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by BlandDuck
601 days ago
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Hayek makes no statement about the ability of market forces to stabilize prices. On the contrary, his point is that the equilibrium price in a decentralized market is a good sufficient statistic that aggregates the current demand and supply situation. Building on his example on page 525, if more screws of a particular size are suddenly in higher demand, then the price will increase, as it should! The goal is not to stabilize the price but to have the price reflect the marginal opportunity cost. |
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Most famously interest rates without some government (or other, in the case of Crypto) hand in distribution and projected distribution, the market can fail (everyone is encouraged to hoard).
In Stiglitz' case (not looking it up, but from memory), used car markets fail. While the marginal net opportunity cost is what the price yields, it creates a negative feedback loop where people that have a used car that's more valuable than is verifiable exit the market, and then you get .... all the more 'lemons' -- i.e. only bad cars). Dealerships are one way to correct for that information loss, but markets don't always value sufficiently the information that will solve it.
We can be a bit more smug/hopeful nowadays, because information is a lot more easily aggregated/hosted. But we have to recognize the .... value of those components.