Very very very briefly: on the individual level markets give people incentives to find out about what people want, what resources and means exist to satisfy it, whether and how well any companies attempting to satisfy demand are doing, as well as looking into alternative production processes, substitute materials, and the like that might enable them to make money. On the global level, prices set by markets reveal social preferences about how to allocate resources.
All this is subject to the usual caveats about markets only telling us about effective demand (of people that have money), and nor reflecting any changes in social preferences that might come about through public deliberation, as well as the usual public goods problems and externalities. But any source of information has its defects, unless you're God -- thus, asking people what they want may not give you true answers or indeed informed judgments; plans have their own externalities and analogs to public goods problems -- the kind of distortions imposed by trying to reach plan targets familiar from the Soviet experience that I was ribbing Doug about when he said he was Gosplan (this is not affected by democracy, btw), and so forth.
> Maybe I'm just a
> technerd jaded by info, but it seems to me that free
> markets aren't
> impressive at delivering info. (For example,
> externalities aren't
> accounted for in a given transaction.)
>
> I mean, in an economy where 10-17% of our GDP comes
> from the marketing
> industry, and corporations are essentially secret
> societies, maybe
> markets do convey some needed information. But if I
> wanted an economic
> system which fosters information, an alternative to
> communism/capitalism
> seems more useful. (Parecon, maybe?)
Yikes. I'm not going there. Fucking disaster. Some years ago Robin Hahnel published and answered, without asking me or informing me he was doing so, some of my criticisms of parecon, with his responses. You can read this "discussion" here, see if you find his responses persuasive.
I am NOT going get involved in any debate about parecon.
http://www.zmag.org/ParEcon/writings/hahnelanwers.htm
>
> I'd think that information can come from anyone
> making opportunity cost
> decisions. And it seems that most economists don't
> know about
> opportunity costs, so I'm a bit hesitant to believe
> many of their claims.
> http://wiki.zmag.org/Opportunity_cost
>
Uh, well, maybe many economists don't know, but the notion of opportunity costs is the backbone of (a) sane financial planning and investment, and (b) Austrian-Coasian economics. So maybe instead of asking an economist you ought to ask a CFO or even a good family financial planner, or a Hayekian. Note that it is markets that give us the idea of an opportunity costs and a reason to find out what they are. If I can make a 7% return on money I have borrowed at 1.9%, then paying it off the loan imposes an opp cost of 5.1% -- this was a real life example I was dealing with today. Plans may be able to take account of opp costs, but they do not impose the discipline to take account of them that markets do.
Btw, I am, at by my lights, a socialist, not a libertarian or right winger -- a sort of Marxian Hayekian. Who says the unity of opposites is a Hegelian fraud?
__________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com