Here is Hayek on the essential problem of economics:
The peculiar character of the problem of a rational economic order is
determined precisely by the fact that the knowledge of the
circumstances of which we must make use never exists in concentrated or
integrated form but solely as the dispersed bits of incomplete and
frequently contradictory knowledge which all the separate individuals
Here is Vernon Smith saying something very similar:
We know that the essence of
markets is that individual cost and value information is private and
dispersed, and that command and control economies inevitable must fail
to deliver the goods because the appropriate information is not, and
cannot be, given to any one mind.
The current episode of EconTalk and next week’s, look at the issue of aggregating dispersed knowledge.
In this week’s EconTalk, I interview Cass Sunstein, whose latest book, Infotopia, explores the different ways to aggregate dispersed information for better decisions. Next week’s podcast is with Vernon Smith and what experiments have taught us about how markets aggregate information. Enjoy.