Prices and Knowledge A Market-Process Perspective

Since Friedrich Hayek's "The Use of Knowledge in Society," much has been written about the role of prices as a means of communicating information. Information economics emphasizes that prices can be sources from which agents infer information, and means by which they transmit information. The growing interest in this area has led to a greater stress on the role of prices, and this book meets the need for a comprehensive survey of the field. "Prices and Knowledge" analyzes different theoretical approaches to the role of prices in situations of imperfect information. The "informational efficiency" approach of Grossman and Stiglitz and the "bounded rationality theory" of Nelson and Simon are shown to be useful, but incomplete, in their consideration of situations of disequilibrium. Esteban Thomsen, by contrast, adopts a market process perspective and develops a modern Austrian approach. He views market activity as a continuing process of change rather than as a fully adjusted state. Because agents are acting in conditions of uncertainty or ignorance, prices are of paramount importance. Disequilibrium prices can become sources of profit opportunities that stimulate entrepreneurial discovery and the exploitation of previously unnoticed opportunities.Thomsen, Esteban F. is the author of 'Prices and Knowledge A Market-Process Perspective' with ISBN 9780415068659 and ISBN 0415068657.