Prices and knowledge: A market-process perspective

76 Prices and knowledgeIf what is uncertain is a multitude of facts about conditions inindividual markets, then decentralized pricing will appearattractive; if the uncertainty is global, infusing major events thatwill affect many parts of the organization in the same direction,then it may be advantageous to centralize the making ofassumptions about the future and to instruct the decentralized unitsto use these assumptions in their decisions.(Simon 1981:51)Given that, as he argues, at least one of these elements is almostalways present, and given his use of terms, Simon may be stating thatindividuals in a market system will generally find it advantageous tochoose a combination of price-mediated transactions and firms.Alternatively, he may be endorsing—with almost ‘neoclassical’arguments—a combination of markets and government planning asthe most desirable form of social organization. 25A MARKET-PROCESS PERSPECTIVEComplexity and the knowledge problemThe description of Simon’s ideas and the previous discussion ofthe market-process approach suggest that the type of ignoranceSimon sees as due to complexity and the ignorance to be overcomeby Kirzner’s entrepreneurial discovery are different. WhereasSimon is dissatisfied with the omniscient agent of equilibriumeconomics only when it is applied to complex situations (i.e.situations with too many elements to be considered for an optimalresult), 26 Kirzner’s entrepreneur is necessary even in the simplestsituations.For example, Simon’s approach might not object to a neoclassical(equilibrium) description of the exchange expected to take placebetween two potential traders in an imaginary isolated island asunrealistic: the information would not tax the computationalcapacities of these agents excessively. 27 A market-process economist,on the other hand, would point out that there is a knowledge problemto be overcome by the islanders’ entrepreneurial discovery of theprofitable trading opportunity. The opportunity might not beperceived by the agents, and so it may not occur to them to trade atthe most appropriate terms, or, for that matter, to trade at all. (That