>>> Yoshie Furuhashi <furuhashi.1 at osu.edu> 04/14/00 12:11PM >>(3) Prices do not work as signs & incentives if the government does
not allow the market to discipline inefficient firms by failures and
bankruptcies. As Hayek notes, "The remunerations which the market
determine...will produce a viable order only because they often
disappoint the expectations they have caused when relevant
circumstances have unexpectedly changed. It is one of the chief
tasks of competition to show which plans are false" (_Law,
Legislation and Liberty_). In other words, the market = discipline
through failures & disappointments; no discipline, no "market
efficiency."
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CB: And of course, the history of the actually existing market system, i.e. capitalism, and its inevitable development to monopoly capitalism, demonstrates that marketeers have enormous incentive to completely exempt themselves from any kind of market discipline; that a certain elite in this competition for privileged exemption from market discipline succeed in exempting themselves; that this elite dominates the state (state-monopoly capitalism), which more and more works to make the elite completely exempt from market discipline (while putting the entrepreneurial suckers born everyday under the war of all against all, monopoly competition and discipline, cannon fodder for the market), like bailing out Chrysler, S & L banks and that big hedge fund, etc.
Get real Hayek. Everything real capitalists do is to get the market to exempt themselves and "discipline" others.
CB