Friday, December 29, 2017

Peter Radford — 1937

Hayek, Coase and uncertainty.
In any case I find it fascinating that the two, Hayek and Coase, both in their own way, brought the impact of uncertainty to the fore in the same year.
It’s a shame that economics has never fully embraced, nor realized, the full richness of their ideas. Neither author was willing to step into the world that they clearly understood existed. Hayek was right about universal central planning: it is an impossibility. He was wrong to assert that this implied anything about the market place or prices. By his own argument we simply cannot know whether something is optimal. Uncertainty makes such a thing inscrutable too us. And Coase was equally correct when he saw the need for local central planning: it is the only way we can organize production adequately in the face of uncertainty. But his focus on transactions was a legacy of the classical emphasis on exchange. It ignored the need for active coordination. He missed the requirement for management. He should have talked about “management cost” not “transaction cost”. They’re different animals.
So: an interesting question is this: what happens to Coase’s “institutional structure of production” when information, and by association knowledge, is less clumpy in the economic landscape? Does something like the Internet, which is a vector for information and knowledge, obviate the need for such structure? Does it smooth that landscape out sufficiently for firms not to exist?
We need to think about that.
We need a new version of the discussion that ought to have taken place in 1937.
The Radford Free Press
Peter Radford


Matt Franko said...

"Hayek was right about universal central planning: it is an impossibility. "

Its an impossibility for am Art major I'll give you that one..

Bob Roddis said...

Matt Franko is completely oblivious to the Socialist Calculation Problem.

Bob Roddis said...

"In the 1920s and 1930s, Ludwig von Mises developed a challenge to the economic feasibility of socialism that was finally, and suddenly, accepted as self-evident in 1989."

I guess senility has set in.