Prices and knowledge: A market-process perspective

28 Prices and knowledgemarket participants. It thus promotes the discovery of theseinefficiencies and of their solutions. 28Although market-process economists may be accused of nothaving fully developed an alternative normative standard, theycertainly do not attribute to free markets the achievement of anythinglike Pareto optimality, as has sometimes been suggested. Mises(1949:705), for example, states thatWe do not assert that the capitalist mode of economic calculationguarantees the absolutely best solution of the allocation of factorsof production…. What the operation of a market not sabotaged bythe interference of compulsion and coercion can bring about ismerely the best solution accessible to the human mind under thegiven state of technological knowledge and the intellectual abilitiesof the age’s shrewdest men. As soon as any man discovers adiscrepancy between the real state of production and a realizablebetter state, the profit motive pushes him toward the utmost effort torealize his plans. The sale of his products will show whether he wasright or wrong in his anticipations.And, again,There are [in the market economy] disadvantages caused byinadequate foresight. It would be a universal boon if every man andall the members of the market society would always foresee futureconditions correctly and in time and act accordingly. If this werethe case, retrospection would establish that no particle of capitaland labor was wasted for the satisfaction of wants which now areconsidered as less urgent than some other unsatisfied wants.However, man is not omniscient.(ibid.: 665)The development of a more appropriate normative standard forjudging disequilibrium market processes is only one among severalresearch projects which still remain to be done. Even so, marketprocesstheory in its present state serves to shed light on theinformational role of prices and to examine other theoreticalapproaches to this matter, tasks to be undertaken in the followingchapters.