
worldwide cooperation.
What markets do is coordinate
the self interest
of many different people
who ultimately
have different goals,
different preferences,
different insights,
different knowledge,
different circumstances.
What markets do, they coordinate
the different interests
and knowledge
of these different people
to produce extensive cooperation
and mutual gain.
That's one of the deep lessons
of economics. Thanks.
- [Narrator] If you want
to test yourself,
click "Practice Questions."
Or, if you're ready to move on,
just click "Next Video."
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