The business cycle · Course 4 of 15 · Capital, prices and money
Prices, knowledge and the market
The half of this tradition that is about information. What no single mind holds, what a price carries, and the limit one of its members insisted on.
Most of what people know about this tradition is the theory of the cycle. The part that travelled furthest into mainstream economics is this course: Hayek's argument that the economic problem is the use of knowledge that nobody holds in one place, and that prices are how scattered knowledge gets used by people who never meet.
Eight lessons. The first two are Hayek's 1945 paper, which is the single most cited thing anyone in this tradition wrote. The next four are the consequences: competition as an activity rather than a condition, what equilibrium is for in a theory where nobody is ever in it, and Kirzner's entrepreneur, who is the person who notices.
The last two are Lachmann. He supplies the piece the later theory of the cycle cannot do without, that capital goods are specific and work only in combinations, and then he supplies the hardest objection in this whole track. It comes from inside: if expectations are not pinned down by the theory, there is no guaranteed tendency toward anything, and the theory can predict less than its friends claim.
That lesson is not a concession tacked on the end. It is why this course exists before the cycle courses rather than after them.
Nothing here is a forecast or a view about any security, and ValueScreener gives no advice.
A theory, not a measurement
Prices, knowledge and the market is 8 lessons on capital, interest and money as this school defines them. These are definitions and arguments about definitions. Nothing here reads a balance sheet, and the capital in it is the economy’s, not the capital employed by a company you hold.
Related
- What the Austrian school is places this tradition, and its last lesson draws the boundary this course stays inside.
- Money, banking and credit is the next course, where a specific price, the interest rate, gets a chapter of its own.
See our methodology for how the product reads a filing and what it refuses to compute.