Prices and knowledge: A market-process perspective

24 Prices and knowledgeSome writers, notably Hayek and Lavoie, have emphasized adifferent difficulty regarding knowledge. Their concern is thatmuch useful knowledge is inarticulate or inarticulable (or ‘tacit’),an idea influenced by the work of Michael Polanyi. 23 In theirargument, the market is a process for discovering and conveyingsuch knowledge. 24 Although this approach seems perfectlycompatible with Kirzner’s, a comparison of both approaches willnot be attempted here.Not all economists have noticed the limitations of the economicsof information for an understanding of market processes. Because oftheir interpretation of ignorance exclusively in terms of costlyinformation, some still believe thatalthough the problem of decentralized co-ordination of economicactivity in an environment of transaction and information costs iscomplicated, there is certainly no reason why maximizationtechniques cannot and should not be used…. We just must assumea richer informational background under which individualmaximizing decisions take place.(Klein 1975:1307–8)A disequilibrium view of normative economicsAnother implication of the market-process approach is that the usualwelfare standards—such as Pareto optimality—that operate(implicitly) from the point of view of an omniscient observer (orplanner) become irrelevant for evaluating actual markets once thelatter are viewed as always in disequilibrium. From such a point ofview, to use Fisher’s words,welfare comparisons of equilibria would be largely irrelevant sincewhat would matter would be the comparison of the relatively‘transient’ behavior of alternative systems including alternativeforms of market organization. 25 (Fisher 1983:9)Fisher’s position, it should be noted, is not exactly the same as that ofmarket-process economists. For the latter, markets never achieve fullequilibrium, so that the market process is certainly not seen as‘relatively transient behavior’.