Page 168 - Encyclopedia Of World History Vol III

information societies 987

processed and shipped to Illinois,and how it was cooked:
By paying the price of a meal, all this information is sum-
marized and processed by people the consumer does not
know and does not have to know. On the other hand, the
Japanese wholesalers processing the tuna do not have to
know or care who precisely wants to eat what.
Free decentralized markets are neither tools of exploi-
tation nor miracle cures for all of society’s ills; they are
above all information-cost-saving devices. Once markets
are disrupted or abolished, as happened in Marxist com-
mand economies, this information has to be processed
consciously by officials, who set prices by decree rather
than through competitive processes. The results have
been devastating.
Money played a unique role in increasing the infor-
mational efficiency of societies, since money served as a
unique unit of account and thus made exchange easier.
Without a means of exchange, exchange would require
a double coincidence of wants, which is informationally
more cumbersome. Money also provides a measure of
value, thus providing different goods with a common
An example of bone oracle writing from the denominator, which lubricates the exchange process. It is
Shang dynasty in China. now widely recognized that decentralized and unregu-
lated markets are the most efficient information-pro-
cessing social tools in our arsenal. Even when they
as well as Schrödinger’s wave equations. Science is a misfire and create inefficient outcomes, the remedies are
small subset of this set of knowledge, which can be often worse than the maladies.
termed propositional knowledge, but the hallmark of the The degree to which societies allocate resources through
modern age is that its relative importance in the econ- markets rather than through central planning or another
omy has risen steadily. allocation mechanism (such as intra-tribal allocation by
the whim of the leader) and the way allocative knowledge
Allocative Knowledge is processed and distributed determine to a great degree
The ways society has used information to allocate re- the social and economic development of a society. Market
sources and reproduce itself involve some of the central economies on the Eurasian continent developed, by and
questions of economic history. Information about ex- large, to a greater degree than those in Africa, Oceania,
change is summarized effectively in market economies by and pre-1492 America. In western Europe market alloca-
the price mechanism. In a classic article published in tions were highly developed in Roman times but for a vari-
1945, economist F. A. Hayek pointed out that in market ety of reasons declined in the second half of the first
economies a mind-boggling amount of information is millennium, whereas the Islamic Middle East and China
summarized and processed by the price mechanism.The were in that sense far more developed.
typical consumer of a meal of sushi in Evanston does not Parts of western Europe recovered during the Middle
have to know where the fish was caught, how it was Ages, and markets became increasingly important in