Prices and knowledge: A market-process perspective

Notes1 Introduction1 For the sake of avoiding confusion, this book follows Machlup’s (1980:8) suggestion not to distinguish between ‘knowledge’ and ‘information’when referring to ‘what people know or are informed about.’ Although, asMachlup shows, many important distinctions can be drawn between theseterms, and although ‘all information, in the sense of the contentsconveyed, is knowledge’ but ‘not all knowledge may properly be calledinformation’ (58), these differences are not of much significance here (seeesp. 8–9, 56–8).2 Some contemporary economists in this approach, wishing to rid economicsof its dependence on any notion of equilibrium whatsoever, would probablyobject to the description of their work as ‘disequilibrium’ theory.2 A theory of the market process1 See also Hey (1981:3–4).2 And thus, for example, there have been, and continue to be, discussionsregarding whether macroeconomic models that allow for unemployment areor are not disequilibrium models. According to Fisher (1983:1), these ‘arenot truly disequilibrium investigations, although they are sometimesmisnamed as such’.3 Similarly, Hahn also says, ‘an economy is in equilibrium when it generatesmessages which do not cause agents to change the theories which they holdor the policies which they pursue’ (1984a:59). For a comparison of Hayek’sand Hahn’s notions of equilibrium, see Littlechild (1982) and White(1982).4 According to Hey (1981:238), ‘it is…important not to equate equilibrium ina market with market-clearing, and disequilibrium with non-marketclearing’.5 According to Fisher (1983:2), ‘by building a full model of disequilibriumbehavior we obtain considerable insight into a number of areas. Theseinclude the nature of fixed-price, quantity-constrained equilibria, the role of