Prices and knowledge: A market-process perspective

‘Bounded rationality’ and the price system 87comments ‘about the computational difficulties of the equationsolvingapproach [that] were responsible for misleadinginterpretations of their arguments’.Hayek adopts a position very similar to Simon’s in the followingpassages of his book The Road to Serfdom. He says:There would be no difficulty about efficient control or planningwere conditions so simple that a single person or board couldeffectively survey all the relevant facts. It is only as the factorswhich have to be taken into account become so numerous that it isimpossible to gain a synoptic view of them that decentralizationbecomes imperative.(1944:48–9)The point which is so important is the basic fact that it is impossiblefor any man to survey more than a limited field, to be aware of theurgency of more than a limited number of needs.(59)In both paragraphs Hayek uses the word ‘survey’ rather than‘discover’. This is similar to Herbert Simon’s preference for the word‘search.’ The problem with these terms is that they suggest that ‘facts’are readily visible to anyone who cares to look at them, if only theyweren’t so many and so complex. This ambiguity in some of Hayek’swritings has also led other authors, aside from the market-socialistsand Simon, to interpret him as being concerned with theoverwhelming quantity of facts. 38Hayek then proceeded, during the 1940s, to articulate the marketprocessview of the informational role of market prices and of therole of competition as a discovery procedure shown in chapter 2. Henot only emphasized that much useful knowledge (skills, ‘techniquesof thought,’ etc.) appears in a form that cannot be articulated orconveyed to any other point. 39 In his latest writings he also points outthat an economic system should be capable of using individuals’abilities ‘of discovering such facts as will be relevant to theirpurposes in the particular situation’ (1979:190, n.). That is, it shouldprovide a framework stimulating their entrepreneurial alertness. Inthis way, it has become increasingly clear that his view of marketspoints beyond Simon’s.Lavoie (1985a:66), who has provided an account of the socialistcalculation debate from a modern Austrian perspective, says at one