Markets Link the World

In this video, we discuss how markets link people and places all over the world. We’ll take a look at production and consumption markets and, importantly, the role that prices play in it all. Following up on our example of a rose, we take a look at other global products such as the Apple iPhone. Where is the iPhone made? It’s produced by thousands of people all over the world, working in cooperation in order to make one product that many of us enjoy. Join us as we observe the invisible hand in action.

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- Today, we begin a series of talks on the
price system. Not one market in isolation

with demand in 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 it 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

link in 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 product 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 to 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 you 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 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.

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