Prices and knowledge: A market-process perspective

‘Bounded rationality’ and the price system 79presented to a digital computer has not, in some way, beenartificially constrained. 30(Dreyfus 1979:xii)An advantage of the price system, for an entrepreneurial perspective,is, as already explained, that it translates unknown facts into attractiveprofit opportunities for entrepreneurial individuals who otherwisemight not have found the discovery of such knowledge to be in theirinterest. Profits thus stimulate innumerable individuals to ‘zero in’,even if only fallibly, on knowledge that has gone unnoticed up to thatmoment.Some of the cognitive issues that separate Simon from marketprocesseconomists are difficult and still have to be solved. However,given Simon’s assimilation of human beings to digital informationprocessors, it is suggestive that in the last decade or so somethingcalled ‘knowledge representation’ is considered ‘the most centralproblem confronting artificial intelligence’ (Cercone and McCalla1987:xxi). 31 In recent work in this area the following difficulties arementioned:In addition to the problems of acquiring a knowledge base, anintelligent agent must use knowledge to advance its goals. Thisrequires being able to perceive what’s happening in the world inorder to act appropriately. It is necessary for the agent to perceivethat it is in a situation in which knowledge is applicable, and to findthe knowledge that is relevant to the situation. It is necessary to useknowledge to support the perception of what is the same and whathas changed from a previously known state of the world. Amongother things, knowledge will be used to perceive new individualentities that are present but formerly unknown and to identify newperceptions with preexisting concepts of known individuals whereappropriate.(Woods 1987:55–6)The ways in which human beings handle these problems (howeverimperfectly when seen from an omniscient perspective) areemphasized by an entrepreneurial perspective and used forunderstanding markets. But they have not been included adequately inSimon’s framework.The distinctions made between the approaches of Simon and ofmarket-process economists are not meant to deny the existence of