Prices and knowledge: A market-process perspective

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Indexaggregation of information 30, 32–7,37–8allocation of resources 31, 47; andarbitrage 37; and computers 74,77; effects of change on 98; andknowledge 15–16; market orgovernment 54, 73; optimized31–2, 74, 77, 98; problems of 97,98, 99; and profit opportunities 28Ando, A. 63, 64‘approximation’, concept of 69arbitrage: and allocation of resources37; in equilibrium 38, 44;opportunities 12, 17, 56, 91Arrow, K.J. 53Artificial Intelligence 78–9, 121aspiration levels 70–2‘auctioneer’, market concept of 39,43Austrian school of economists 2, 6, 7,64–5; and disequilibrium prices55; and entrepreneurship concept49–50; and knowledge problem83–8; and market-process concept14–28; and price mechanism49–50bargaining 73barter 121Bartley, W.W. 16, 46–7Baumol, W.J. 20, 68Bayesian economics 13bounded rationality 1–3, 5–7, 64–70,117, 118; and central planning 97,112, 120; and change 98;cognitive limitations of 115; andcomputers 67, 68, 81, 86;consequences of 68–70; andeconomic organization 103,108–115; and informationtransmission 108; and marketprocessconcept 80–3, 84;Nelson’s concept of 97; and pricesystem 63–94; Simon’s concept of64–70; and simplificationprocesses 68–76brand names 121‘bridging’ information 89–90, 91bureaucracies,decentralized 112–15central planning: and boundedrationality 97, 112, 120; orcompetition 7, 36–7, 109–11,114; and complexity 83–8, 97;and computers 81; and control99–100, 103; and coordination75, 88–9; and data 85; anddecentralization 116, 120; anddiscovery procedure 46, 106–7,111; and externalities 81; andignorance 46; imposition of110–11; and incentives 46, 111;knowledge problem in 15, 83–6,105, 107; and profitopportunities 82–3; response tochange in100–2, 103, 104–5centralization: of decision-making 54;of resource allocation 73
144 IndexCercone, N. 79change: and central planning 100–2;and complexity 67, 106–7; coordinationof response to 101–2;entrepreneurial discovery of 105;and knowledge problem 7, 106–7;response to 72–3, 98, 100–2, 105;time aspects of 106–7; unexpected13, 95, 100–1; and updating data103choice: and omniscience 64; andsatisficing 70–1Coase, R.H. 109–10, 111Coddington, A. 43, 55cognition theory 4, 78–9, 118, 121command and control 97, 99–100,113–14; of informationtransmission 103competition: and central planningcompared 7, 36–7, 109–11, 114;concept of 65; as co-ordinatingprocess 22; as discovery procedure16–17, 83, 87, 95, 109; imperfect67; rivalrous 5, 44, 50, 65, 114,119complexity 4, 66–70, 99, 113; andcentral planning 83–8, 97; andchange 106–7; and governmentintervention 81; and ignorance104, 115; and knowledge problem76–80; and market-processconcept 83–8; and money 121–2;and price mechanism 72, 80–2;Simon’s theory of 118;simplification of 68–76, 116; andtime 99–100computers 86; and allocativeoptimization 74, 77; and boundedrationality 67, 68, 81contracts 107, 121co-ordination: of actions 88–9, 90–1;by entrepreneurs 58–9, 90, 91,114; and central planning 75,88–9; and decentralizeddecision-making 24, 103; anddisequilibrium 82, 83, 88; andequilibrium 9–10, 11; ofknowledge 88, 89–90, 91–2; andmarket-process concept 7, 73, 75,114, 122; meaning of 88–92; andNelson 107–8; and Paretooptimality 11; and response tochange 101–2costless information 35–6, 43, 53costly information 29, 32–3, 34,38–9, 53–4, 118Dasgupta, P. 41–2data: acquisition and handling 96;and central planning 85; changing98, 103; in disequilibrium 2, 3,15; in equilibrium 20; reduction of48decentralization: of bureaucracies andmarkets 112–15; of centrallyplanned organizations 116, 120;and co-ordination problems 24,103; of decision-making 103, 112;versus centralization 36decision-making 2, 110;centralized 54;decentralized 103, 112demand and supply: and effects ofchange 98; knowledge of 105Demsetz, H.: and standards ofefficiency 54, 58, 118; and welfareeconomics 25–7, 53discovery procedure 6, 23, 45,115–16; in centrally plannedsystems 54, 106–7; competitionas 16–17, 95, 109; indecentralized hierarchies 113;and ignorance 23, 104; andmarket system 105–6; see alsoentrepreneurial discoverydisequilibration 122disequilibrium: co-ordination in 82,83, 88; and equilibrium 37–40;modelling 11–12; order in 58,73–4, 119, 122disequilibrium analysis 2, 10–14, 27,102–3; by Austrian school 14–28;and Grossman and Stiglitz 39–40;and Hahn 10–11; andmathematical formalism 5, 22;and normative economics 24–8;and Simon 65; in theory ofmarkets 11–14
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Prices and knowledge
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ContentsAcknowledgmentsvii1 Introdu
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Chapter 1IntroductionIn recent deca
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Introduction 3to changes, and not a
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6 Prices and knowledgeOUTLINE OF TH
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Chapter 2A theory of the market pro
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10 Prices and knowledgeexistence of
