The Beauty of the Price System | Foundational Concepts in Economics with Howard Baetjer

Professor Howard Baetjer explains why the information conveyed by prices is crucial for a well-functioning economy.

A centrally-planned system—like the one used in the old Soviet Union—will tend to misallocate resources because prices coordinate people and act as "knowledge surrogates" so that resources are naturally distributed according to their highest-valued uses. There is no better substitute for this: without prices, the full breadth and depth of this information can't be conveyed.

No one is in charge . . . and yet the price system works by well-defined and observable rules. This is an example of what F. A. Hayek called "spontaneous order," and it's part of the beauty of the market process.

Watch the full lecture video this clip was taken from: http://bit.ly/2A1ptj2

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