[OPE-L:2160] Re: Re: Markets and Information

From: Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Date: Fri Jan 14 2000 - 23:32:27 EST

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On Fri, 14 Jan 2000, Duncan K. Foley wrote:

> [Hayek] views the market as a device that does two things:
> 1. It induces people to reveal at least some of this
> information, which he thinks they otherwise would be
> reluctant or unwilling to do. The market willy-nilly forces
> people to take positions (or risks) that reveal some of
> their information.

Suppose I come up with an invention that permits the production
of some item using less than the going amount of social labour
time. If I'm operating in a market system I have an incentive
to utilize that invention, undersell the competition and make a
super-profit. My investment in the new technique reveals to
others _that_ I have a new method, but it does not reveal what
that method is, how it works. I may patent the new method and
keep it a secret for as long as possible. Contrast this with
the communist procedure that we see with Open Source software
these days. A new invention is made; the inventor has the
incentive of kudos and the esteem of his peers to reveal what
he's done, and the further incentive that by opening up the
invention he's likely to get help with advancing it faster than

The implied contrast with the view you ascribe to Hayek seems to
be that people in a non-market system would just sit on their
information, not revealing it for fear that they would get no
reward and would just have their plan quota raised. That seems
a bleak -- and, happily, unrealistic -- picture of human
behavior, given a modicum of cooperative culture and interest in
one's work.

> 2. The market roughly integrates these disparate pieces of
> information and thus makes social production possible.

True, but here Paul's technical points kick in. There's reason
to believe that a planned system using the right methods could
do better than the market's "rough", slow, ex post integration.
I believe (but then I would!) that the burden is now on those
who maintain Hayek's position, to show just what it is that only
the market is able to achieve.

Allin Cottrell.

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