How Markets Work

Please select the video you would like to view from the options listed below.

We have also made this playlist available on our YouTube channel. You can review the PPE Capstone syllabus here.

Video 1—The Market ProcessProf. Christopher Coyne
PPE - Market Fairness

One of the first lessons of economics is that we live in a world of scarcity. Scarcity necessitates that people choose between competing alternatives. How should people spend their limited time and resources?  What is the best way to produce things so that we don’t waste resources that would be better used elsewhere? How do we coordinate our actions with other people who are pursuing their own diverse goals? The theory of the market process offers answers to these questions. The market process has four main characteristics, which are explained in this video: 1) It requires an environment of property rights and market prices; 2) It is driven by entrepreneurship and profit and loss; 3) It is a spontaneous order; and 4) It is an open-ended, ongoing process.
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Video 2—Market FailureProf. Jonathan Anomaly

Market failure happens whenever resources are allocated inefficiently. Franics Bator, who coined the term “market failure,” meant it to indicate conditions in which, in principle, governments might intervene in markets to improve efficiency. This video describes the main sources of market failure, including positive and negative externalities, and market failure to provide “public goods.” Watch video …

Video 3—Market FairnessProf. Michael Munger

Fairness requires that exchanges are voluntary. But what if the exchange is not voluntary? And what if there is great inequality in bargaining power? Are markets fair then? Market critics like philosopher Michael Sandel are concerned about inequality, and about poor people being coerced by desperation. However, Michael Munger argues that if we want to help people who are suffering, our real concern should be poverty, not inequality, and the key to alleviating poverty around the world is allowing markets to work. Watch video …