Prices and knowledge: A market-process perspective

‘Bounded rationality’ and the price system 77the knowledge problem may seem trivial in such a setting shows howmuch people’s entrepreneurial abilities are often taken for granted.)The difference arises because of the rather special views ofperception and ignorance held by Simon. His arguments seem basedon the idea that an individual’s limited computational and perceptivecapacity is the only barrier between his knowledge and ‘objectivefacts’. And these limitations he describes in very physical terms. Atthe risk of oversimplifying, Simon seems to say there are many‘facts’ to be seen, but that, because of their bounded rationality,individuals can see only some at a time (and that it would take themtoo long to scan all of them before making a decision). As pointedout above, Simon stresses ‘omission in perception’, that theindividual’s perception ‘encompasses only a minute fraction of allthe relevant characteristics of the real environment…’ (1959:306;emphasis added), as the problem. This enables him to imply that withthe aid of computers man gets (even if only slightly) closer to(neoclassical) optimizing 28 and that he may achieve objectiverationality in ‘simple problem situations’, in which case theneoclassical agent may be appropriate.In the market-process approach, on the other hand, facts, even ifthey are few and simple, have to be noticed, discovered, by alert,active agents. What complexity does is increase the likelihood thatinstances of ‘sheer’ ignorance will happen, making a discoveryprocess even more necessary. It is not that the number of facts willbecome so unmanageably large as to saturate a human mind, but thatit becomes much more probable that many facts will not be noticed atall. In this view, the facts do not ‘hit’ the individuals ‘in the face’while they act as passive receptacles of knowledge. Nor are thesefacts there simply to be seen by anyone who merely ‘scans’ theenvironment. As Kirzner (1983:29) has put it,The entrepreneurial alertness with which the individual is endoweddoes not refer to a passive vulnerability to the impressionsimpinging on his consciousness during experience in the manner ofa piece of film exposed to light; it refers to the human propensity tosniff out opportunities lurking around the corner.Of course, Simon does not say human beings act in a purelypassive manner: he describes satisficing agents as activelysearching their environment for a satisfactory alternative.However, although it is not explicitly stated, this search must be