Prices and knowledge: A market-process perspective

124 Notesmoney, the behavior of arbitraging agents, and the function of the stockmarket.’6 See also the remarks in Arrow (1986: s. 387).7 See also the criticisms in Littlechild (1977).8 The founder of the tradition, Carl Menger (1871), had already shown asomewhat unusual concern with problems of knowledge. Even so, somerecent interpretations, such as, for example, Streissler (1973), seem toexaggerate Menger’s sophistication in this area.9 In contrast to this view of competition, most economists can be described asseeing it only as a ‘disciplinary procedure’, to use Boudreaux’s (1987)term.10 Different types of ignorance are distinguished below.11 For some differences between this view of entrepreneurship andSchumpeter’s see Kirzner (1973:72–4, 79–81, and esp. 125–31).12 However, this dichotomy should not be taken too literally: the Misesianapproach ‘treats both tasks—that of identifying the relevant ends-meansframework and that of seeking efficiency with respect to it—as a single,integrated human activity’ (Kirzner 1973:34).13 For an attempt, see Littlechild and Owen (1980).14 This is not to deny the usefulness of sometimes abstracting from the temporalelement and dealing with current prices.15 On this distinction, see Kirzner (1985a:34–6, 94–8), Kirzner (1973: 228–9),and Lavoie (1985a:143–4).16 For support of Hayek’s statement that his constitutes the ‘older’ view ofcompetition, see McNulty (1967, 1968).17 For example, Hayek (1940:191) has referred to ‘the failure to understand thetrue function of the price mechanism, caused by the modern preoccupationwith stationary equilibrium…’.18 See Garrison (1982:131–8). For examples of different positions seeO’Driscoll and Rizzo (1985), and the review of their book by Kirzner(1985b); Cowen and Fink (1985:866–9); Thomsen (1986); Fehl (1986: 72–86); and High (1986).19 This makes Mises’s entrepreneur different from Schumpeter’s: the latter‘destroys’ existing equilibria.20 Although the argument may merit lengthier treatment, the same commentsare applicable to ‘search theory’. Kirzner (1973:34).21 See, e.g., Kirzner (1983:137–53).22 Buchanan (1985:19) makes a similar distinction when he mentions asmotives for lacking some information that it may be ‘because it is too costlyto obtain, or because it is simply overlooked’ (emphasis added).23 See, e.g., Polanyi (1969).24 See, e.g., Lavoie (1986).25 See also Reder (1947:147–51).26 See Buchanan (1985:26). Buchanan’s book shows different difficultieswith the usual efficiency analysis, but also points out unsolved problems inthe comparative institutions approach. Regarding the latter, Buchanan(1985:44) says, ‘there is not even a theory of intersystemic efficiencycomparisons in the same sense in which there is a theory of intrasystemiccomparisons’.