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

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Not one market in isolation[br]with demand and supply,

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but how markets link people[br]and places all over the world.

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

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

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it's a signal wrapped up[br]in an incentive.

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

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about speculation and prediction,[br]and much else beside.

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We're going to begin[br]with markets linking the world.

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We've already talked[br]about the rose as a global product

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but it's not just roses of course.

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Take a look[br]at the products around you.

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An iPhone designed in California[br]has parts from the United States,

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from Kentucky, from Texas,[br]from New York.

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The rare earths[br]are from inner Mongolia.

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Some of the chips are produced[br]in Korea and Taiwan.

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The gyroscope comes from France[br]and from Italy.

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

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It's really made here in the world.

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

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it's produced by thousands,[br]hundreds of thousands

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of people all brought together,[br]all cooperating

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in order to produce a product.

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Now take a look at this picture.

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It shows something utterly familiar[br]but I want you to see it

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deeper now with new eyes.

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We have here grapes from Chile,[br]pineapples from Brazil,

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

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of one another.

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Think of all the farmers,[br]all the truckers,

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all the airline pilots[br]who have worked together

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to bring this literal[br]cornucopia to you.

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And what do we call this place?

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Think of the name now[br]with a new meaning.

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We call it a supermarket.

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When we read the news[br]or see it on television,

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

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

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

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a tremendous amount[br]of worldwide cooperation.

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Hundreds of thousands of people[br]from Kido to Chicago cooperated

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to bring the rose[br]to our handsome young man

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and they did so voluntarily,[br]on the basis of self interest,

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without central command[br]or central direction.

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This is the invisible hand[br]in action.

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Self interest coordinated[br]towards the social good

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through the use of markets.

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Even in economics,[br]we often focus on competition

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but the deeper story[br]is cooperation,

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worldwide cooperation.

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What markets do is coordinate[br]the self interest

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of many different people

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who ultimately[br]have different goals,

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different preferences,[br]different insights,

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different knowledge,[br]different circumstances.

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What markets do, they coordinate[br]the different interests

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and knowledge[br]of these different people

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to produce extensive cooperation[br]and mutual gain.

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

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- [Narrator] If you want[br]to test yourself,

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click "Practice Questions."

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

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