[Geee]

Hayek doesn't talk about price stability or inflation at all in this article. There's no fallacy here.

This is basically the "prices are all we need" of economics. It's written in historical context when some still economists thought that a centrally planned economy could work. Hayek writes about the price system and how it enables an economy to function in a decentralized manner, and why it can't function without it. Hayek argues that it's essential that the decisions are made with local knowledge, because every individual possesses private and unique knowledge, which is not available to central planners.

On the other hand, all the information which an individual needs from other individuals is transmitted through prices, i.e. everyone only needs to know how to make best use of the prices they see. Thus, there's no need for any kind of oracle or central entity which knows what's going on in the economy to make it function.

This is still relevant of course, in the way that most people don't realize how magical the price system is, and how humans basically just stumbled upon it without anyone understanding it.

[ihm]

It’s not remotely true that prices are capable of transmitting all the information required to reproduce society.

This is for the simple reason that prices more or less only communicate information about the amount of labor required to produce a thing[0].

Therefore prices on their own are, for example, incapable of transmitting information about what action needs to be taken to correct the relationship to the biosphere. Information about the state of the biosphere will only enter into prices to the extent that things start taking more labor to produce. But there’s no market mechanism that would then cause that to direct action towards stabilizing the climate.

[0]: This is because cost resolves into business owner’s cut + labor cost + cost of inputs, and the inputs can recursively be split into the same until you’re left with the amount owners take, the amount paid to workers, and the amount paid to owners of natural resources.

The business owner’s cut and the amount paid to owners of natural resources are socially determined and bear almost no relationship to the physical world or reproduction of society.

[svnt]

Is this an intuitive conclusion you’ve arrived at or do you have a source for it? It seems it can trivially be shown to be false under a number of circumstances: supply and demand, secondary markets, etc.

[kelseyfrog]

It's a bit strange you didn't mention externalities in your list. How are they factored into price?

[schuyler2d]

Not in the article, but the body of work (that you're clearly familiar with).

If you believe the Fed/ability-of-the-Fed to smooth the boom/bust cycle, then you disagree with Hayek -- he wasn't (just) arguing for a generally free market -- he believed that all markets were perfect (especially/including the price value of Money).

It turned out Keynes was right.

[Geee]

Yeah, it's related in that way. Fed or other central banks setting / controlling interest rates is definitely price control (interest is the price of money), and it is a form of central planning, or central intervention which makes price signals less pure.

I think it's "too soon" to say that Keynes was right. Afaik, Hayek predicted the Great Depression based on the Austrian business cycle theory. I think that ABCT is mostly right, but it's probably imperfect. There's so much going on in the real world that it's almost impossible to say whether a policy or a theory or whatever actually caused something or didn't cause, and what would have happened otherwise.