Sorry. I didn't realise that the stuff about Hume was part of
this longer post or I would have deleted the extraneous material.
I can see that prices are for the consumer a sign of what can be
afforded, and for the hypothetical rational consumer would lead
him or her to allocate funds "efficiently" in some sense to
satisfy desires and would lead persons to evaluate "what they
really want". That goods have prices makes one realize that one
cannot have everything one might desire but any system of
rationing or that requires qualifications to receive goods or
services will make one realize this. But Bill Gates hardly will
take into account conflicts of desires which he might have
overlooked through accounting of costs.On the other hand such
accounting of costs might lead a person with few marketable
skills to decide what they really want is to be a drug dealer, or
bank robber as the most likely career path to be able to afford
the price of a reasonable material standard of living. Or the
conflict of desires that might be involved for the less well off
might be whether to satisfy the desire to pay the rent or to feed
the family or pay for medicine. Better a system where person do
not need to worry about whether they can afford basic shelter,
food, or health care.
On the producer side I can see a certain point to Hayek's claim
that prices may be a sign that profits could be made given the
cost of productive inputs. But the matter is extremely
complicated too, especially when production start-up may take
some time and the start up costs go up and the product price go
down. The entrepreneur would need to look not so much at prices
but at conditions that might influence prices to go up or down. A
good example is hog production.
A little more than a year ago prices were so low producers lost
about 50 dollars per hog. This would surely be a sign not to go
into hog production. The results. Many producers, particularly
small producers went bankrupt, and some did decide that it was
time to leave the business. But a number of entrepreneurs decided
that it was a good time to build even larger hog barns and that
is what is still happening now. As commentators put it. There was
blood all over the floor as producers lost their life savings
from following market deamnds for pork in Asia just as the Asian
economy went sour. The signs that the big hog barn entrepreneurs
were following were not the low prices but the conditions in the
future in which many producers had been wiped out and the market
would recover. But there are no prices that they are using as
signs just the hope that because of developing conditions prices
will be high enough for profits. They were right but what did
prices as a sign have to do with it? If prices were a sign would
they not have invested elsewhere where prices indicated profits?
I think you mean "failures in the marketplace" that is producers
who do not make a go of it, not "market failures". However, that
a producer fails to make a profit may show that there is not
sufficient effective demand to make the production profitable but
it says nothing about whether the production plan was true in the
sense that the production might be socially useful or even
efficient in a wider sense. For example someone might invest
heavily in production of solar heat equipment that would be quite
profitable if fossil fuels were priced at their true costs
including costs to the environment. Under Hayek's model the plan
was false as it fails to bring a profit but this is just a quirky
use of "false" perhaps part of the emotive spin Hayek puts on the
whole idea of free markets.
Cheers, Ken Hanly
Yoshie Furuhashi wrote:
>
>
> What Hayek claims is that the price system brings about "the taking
> into account of conflicts of desires which would have been overlooked
> otherwise [i.e. under planned economy]," chiefly through "the
> accounting of costs." Prices are for Hayek "signs which enable him
> [a producer] to contribute to the satisfaction of needs of which he
> does not know, and to do so by taking advantage of conditions of
> which he also learns only indirectly" (Hayek, _Law, Legislation and
> Liberty_). In a move that anticipates postmodernism, Hayek basically
> says that we can't have direct knowledge of what we really need &
> want & of how we should satisfy our needs & wants, unless we are
> mediated by the "sign system" of prices. Prices as "signs" function
> for Hayek as the symbolic order functions for Lacan. Failures are
> not anomalous but essential in Hayek's economy of a "sign system":
> "It is one of the chief tasks of competition to show which plans are
> false." In other words, Hayek implies that truths are only
> differentially revealed to us when set against market failures (false
> plans), just as those who are influenced by Saussurian linguistics
> have us conceive of the dichotomy of true/false in language as
> chiefly differential, de-emphasizing or bracketing altogether the
> role of reference in our language use. Further, just as the
> Saussurian linguistics is synchronic, unlike the diachronic
> conception of language in philology, in the Hayekian ecnonomy, "The
> current prices, it must be specially noted, serve in this process as
> indicators of what ought to be done in the present circumstances and
> have no necessary relation to what has been done in the past" (Hayek,
> _Law, Legislation and Liberty_). If Hayek had adopted psychoanalysis
> (some version of which says an individual's unconscious can never be
> made fully transparent to himself), he would have been _the_
> forefather of postmodernism before the letter! Economy is a
> discourse of desires in perpetual conflict of which we are only dimly
> aware, not a historically determined ensemble of social relations
> which we may consciously & collectively transform!
>
> Needless to say, I think that Hayek's textualization of economy is
> highly misleading (since it directs our attention away from the role
> of the competitive market as *compulsion* & of prices as *alien
> power* that heteronomously determines our lives, severing our means
> from ends), and I add once again that Hayek doesn't explain why we
> can't use planning as a democratic procedure of discovery through
> trial and error, figuring out how to meet existing needs and to even
> find out & develop new needs & desires.
>
> Yoshie
