The critique makes no sense to me at all. Would von Mises or Hayek really
claim that we do not know our needs and desires without participating in a
market? I know that I want to have fresh mashed potatoes out of my garden
without participating in a market. I know when I want sex without going to a
red light district. When I participate in markets I learn what I can afford
not what I need or desire. Indeed needs
as effective demands are what establish markets.
HOw could we start out with a given system of preferences if our needs
and desires are not known until we get the price information? Also, most of
our preferences will not be endogenous but a function of culture including
the culture of consumption, conspicuous consumption and so on. So the market
will most efficiently provide rich sobs with suvs.
Planners will screw up because of lack of information. Consumers will
scream bloody murder. Poor supply, poor quality, poor choice. So the planners
modify the plan and production. So that is wasteful. But how do you determine
if that is any more wasteful then having entrepreneurs guess what might sell,
competing and going bankrupt, or advertisers spending milliions trying to
ensure there is a preference
for pet rocks?
Cheers, Ken Hanly
Yoshie Furuhashi wrote:
>
>
> I entirely agree with you. A Mieses-Hayekian opposition to our
> position, however, would be something like this: "all needs & desires
> of all individuals are unknown & unknowable to any single mind; we as
> individuals only possess very partial knowledge; it can't be properly
> said that we 'know' even our own needs & desires unless real, not
> hypothetical, alternatives are presented & opportunity costs
> (tacitly) calculated through our participation in the market; we
> can't explicitly go through all the relations between ends and means,
> so we need prices that help us (tacitly) make use of a relative value
> of each alternative." (This radical privileging of tacit & partial
> knowledge dispersed among individuals over explicit & collective
> knowledge, as well as opposition to conscious planning, is a theme
> that later gets carried by postmodernists to its anti-scientific
> extreme.)
>
> Whereas we think of the market, for instance, as a mechanism of
> rationing ("A shortage of water supply? Raise the price!
> Unemployment? Lower the wage!") in the system of production for
> profits, not for human needs, Hayek thinks of the market as a
> mechanism of discovery of human needs & desires we cannot know
> otherwise. For us the market is a question of social relations; for
> Hayek, it is a matter of epistemology.
>
> ***** If we possess all the relevant information, if we can start
> out from a given system of preferences, and if we command complete
> knowledge of available means, the problem which remains is purely one
> of logic. That is, the answer to the question of what is the best use
> of the available means is implicit in our assumptions. The conditions
> which the solution of this optimum problem must satisfy have been
> fully worked out and can be stated best in mathematical form: put at
> their briefest, they are that the marginal rates of substitution
> between any two commodities or factors must be the same in all their
> different uses.
>
> This, however, is emphatically not the economic problem which society
> faces. And the economic calculus which we have developed to solve
> this logical problem, though an important step toward the solution of
> the economic problem of society, does not yet provide an answer to
> it. The reason for this is that the "data" from which the economic
> calculus starts are never for the whole society "given" to a single
> mind which could work out the implications and can never be so given.
> (Hayek, "The Use of Knowledge in Society," at
> <http://www.virtualschool.edu/mon/Economics/HayekUseOfKnowledge.html>
> *****
>
> I agree with Hayek that no single mind can command the complete
> knowledge of all our needs & desires + all available means. Why
> should we, however, strive to work out planned economy with such
> assumptions of divine perfection? Why set the bar of successful
> planning so impossibly high? There seems no reason to assume what
> Hayek has us assume. We need only know enough to meet existing needs
> better than capitalism does (= we don't have to be perfect) & leave
> room for improvement (say, invention of greener technology) through
> the process of trial and error (here we can even, if we so desire,
> leave a little room for the "market" as long as the "market" doesn't
> assume the character of compulsion). In other words, I object to
> Hayek's assumption about what degree of knowledge is necessary to get
> socialist planning going.
>
> Yoshie
