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Summer 2022

ISSN 0890-913X

Volume 37, Number 2

The Discovery Role of Disequilibrium Prices

Vincent J. Miozzi, Texas Tech University

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TheJournalofPrivateEnterprise37(2),2022,29-38TheDiscoveryRoleofDisequilibriumPricesVincentJ.MiozziTexasTechUniversityAbstractBecausepricesareessentialtothemarketprocess,priceformationandadjustmenthavealwaysbeenconcernsforeconomists.Aninsightthathasgainedwideacceptanceintheprofession—mostnotablysincetheemergenceoftheeconomicsofinformationandtheresurgenceoftheAustrianSchool—isthatpricesperformaninformationalfunctionbyconveyingrelativescarcities(Hayek1945).Butmostofthediscussionsurroundingpricesissetagainstthebackdropofequilibriumanalysis.Thediscoveryroleofpriceshasnotbeenstudiednearlyasmuch.Ifactualpricesarenotequilibriumprices,whatinformationdotheyconveytoactorsandwhatincentivesdotheypresent?Thesearethequestionsthispaperseekstoengage.IproposethatbothinformationeconomicsandAustrianeconomicsprovideinsightintothesequestions.Specifically,Austrianpricetheoryoffersthebestframeworktounderstandtheinformationalroleofdisequilibriumprices.JELCodes:B53,D40,D80I.IntroductionAninsightthathasgainedwideacceptanceamongeconomistsisthatpricesperformaninformationalfunctionbyconveyingrelativescarcities,apointfirstmadeexplicitbyHayekin“TheUseofKnowledgeinSociety”in1945orarguablyevenearlierinPricesandProduction(McClureandThomas2019).Becauseofthisinformationalfunction,priceshelpeconomicactorscoordinatetheirdissimilarplans.Thomsen(1992)listedthethreewaysinwhichtheinformationalroleofmarketpricesisunderstoodwithintheeconomicsprofession:1.Pricesareknowledgesurrogates.Theycaninformtheactionsofindividualswithoutinformingthemofalldetails.Icallthisthesurrogateroleofprices.2.Pricesaresignals.Theycanbereadandusedtoinferortransmitinformation.Icallthisthesignalingroleofprices.3.Pricedisparitiesmayprovideprofitopportunitiesthatsparktheentrepreneurialdiscoveryofnewknowledge.Icallthisthediscoveryroleofprices.

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Metadata [hide]

Title	The Discovery Role of Disequilibrium Prices
Authors/Creators:	Vincent J. Miozzi, Texas Tech University
Year:	2022
Volume:	37
Number:	2
Pages:	29 - 38
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Discovery Role, Prices fluctuation, Economic analysis

Citation:
Miozzi, Vincent J. / 2022. "The Discovery Role of Disequilibrium Prices." The Journal of Private Enterprise, 37(2): 29-38.