Prices and knowledge: A market-process perspective

90 Prices and knowledgeand B’s tastes, there is co-ordination of knowledge; a bridge, so tospeak, has appeared between the previously isolated pieces ofinformation. (This bridge is due to entrepreneurship.) As soon as thisdisco-ordination is noticed, moves towards its elimination are assuredbecause doing so is profitable, and co-ordination of action follows.Thus, for example, in a market, there would finally be (were full coordinationto be achieved) no excess demands or supplies at the newprice. However, although co-ordination of knowledge may be asufficient condition for co-ordination of actions, it is not a necessaryone in the usual meaning of ‘co-ordination of actions’.To understand how co-ordination of action does not implythere is also co-ordination of knowledge, the army example isagain useful. Say the commander is ordering certain strategicmanoeuvres, and there is among his soldiers one individual who,were he consulted, would prove to be a highly capable strategist.But the commander is unaware of his existence and therefore doesnot make use of his talents. There will not then be co-ordinationof knowledge. However, in the sense described initially, therecould still be (a visible) co-ordination of actions: the soldierscould act in a harmonious way towards the achievement of thecommander’s goal.There are thus two types of disco-ordination that could occur inthis example. (1) There could be disco-ordination of knowledgebecause there remain isolated bits of information that have not yetbeen ‘bridged’ by a single mind: in this case, not making use of thesoldier’s talent for strategy. (2) There could be disco-ordinationonly of actions because, for example, the number of men anddifferent tasks have become overwhelming for a singlecommander’s mind, given the present organization of this army.The first is an instance of ‘sheer’ ignorance, while the secondcorresponds to Simon’s type. This also serves as an additionalexample of how the knowledge problem is related to the number offacts to be known: in this case, the larger the number of soldiers themore likely the commander is not to notice the individuals’ abilitiesthat may be useful to him. 43Although this use of the term ‘co-ordination of actions’conforms to its habitual use, Kirzner’s example suggests that heprefers to confine its use exclusively to situations in which there isalso co-ordination of knowledge. Thus when, say, A trades with B,unaware that he could trade even more profitably with C, who isalso unaware of this opportunity, Kirzner would not describe this