Prices and knowledge: A market-process perspective

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‘Bounded rationality’ and the price system 93ConclusionsSeveral market-process economists have made statements similarto those of Herbert Simon. However, these statements either weremade in the early stages of the development of the market-processperspective, or were isolated sentences better interpreted inentrepreneurial terms, given their occurrence in contexts showingan understanding of the dynamic nature of market processes. Theseisolated quotes only show how the entrepreneurial perspective hasbeen, and must still be, progressively developed and refined.Although some statements by market-process economists mayhave been somewhat ambiguous, as the entrepreneurialperspective becomes better articulated it becomes increasinglyclear that it has gone in important respects beyond the boundedrationalityapproach.FROM SIMON TO NELSONSimon has concentrated more on other issues and has not reallyattempted to provide a full theoretical picture of how marketswork. This deficiency leads him to oscillate, as shown, betweenan equilibrium view of markets and an ill-defined alternative.Why then, it may be asked, has so much space been devoted to hisideas? Isn’t Simon’s view of the role of prices in a marketeconomy almost identical to that of the equilibrium economistsconsidered in the previous chapter and, thus, subject to the samecriticisms? The justification for the present efforts has severalaspects to it. First, if there is a similarity on this matter betweenSimon’s ideas and the equilibrium approach, this is a finding initself, given that it is one of the areas in which he is perceived tobe offering an alternative view. In fact, this finding would serveas an antidote to the tendency, noted above, of some economiststo overlook how far market-process economists have gonebeyond Simon’s work in presenting a theory of markets.Also, the consideration of Simon’s ideas has drawn attention tointeresting problems of perception and discovery, and hashighlighted additional differences between considering prices as partof a competitive discovery procedure or merely as a means ofsummarizing large numbers of facts.
94 Prices and knowledgeFinally, the understanding of bounded rationality gained from thepreceding pages will be useful—in fact, indispensable—for the taskthe following chapter undertakes: an analysis of the writings ofRichard Nelson. In these writings a more detailed and more dynamicapproach to the analysis of markets and central planning can befound.
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Prices and knowledge
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ContentsAcknowledgmentsvii1 Introdu
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Chapter 1IntroductionIn recent deca
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Introduction 3to changes, and not a
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6 Prices and knowledgeOUTLINE OF TH
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Chapter 2A theory of the market pro
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10 Prices and knowledgeexistence of
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12 Prices and knowledgebehavior of
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14 Prices and knowledgedisequilibri
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16 Prices and knowledgeresources kn
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18 Prices and knowledgeproduce, bet
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20 Prices and knowledgeimportant in
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22 Prices and knowledgeauxiliary’
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24 Prices and knowledgeSome writers
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26 Prices and knowledgeall practica
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28 Prices and knowledgemarket parti
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30 Prices and knowledgeprices fully
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32 Prices and knowledgeoptimal allo
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34 Prices and knowledgeAn example.
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36 Prices and knowledgeIn this case
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38 Prices and knowledgeequilibrium.
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40 Prices and knowledgethose return
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Page 95 and 96: 86 Prices and knowledgeAgain Mises
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Page 117 and 118: 108 Prices and knowledgedeliberate
Page 119 and 120: 110 Prices and knowledgeframework s
Page 121 and 122: 112 Prices and knowledgeMarkets and
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Page 125 and 126: 116 Prices and knowledgemain virtue
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Page 129 and 130: 120 Prices and knowledgenoticed, wo
Page 131 and 132: 122 Prices and knowledgeAs a by-pro
Page 133 and 134: 124 Notesmoney, the behavior of arb
Page 135 and 136: 126 Notes14 It is not clear why the
Page 137 and 138: 128 Notes39 See also Hahn (1984a:11
Page 139 and 140: 130 Notestheories of cognition held
Page 141 and 142: 132 Notes3 Economists, Nelson and W
Page 143 and 144: ReferencesAkerlof, G.A. (1970) ‘T
Page 145 and 146: 136 ReferencesGilad, B. (1981) ‘A
Page 147 and 148: 138 ReferencesKihlstrom, R.E. and M
Page 149 and 150: 140 ReferencesOsana, H. (1978) ‘O
Page 151 and 152: 142 Referencesfrontiers of analytic
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144 IndexCercone, N. 79change: and
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146 Index61, 118; on costless infor
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148 Indexmisinformation 55, 57mista
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150 IndexVeljanowski, C.G. 43voting
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