Prices and knowledge: A market-process perspective

148 Indexmisinformation 55, 57mistakes, entrepreneurial 12, 21, 27,91, 107, 122mixed systems 104models: of equilibrium 38–9;Marshallian 41, 42Modern Austrian school ofeconomists see Austrian school ofeconomistsmoney 121–2moral hazard 26Nelson, R.R. 2, 7, 64, 72, 120; andbounded rationality 97; onchange 95–100, 100–2, 102–8,112, 116; and co-ordinationproblems107–8; and knowledge problem7, 103–7; and markets versushierarchies 108–15; and privateenterprise 95; and responsiveness100–2; and socialist calculationdebate 99–100; and welfareeconomics 95, 96–100new knowledge 27, 46–7, 105, 111,119‘noisy’ prices 33–5, 36normative evaluation 6; anddisequilibrium 24–8; of economicsystems 36; and Grossman andStiglitz 52–5; and unregulatedmarkets 96O’Driscoll, Jr, G.P. 50omniscience: and central planning15; and changing data 98; andchoice 64; and welfareeconomics 24–8; see also perfectknowledgeoptimization, and boundedrationality 68order, in disequilibrium 58, 73–4,119, 122organizations: allocation problems in97; and bounded rationality 103;command problems of 97;comparisons of 7, 108–15, 120;decentralized 95; form of 3, 4; andknowledge problems 96, 97;theory of 110Pareto optimality: and allocation ofresources 31–2; and coordination11; as economicevaluation 52–5; and normativestandards 24–8; and price assufficient statistic51–2; and satisficing 73Pelikan, P. 107perception, human 77–8, 79perfect competition 21, 55perfect knowledge 15, 20, 53planning see central planningPolyani, M. 24price accepting 57, 60price making 51–2price mechanism: and boundedrationality 63–94; andcomplexity 72, 80; paradoxes of33; and planning mechanism72–3; and Simon 72–5;supersession of 110price setting 48–9price taking 33, 44, 48–9, 51, 55–7prices: as aggregated information 30,32–7, 37–8; and discovery ofknowledge 6, 17, 37, 119–20;disparities in 22, 44–7, 60;equilibrium 40–3, 117–18; asfeedback mechanism 58; fullyinformative 32–5, 34; Grossmanand Stiglitz on 31–7; Hayek’sargument on 16–17, 30–1;inference of knowledge from 6,41–3, 49, 118; as informationsummaries 80, 81–3, 116, 120;informational efficiency of 2, 6,16, 29–37, 118; as knowledgesurrogates 6, 41, 43–5, 118;knowledge transmission by 30, 35,37–8; Lange’s view of role of99–100; and market clearing 42;noisy 33–5, 36; and Paretooptimality 51–2; and profitopportunities 105; ‘shadow’ 75; assignals 3, 29, 48, 121; as sufficientstatistics 1, 29, 32, 36, 47–52