Friedrich Hayek Explains the Function of the Price System

In a market, many different people with only a limited scope of knowledge make independent decisions and plans.

Steven Horwitz

Steven Horwitz is Economics Editor at Lib​er​tar​i​an​ism​.org and Distinguished Professor of Free Enterprise at Ball State University. Horwitz has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and macroeconomics.

Summary:

In “The Use of Knowledge in Society,” Friedrich Hayek explained his understanding of the function of prices in a market economy. In a market, many different people with only a limited scope of knowledge make independent decisions and plans. Prices serve as knowledge surrogates that allow different people’s understanding of the world to overlap enough to allow them to coordinate their plans with one another.