How is it that people in snowy, chilly cities have access to beautiful, fresh roses every February on Valentine’s Day? The answer lies in how the invisible hand

How is it that people in snowy, chilly cities have access to beautiful, fresh roses every February on Valentine’s Day? The answer lies in how the invisible hand helps coordinate economic activity, Using the example of the rose market, this video explains how dispersed knowledge and self-interested actors lead to a global market for affordable roses.

See: I, Pencil

Download
Options
Translate

Transcript

Here's the scene. It's cold outside, it's snowing, it's Chicago in the middle of winter. In fact, it's February, Valentine's Day. And here's our handsome young man about to deliver these wonderful roses to someone he's eager to impress.

 

Wait, roses in Chicago in February? Where did they come from? Not from greenhouses in the United States. There's not nearly enough. In fact, millions of roses are being delivered on this day all over the United States. But where do all the roses come from?

 

A rose is a truly global product. They're grown in countries like Ecuador, Colombia, Kenya. Behind every Valentine's Day rose, there's an extensive network of people from all over the world. From the farmer to the shipper, to the auctioneer and the retailer, all cooperating to produce and transport roses from field to hand in a matter of days. Notice that this amazing process is not centrally directed. There's no rose tsar, no parlor bureau production. Indeed, no single individual even knows how the entire process works. Each individual only sees a small part of the whole, and each individual only acts on their self-interest.

 

But through the price system, each individual's local knowledge and local interest are coordinated with the whole, as if, in Adam Smith's words, guided by an invisible hand. So on Valentine's Day, I give my wife roses because to me the rose is not just a symbol of love, it's also a symbol of global cooperation coordinated by the invisible hand. But what is this invisible hand? How does it work? In future videos, we'll go behind the metaphor so that we can see the invisible hand, and better understand our world.