[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,- [Alex] A modern economy\Ndepends on the cooperation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of vast numbers of strangers,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but how is this cooperation\Ncoordinated?
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Let's revisit the economics\Nbehind roses,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but this time,\Nlet's go back to 1973.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In the 1970s, the price of oil\Nskyrocketed so it made sense
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to economize,\Nbut oil has many uses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So which uses should we cut back\Nand which should we maintain?
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In a market economy, no one person\Ndecides these questions
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or perhaps more accurately,\Neveryone does.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,A price is a signal\Nwrapped up in an incentive.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So when the price of oil increased,\Nit signaled that oil
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,had become more scarce\Nand it gave everyone
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,an incentive to listen\Nto that signal.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It said, "Find ways\Nto economize on oil
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or develop substitutes\Nand you will profit."
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,When the price of oil\Nfirst increased,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,most roses bought\Nin the United States were grown
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in greenhouses in New Jersey,\Nin Pennsylvania.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The increased price of oil\Nmeant that it cost more
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to heat those greenhouses,\Nwhich meant a shift upwards
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in the supply curve for flowers\Nand an increase in the price.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The result was that\Nit encouraged people
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to turn to substitutes.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So just chocolate and Teddy bears\Nto give to their loved ones
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,at Valentine's Day,\Nbut the story doesn't end there.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Seeing the higher price of oil,\Nentrepreneurs began to think
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,about other ways\Nto produce flowers.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Instead of heating a greenhouse,\Nwhy not use the natural heat
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of the sun and transport the roses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Entrepreneurs encouraged farmers\Nin Kenya and Ecuador
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to start growing roses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And they began to invest\Nin a new global infrastructure
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to deliver roses around the world.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Who could have predicted it?
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Did one way of adjusting\Nto a reduced supply of oil
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,was greater consumption\Nof chocolate?
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And another way,\Nby importing roses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In fact, no one\Ncould have predicted,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,let alone plan all the myriad ways\Nin which people responded
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to the increased price of oil.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That's because no one knows\Nall the information
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that the market uses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Everything from the cost\Nof growing greenhouses,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to the demand for roses\Nversus chocolate,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to the value\Nthat a particular piece
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of land in Kenya has\Nfor growing flowers versus coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,No single individual\Nknows all of these information.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It's dispersed.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So when oil becomes scarce,\Nwe want people all over the world
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to use this dispersed information,\Ntheir information
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and their ingenuity to figure out\Nhow best to economize on oil.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The price system does this\Nin a remarkably efficient way.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The Kenyan farmer doesn't have\Nto know anything about oil
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to have an incentive\Nto do the right thing.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,He just sees that the price paid\Nfor roses has increased
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and so following his self interest,\Nhe starts to produce more roses.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Ultimately, that frees up more oil\Nto be used in the production
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of jet fuel where there\Nare fewer substitutes.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Millions of decisions like this\Nmade all over the world,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,rearrange and reallocate\Nthe world's production.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Taking oil from where\Nit has low value and moving it
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to where it has high value\Nso that we produce the most value
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,from our limited resources.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That is the invisible\Nhand in action.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,If it had been invented,\Nthe price system
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,would be one of the most amazing\Ncreations of the human mind.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But like language,\Nit wasn't invented,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and it worked long before\Nanyone had any understanding
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of its principles.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,There's Nobel price economist,\NVernon Smith, has put it,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,"The pricing system\Nis a scientific mystery as deep,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,fundamental, and inspiring\Nas out of the expanding universe
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or the forces that bind matter."
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,We'll be exploring more\Nabout the mystery
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and the marvel of the price system\Nin the next video.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,- [Narrator] If you want\Nto test yourself,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,click "Practice Questions."
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Or if you're ready to move on,\Njust click "Next Video."
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,♪ [music] ♪