Prices and knowledge: A market-process perspective

128 Notes39 See also Hahn (1984a:11) and Fisher (1983:4). According to Lavoie(1985a:35), ‘there are elements of disco-ordination diffused throughout anymarket economy…But there are also the well-known general regularities,such as those between prices and costs of production, that are reflected inboth the classical labor theory of value as well as the modern subjectivisttheories of marginal utility and imputation.’40 This view clearly underlies Mises’s writings: in a world with nounpredictability no ‘Misesian’ action would be necessary (an equilibriumwould, presumably, sooner or later, be achieved), and in a world withcompletely volatile and unpredictable change no such action could besuccessful or, therefore, worth while.41 As in other instances, the imperfection here referred to uses the questionablestandard of an omniscient agent’s point of view.42 Schumpeter (1934:62) describes equilibrium as ‘never attained, continually“striven after” (of course not consciously) …’.43 In the world of price-taking agents of the standard version of this story, itis not clear who, aside from the makeshift device of a fictitiousauctioneer, is in charge of increasing the price of tin. This deficiency ofstandard (‘competitive’) price theory leads Fisher (1970:195) to remarkthat ‘the Invisible Hand is a little too invisible in this, the center of itsactivities’.44 This role includes the possibility of transmitting information (‘signalling’)through prices.4 ‘Bounded rationality’ and the price system1 For example, Simon (1981:41), Nelson and Winter (1982:361), andWilliamson (1975:4–5) have interpreted Hayek as arguing against centralplanning from a bounded-rationality perspective. See also Langlois(1985:225–35). For an attempt to find common elements in these lines ofthought, see Langlois (1986: esp. 225–41).2 See, e.g., Radner (1968); Nelson and Winter (1982); Williamson (1975);Loasby (1976).3 Cf. Kirzner (1973:32–7). Simon, like the Austrians, also distinguishesbetween subjective and objective rationality, and mentions the need for anunderstanding of how the means-ends framework is perceived by agents. Anearly distinction between objective and subjective rationality appears inHutchison (1938:109–14).4 Also see Ando (1979:86).5 The Austrian flavour resides in the content of the passage and not in itsreference to Schumpeter.6 For a strong criticism of Simon’s, and other researchers’, treatment of humanbeings as information processors, see Dreyfus (1979) and Dreyfus andDreyfus (1986).7 Williamson also includes within bounded rationality what he calls ‘languagelimits’, which ‘refer to the inability of individuals to articulate theirknowledge or feelings by the use of words, numbers or graphics in ways