Prices and knowledge: A market-process perspective

120 Prices and knowledgenoticed, would have to rely implicitly on this role to ensure thatequilibrium is achieved and always maintained.)Aside from emphasizing prices as summaries of information,the bounded-rationality approach, as exemplified by Nelson’swork, attributes advantages to the market system that are to alarge extent due to its being highly decentralized. To show whythe same, or even better, results would most likely not beachievable by merely decentralizing a centrally planned economy,chapter 5 pointed out some important differences between marketand non-market organizations and between decentralizedhierarchies and markets. Market competition and profits stimulateentrepreneurs to discover when organizations may be worth whileand as much knowledge as possible for setting up the mostappropriate type of organization. Non-market-created hierarchies,on the other hand, would most likely be established with betteralternatives remaining undiscovered, and could continue to existregardless of whether they were appropriate or not. Regarding thedifferences between decentralized organizations and markets, itwas argued that, from an entrepreneurial perspective,organizations can never be fully decentralized, because theyrequire a designing mind that will also limit the range ofentrepreneurship that can be exercised within them. Markets, onthe other hand, are fully decentralized and leave a much largerscope for entrepreneurship. The conclusion then is that pricemediatedtransactions have some informational advantages evenover decentralized organizations, and that organizations set up bythe market will most likely be more economically worth whilethan those created otherwise.Viewing prices as incentives to entrepreneurial discovery opensup potentially fruitful areas of research. As an example of the manyissues that may be worthy of investigation, some points onlytangentially touched on here can be briefly mentioned.SOME AREAS FOR FUTURE RESEARCH1. The ways in which the different informational roles of prices maybe interrelated in the market process are one topic that should beexamined. Chapter 3 took a small step in this direction whenexamining how market prices, that is, disequilibrium prices, could stillpossibly perform a role as knowledge surrogates quite effectively. The