QUICK BITS No. 19

Emily Skarbek posts (13 July) on ECONLOG HERE

Hayek's Views on Emergence”

“Emergence is central to a Hayekian understanding of spontaneous order and properties of the price system. In the market, prices are "of human action, but not of human design" - they emerge from the buying and selling of the many individuals at the micro level, but settle on values that balance the quantity demanded with the supplied of a particular good. Prevailing market prices are reflective of individual decisions, but not necessarily reducible to any particular bid / ask. Moreover, the vast array of prices in an economic system are far too complex and interdependent for anyone to be capable of accurate, detailed future predictions. This idea that in complex systems we are limited to what Hayek called "explanation of principle" or pattern prediction builds from his earlier work concerning the classification system of the mind.”

COMMENT

My problem with this typical explanation of both ‘emerging market prices” and “settled” market prices, as above, is illustrated here:

“market, prices are "of human action, but not of human design" - they emerge from the buying and selling by the many individuals at the micro level, but settle on values that balance the quantity demanded with the supplied of a particular good.”

There are billions of market prices ”emerging” at any one moment and, according to Emily Skarbek, as presented above, are representative of how modern economists think - and teach!

Surely at any one moment prices individually are not both ‘emerging’ and ‘settling’ simultaneously! Which also raises questions about simple ‘supply and demand’ diagrams that allegedly illustrate market equlibria. Indeed, is market equilibria a meaningful idea in the real world.