Morgan Spurlock's New Short Film Explains The Market Economy So Even A Caveman Could Get It

Only 39% of American adults have a budget and keep close track of their spending, according to the 2014 Financial Literacy Survey conducted by the National Foundation for Credit Counseling.

Not to mention that 32% of households don't save for retirement, and 60% haven't looked at their credit score in the last year.

However, that same survey finds that 59% of us give ourselves grades of "A" or "B" when it comes to financial literacy.

Maybe we don't know as much as we think we do.

Microsoft cofounder Paul G. Allen and movie director Morgan Spurlock want to change that. Allen's Vulcan productions and Spurlock's Cinelan produced a series of short films called "We The Economy: 20 Short Films You Can't Afford To Miss."

The 20 short documentaries, directed by a handful of well-known directors, tackle everything from Wall Street ("The Street," directed by Joe Berlinger) to the Federal Reserve ("Fed Hed," directed by Catherine Hardwicke) to what the government has to do with our money ("Taxation Nation," directed by Jessica Yu).

"I think we live in a country and we live in a time, where, you know, a lot of us are economically illiterate," Spurlock told Marketplace's Kai Ryssdal. "I think that our eyes glass over, we kind of go into a slump hearing about derivatives or market fluctuation or the Federal Reserve. I think having a basic understanding of how these things work, and how they impact our lives, is important."

Take, for instance, the first film in the series: Spurlock's own roughly seven-minute "Cave-o-Nomics," which explains how the market economy began.

We start off with the formal definition of the economy (yawn):

But are soon introduced to (most likely historically inaccurate) cavemen Ugg and Glugg, who realize that by trading the things they have with each other, they can get the things they need.

When Ugg and Glugg realize that they can trade the things they have for things other people have, their cave market is born, a place where "skilled tradesmen could sell their goods to more and more people."

Those marketplaces led to businesses, which led to industries, which allowed the cave-businesspeople to sell their wares far beyond the cave.

But, as the narrator points out, markets are about other people trying to improve their interests, too. "After all," he says, "competition drives innovation."

Soon, an interloper has begun to siphon off Ugg's spear clients with a new and improved spear model. "Innovation drives productivity," continues the narrator, "and productivity drives profit."

"The greater the supply, the cheaper the price," the narrator says. "The cheaper the price, the greater the demand. The greater the demand, the higher the productivity. The higher the productivity, the cheaper the price."

The film points out that factors like scarcity, quantity, and quality will also affect the value of any given product.

The sale of goods soon became the sale of services, and the government took on the role of policing the marketplace. "Free markets function best if a playing field is level," the narrator tells us. "If any one individual, group, or company has an unfair advantage, people lose faith and the whole thing can crumble."

Although the government, meant to regulate the markets, can be a source of corruption itself, the film explains that the markets only work if the people participating in them think they benefit. "In the end, markets are only as strong as the confidence people have in them," the narrator says.

Watch the entire film below, and see the rest of the series on Youtube or at Wetheeconomy.com.