Re: Yet more equilibrium, stasis and death

[Jim Devine <JNDF%LMUACAD.BITNET@xxxxxxxxxxxxxxxxx>]

On Sun, 23 Jan 1994 00:02:28 -0700 Brad Cox @ GMU/PSOL said:
>
>Remember, I claim no authority in economic matters...

I hope the *economists* on the list are willing to make this kind of
disclaimer.  I know I am. :-)
>
>As I understand it, Hayek shifted the focus away from capital, labor and
>rent to the efficient use of tacit, distributed *knowledge* by society. In
>his view, prices are a long-range communication mechanism whereby
>individuals' tacit knowledge of matters of local time and space are
>mobilized into the vast organism known as society.

In a nutshell, one can see what's wrong with Hayek's perspective: he
ignored the role of other factors besides prices that play a role of
communication mechanisms.  At a minimal level, economic actors also
respond to quantities.  They also communicate through talking, newspapers,
TV, etc., etc.  Von Hayek and his followers want to force the world
into the model in which only market forces (prices as signals) do
the work, since they view  non-market institutions as alien or
unnatural.  They also have a totally idealized (perhaps as idealized
as is possible) vision of markets and prices.  Von Hayek assumes
that externalities are mere "neighborhood effects" and can
effectively ignored.  A lot of the silliness of the  rational
expectations/new classical school derives from von Hayek et al.
Murray Rothbard, for example, argues that one can't blame the
Great Depression on entrepreneurs since it wasn't profitable to them.

>Thus the Copernican shift from energy/matter (capital, labor, rent) in the
>center of the universe to *knowledge* at the center, with capital, labor
>and rent in the periphery.
How is it possible to have knowledge without having something to have
knowledge about, i.e., capital, labor, resources, etc.?

>In my amateur's opionion, his model of the economic universe explains
>phenomena like the recent collapse of centrally-planned economies more
>satisfactorily than any other I'm aware of. But Hayek does not represent
>the mainstream in economics today, having been pushed aside by Keynesianism
>and mathematical equilibrium-obsessed modeling.
>
As Cottrel (sp?) points out, Hayek's critique of the old USSR-type
system was based on the assumption that the market system did the
job well.  I must admit I like old Leon Trotsky's argument (in the
1920s) that central planning only works  with democracy -- because
authoritarian control cuts off the flow of information from the
bottom to the top. And of course von Hayek was strongly opposed to
democracy.