tag:blogger.com,1999:blog-6245381193993153721.post2715962078162995984..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Salerno on Mises’s View of Coordination in Market EconomiesLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6245381193993153721.post-5312047181364626732013-03-26T06:54:24.079-07:002013-03-26T06:54:24.079-07:00Let us run through the reasons why Hayek's &qu...Let us run through the reasons why Hayek's "prices-convey-the-needed knowledge" theory is wrong:<br /><br /><b>(1)</b> First, Hayek's own theory requires the belief that real world economies persist in a state of near equilibrium to the role of prices to work:<br /><br /><i> “as Hayek points out, in order for prices to fulfill their knowledge-disseminating and plan-coordinating functions, <b>the economy must subsist in a state of what I will call ‘proximal equilibrium,’ wherein realized prices are always fairly accurate indicators of future prices.”</b></i> (Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized,” Review of Austrian Economics 6.2: p. 128).<br /><br />That is absurd -- and curiously a damaging criticism leveled at Hayek even by Misesians.<br /><br /><b>(2)</b> Secondly, and strongly related to the first, is the correct observation that Hayek's theory about prices communicating knowledge ignores the crucial role of Knightian uncertainty:<br /><br /><i>“Uncertainty for Hayek means that each individual decision maker only has a small piece of the puzzle. However, as a whole, the aggregated set of all decision makers have a complete set of all relevant knowledge. There are no pieces missing, lacking or unavailable from the puzzle. Market prices organize and synthesize the aggregate amount of knowledge so that market price signals, understood only by savvy, knowledgeable entrepreneurs, [eliminate] … any uncertainty.”</i> (Brady, Michael Emmett. “Comparing J.M. Keynes’s and F. von Hayek’s Differing Definitions of Uncertainty as it Relates to Knowledge,” January 30, 2011. p. 14)<br /><br /><i>“Keynes, Knight and Schumpeter deny Hayek’s claim that the market generates price vectors which concentrate the knowledge so that savvy, knowledgeable entrepreneurs can act on this information and solve the problem of uncertainty. Uncertainty means vital important information is missing. Pieces from the puzzle are missing and will not turn up in the future”</i> (p. 14).<br /><br /><i>“Hayek could not accept the standard concept of uncertainty as defined by Keynes, Knight and Schumpeter because it would then be impossible for market prices to concentrate knowledge that did not exist. In conclusion, nowhere in any of Hayek’s three articles on Knowledge in Economics in 1937, 1945 and 1947 does Hayek deal with the standard view that uncertainty means knowledge that is not there.”</i> (p. 15). <br /><br /><b>(3)</b> Hayek never made the slightest attempt to explain how fixprice markets and price administration contradict and destroy his theory.<br /><br /><i>Real world </i> capitalists -- as opposed to fantasy world Hayekian ones -- get their signals from demand and sales orders, that is to say, from quantity signals, not primarily from prices.<br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45956702590600657272013-03-26T06:08:17.588-07:002013-03-26T06:08:17.588-07:00I disagree with Rothbard that "the entire Hay...I disagree with Rothbard that "the entire Hayekian emphasis on ignorance and ‘knowledge’ is misplaced and misconceived". Hayek's explanation supplements and complements the analysis of Mises especially for purposes of explaining to obtuse interventionists the necessity of unadulterated market prices.Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-77537202918097276922013-03-23T06:40:49.195-07:002013-03-23T06:40:49.195-07:00You should also check Salerno's view on the di...You should also check Salerno's view on the different monetary systems:<br /><br />http://www.youtube.com/watch?v=wsmUxeFrCV8ivanfoofoohttps://www.blogger.com/profile/07899286403907746852noreply@blogger.com