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by xyzzyz 1274 days ago
> The basis of the free market is full information for all participants,

It’s not, and in fact it is opposite of truth. The reason, for example, why free market economy works better than centrally planned one, is precisely that obtaining full knowledge is impossible, so it is impossible to effectively centrally plan, whereas in market economy, each individual contributes their own private knowledge that is unavailable to other people, through participating in market and communicating it through price mechanism.

See, for example, Thomas Sowell’s “Knowledge and Decisions”, which is precisely about this point, or for more classic reference, Hayek’s “The Use of Knowledge in Society”. Again, to reiterate, the entire point of market economy is that nobody has full knowledge.

1 comments

Perhaps I'm sloppy with my terminology, but https://en.m.wikipedia.org/wiki/Perfect_competition seems to agree more with my statement than yours.
This is just an assumption of a mathematical model, not “the basis of the free market”. That’s like saying that the basis of the behavior of gases is the fact that the atoms are perfectly round and perfectly bouncy balls.
Perfect competition can never exist. There is no scenario where market participants (which make the market) will each have perfect knowledge and act perfectly upon that knowledge.

Along with sometimes being smart or hard working, people are also sometimes lazy, dumb, irrational, careless, destructive, and so on. The point being, there is a wide variety and they bring their messy contributions to the market, which makes for a very messy market. There can never be perfect anything. It's not even a good theory, it's garbage, it would only work in a simplistic simulation with no chaos.

Perfection competition theory is incorrect, badly flawed in a similar manner, as the efficient market hypothesis [1].

[1] https://en.wikipedia.org/wiki/Efficient-market_hypothesis

Neither this or the GGP is remotely an argument that less information makes for a better market, though.