Prices and knowledge: A market-process perspective

Change, responsiveness and co-ordination 111conceivable organizational forms is most appropriate for his purposes.The particular form he chooses will determine which functions it willinclude, what tasks and responsibilities the individual filling each onewill have to carry out, and so on. The ‘planner’ will need to knowwhich employable individuals in the market are the most competent tofill each position. All these facts must be discovered.Profit-motivated entrepreneurs will be stimulated to discoveras much as possible of the knowledge necessary for setting up themost convenient hierarchical organization. No similar incentivesystem seems available to government planners. Thus anentrepreneurial perspective shows significant differences betweenorganizations chosen by agents in the market and organizationsimposed by government. The latter are much less likely torepresent a wise decision in terms of grappling with ‘theeconomic problem’.The following statement of Coase, although it claims too much forthe market because it seems couched in equilibrium terms, alreadyhinted in 1937 at this conclusion:The important difference between [economic planning andplanning in firms] is that economic planning is imposed on industrywhile firms arise voluntarily because they represent a moreefficient method of organising production. In a competitive system,there is an ‘optimum’ amount of planning!(1937:389, n.)Of course, there is not an ‘optimum’ amount of planning in acompetitive system—at least, not in the usual sense economistsattribute to the word ‘optimum’. The argument is instead that thereare profits to be made in such a system as long as the mostappropriate degrees and forms of planning have not beendiscovered and implemented. These profits keep entrepreneursalert and flexible regarding organizational forms. Non-marketcreatedhierarchies, on the other hand, would most likely beestablished with better alternatives remaining undiscovered, andcould continue to exist regardless of whether they were appropriateor not.