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« Robert Conquest (1917-2015) | Main | Private Governance »


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Hayek's interpretation of prices as an impersonal signaling mechanism immediately caught my interest. His system theoretic approach engages with the market framework like how an engineer might analyze the mechanisms behind a complex apparatus.

Essentially it's an attempt to understand the schematics and the scientific structural properties of the market system, uniquely Hayekian.

There is much to agree with here. The idea of prices as a solution is problematic.

I'd go back to Hayek's description of prices as a means of communicating information about relative scarcities. In life we communicate precisely because we are not in equilibrium. People have unsatisfied wants. Communication continues until no further change is desired. So communication is inherently a process in time. So, too, with prices. Their function ends when there is equilibrium, or perfect plan coordination.

Hayek (1937) calls into question the idea of equilibrium beyond that of a single person -- or a centrally planned economy. In a multi-person world with change, achievement of equilibrium in the traditional sense becomes almost incomprehensible. He pursued the same logic in his work on socialist calculation. He actually made the argument first in his work on monetary economics and the business cycle. Add monetary disturbances to the underlying problem of plan coordination, and you have vastly complicated the problem.

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