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12 Prices and knowledgebehavior of
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14 Prices and knowledgedisequilibri
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16 Prices and knowledgeresources kn
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18 Prices and knowledgeproduce, bet
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20 Prices and knowledgeimportant in
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22 Prices and knowledgeauxiliary’
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24 Prices and knowledgeSome writers
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26 Prices and knowledgeall practica
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28 Prices and knowledgemarket parti
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30 Prices and knowledgeprices fully
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32 Prices and knowledgeoptimal allo
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34 Prices and knowledgeAn example.
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36 Prices and knowledgeIn this case
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38 Prices and knowledgeequilibrium.
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40 Prices and knowledgethose return
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42 Prices and knowledgeprices in th
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44 Prices and knowledgeThe informat
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46 Prices and knowledgeinformationa
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48 Prices and knowledgeas devices f
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50 Prices and knowledgeIt is probab
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52 Prices and knowledgetrue that in
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54 Prices and knowledgeknowledge st
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56 Prices and knowledgereached in r
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58 Prices and knowledgecorrespond t
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60 Prices and knowledgetake it away
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62 Prices and knowledgecritics of t
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64 Prices and knowledgeto work out
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66 Prices and knowledgebehavior in
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68 Prices and knowledgerich’ worl
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70 Prices and knowledgeThus the sim
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72 Prices and knowledgeSimon calls
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74 Prices and knowledgebelieves tha
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76 Prices and knowledgeIf what is u
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78 Prices and knowledgeoccurring wi
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80 Prices and knowledgecomputationa
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82 Prices and knowledgemaximizing a
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84 Prices and knowledgeframework de
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86 Prices and knowledgeAgain Mises
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88 Prices and knowledgepoint that
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90 Prices and knowledgeand B’s ta
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Page 103 and 104: 94 Prices and knowledgeFinally, the
Page 105 and 106: 96 Prices and knowledgeBefore prese
Page 107 and 108: 98 Prices and knowledgeas will be s
Page 109 and 110: 100 Prices and knowledgeapples in l
Page 111 and 112: 102 Prices and knowledgeThe identif
Page 113 and 114: 104 Prices and knowledgeAs with Sim
Page 115 and 116: 106 Prices and knowledgerealized th
Page 117 and 118: 108 Prices and knowledgedeliberate
Page 119 and 120: 110 Prices and knowledgeframework s
Page 121 and 122: 112 Prices and knowledgeMarkets and
Page 123 and 124: 114 Prices and knowledgeassigned an
Page 125 and 126: 116 Prices and knowledgemain virtue
Page 127 and 128: 118 Prices and knowledgechapter 3 t
Page 129 and 130: 120 Prices and knowledgenoticed, wo
Page 131 and 132: 122 Prices and knowledgeAs a by-pro
Page 133 and 134: 124 Notesmoney, the behavior of arb
Page 135 and 136: 126 Notes14 It is not clear why the
Page 137 and 138: 128 Notes39 See also Hahn (1984a:11
Page 139 and 140: 130 Notestheories of cognition held
Page 141 and 142: 132 Notes3 Economists, Nelson and W
Page 143 and 144: ReferencesAkerlof, G.A. (1970) ‘T
Page 145 and 146: 136 ReferencesGilad, B. (1981) ‘A
Page 147 and 148: 138 ReferencesKihlstrom, R.E. and M
Page 149 and 150: 140 ReferencesOsana, H. (1978) ‘O
Page 151: 142 Referencesfrontiers of analytic
Page 155 and 156: 146 Index61, 118; on costless infor
Page 157 and 158: 148 Indexmisinformation 55, 57mista
Page 159: 150 IndexVeljanowski, C.G. 43voting
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