Thursday, December 14, 2017

What did Hayek know?

Economists doing a review of Hayek knowledge systems claim there is no aggregate coordination.  But, the brigade system does impose a global condition, uncertainty, all agents agree on the uncertainty of the  current tradebook. Also the physical laws of economics are enforced, the conservation of coin' and we avoid longer queues.  Finally, prices are not the signals, interest charges are the signals  interest charges indicate current queue length. No problem, we got this info stuff nailed.
While Hayek himself did not develop a mathematical formulation of his vision, there do exist models of the economy as a complex adaptive system in which aggregate outcomes are determined by the social interaction of agents with limited and local knowledge. This so-called agent-based literature makes intensive use of computational rather than analytical methods, and focuses on disequilibrium adjustment rather than the characterisation of equilibrium paths. Epstein (2007) calls the approach generative, while Tesfatsion (2006) calls it constructive. Its connection to Hayek’s thought has been previously noted (Vriend 2002, Rosser 2012, Axtell 2016).A key element in this literature is the absence of imposed coordination across individuals in actions and beliefs. There is no assumption that individual plans are mutually consistent, or that subjectively perceived laws of motion coincide with the objectively realised laws of motion to which these perceptions give rise. This does not, of course, rule out model-consistent expectations or market clearing as endogenous outcomes, arising through adaptation by individuals.

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