Prices and knowledge: A market-process perspective

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Index 145disequilibrium market failures 26,101disequilibrium prices 2–4; andAustrian school 55; andcomplexity 80–2; andentrepreneurial discovery 43–7,82–3; feedback mechanism of 3,58; Hayek on 87; informationalrole of 29–30, 44–7, 55–60, 118,119–20; as knowledge surrogates41, 121; as misinformationsurrogates 55, 57; and priceaccepting 57, 60; and pricetaking 55–7; and profitopportunities55–6, 58–60, 105, 119; assignals 48, 121; see also pricesdispersed information 30–1, 82Dreyfus, H.L. 79economic systems: and centralplanning 36–7; compared 36–7,104–6; decentralized 105;evaluation of 7, 36, 52–5;incentives in 19–20; andknowledge problem 7, 105–6;mixed 104; and Pareto optimality52–5economics of information 38, 117,119, 121; and ignorance 22–4, 29economics, mathematical approach to5, 18, 22, 40, 102–3economy: household 84; regulation of96; socialist 85–8entrepreneurial discovery 4, 5; ofchange 105; and disequilibriumprices 43–7, 82–3, 119–20; andignorance 38, 76–8; incentives for47; and inflation 122; andknowledge 104, 105, 119; andprofit opportunities 27, 47;research on 121entrepreneurs: and Austrian school49–50; co-ordinating role of 58–9,90, 91, 114; defined 17–18;Kirzner defines 17–18; andmarkets 114; mistakes of 12, 21,27, 91, 107, 122entrepreneurship 2, 5; andequilibrium 22; in marketeconomy 83, 86–8; Misesdescribes 18; and organizations108–15; and profits 17–20; androle of money 121–2equilibration 51–2, 122equilibrium: arbitrage in 38; andchange 98; and co-ordination9–10, 11; defining 8–10; anddisequilibrium 37–40; Hahn’sconcept of sloppy 9; as‘imaginary construction’ 21–2;modelling38–9; as negative description 21;prices 40–3, 117–18; and profitopportunities 9–10; role of 20–2;and stability analysis 102experimentation 110externalities: and central planning81; and hierarchies 75; andinformation 38–9; and perfectcompetition 55; and price systemparadoxes 33Fama, E. 30feedback mechanism of prices 3, 58‘filters’ 69–70firms 72–3, 76, 108Fisher, F.M. 8, 11–12, 24, 102, 103Fisher, R.A. 48foresight 28free entry 114‘free lunch’ fallacy 26, 53free-riding, and information 33Fundamental Welfare Theorem 42Frydman, R. 103Garrison, R. 48–9, 52, 58Gordon, D.F. 13government hierarchies 109–11;decentralized 112government intervention 26, 81,107–8government planning 96; anddiscovery procedure 54; andknowledge problem 110–11‘grass-is-greener’ fallacy 26, 53Grossman and Stiglitz 2, 6, 29–50,
146 Index61, 118; on costless information35–6; and disequilibriumanalysis 39–40; on ‘diverse’information 30; andinformational efficiency ofprices 2, 6, 31–7, 118; and‘noisy’ prices 33–5, 36–7; andnormative standard 36, 52–5;and price inferred knowledge40–3; and prices as ‘sufficientstatistics’ 47–52Grossman, S.J. 2, 30, 32–6, 39–42,54, 61; see also Grossman andStiglitzHahn, F.: and disequilibrium 10–11;and sloppy equilibrium concept 9,102Hayek, F.A. 1, 6, 7, 117; andcentralized control 113–14; andcomplexity 81, 86–7, 112; andequilibrium prices andinformation 29–31, 32–7, 38–55;and knowledge problem 15–16,25; on the market-processconcept 9–10, 14–17, 20–2, 24–5, 73–4; and response to change99–100, 101, 106–7; see alsoLange-Lerner-Taylor-HayekdebateHellwig, M.F. 39‘heroic abstractions’ 69Hey, J.D. 12, 13hierarchies 4; defined 108; andexternalities 75; government109–11; and markets 72–6, 96;Simon’s view of 72, 75–6; versusmarkets 108–15, 120Hirshleifer, J. 53Hurwicz, L. 30–1, 43Hynes, A. 13ignorance 4, 83; and centralplanning 46–7; and complexity77, 104, 115; deliberate 23; andeconomics of information 22–4;and entrepreneurial discovery38,76–8, 104; optimal 9, 23; andprofit opportunities 17; radical 4,5, 119; sheer 23–4, 27, 38, 84,90, 107, 115, 121; Simon’sconcept of 76–8, 84, 90‘imaginary construction’, equilibriumas 21–2imperfect competition 67imperfect information 53–5incentives 119, 120; profits as 19–20,47, 55, 100, 111, 114; role ofmoney as 121inflation, and entrepreneurialdiscovery 122information: bridging 89–90, 91;collection of 32–3; costless 35–6,43, 53; costly 23–4, 26, 29, 32–3,34, 38–9, 53–4, 118; costs 24, 72,101; dispersed 30–1, 82;externalities 38–9; andgovernment planning 54;imperfect 53–5; irrelevant 68,78–9; and prices 16, 29–62, 80–3,116–20; prices as aggregated 30,32–7, 37–8; prices as summariesof 80, 81–3, 116, 120; as publicgood 53; and role ofdisequilibrium prices 29–30,44–7, 55–60, 118, 119–20;transmission of 30, 35, 37–8, 108;unquestioned 56–8; see alsoknowledgeinformation processing: in centrallyplanned systems 107; electronic67; human 66–7, 68, 79, 86, 96–7,118; and markets 73–4‘information rich’ world 67–8,115–16initiative, concept of 65innovation 98, 100, 114; andaspiration levels 71institutions, comparative standards25–7, 54–5integration, horizontal and vertical107investment 53, 65, 110‘invisible hand’ 11, 30, 35Kirzner, I.M.: on co-ordination
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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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92 Prices and knowledgecoordination
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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 and 152: 142 Referencesfrontiers of analytic
Page 153: 144 IndexCercone, N. 79change: and
Page 157 and 158: 148 Indexmisinformation 55, 57mista
Page 159: 150 IndexVeljanowski, C.G. 43voting
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