Essential Hayek: Knowledge and Prices 

@@fudgefactor1639 what does that mean ?

@@vals4207 it means that it is not from Columbia (USA), but from a country in South America, called Colombia.

Exactly, I believe that people in this day and age might reason like this. Moreover, I do have some remarks with regards to whether the price increase will be felt by the consumer, or by the colombian coffee farmer. Because I feel as if the latter will be financially 'punished' because of this, instead of the former as is implied in the video.

@@zm7844 the point of this theory was that U can't predict what the person will do! The person makes decisions according to prices But with prices there's quality, quantity, discussion involved too and with that he analyses that is this worth it? That's the point! And u go to super market u will just buy products according to prices only! U will check the product, u might see description, ingredients and all but at the end it will all come to just prices. U liked it but it's not in ur budget so u will make decision and that's where prices are involved. Hayek actually won Nobel prize for this. 😏 Now u took full information about a product but u can't buy it because it's costly. So u do something else! That's ur decision which no scientific calculation can predict or measure. The video just gave example. Don't just blindly with that.

@@yydd4954 Yes, people make choices according to prices. But I also think that there is a segment of the population who is willing to look at different variables when making purchases. With the supermarkt example, I feel as if some people will buy a more expensive product if it is healthier, or produced in a more ethical way. If we are talking about wholly homogeneous products then yes, price will be the determining factor, if not, I think some nuance might be in place.

@@zm7844 nobody is denying that though Infact as per my knowledge Austrian school of thought actually talked about consumer decision making. It happens like u r in a market so u will have conversations with different sellers, see prices and then make decisions. I don't think the theory is solely based on price. It talks about the importance of prices. Price system give a hint. Like how can u understand the quality of a product? What some people do is they a high priced product and that makes them think that it is of high quality. This is a subjective approach. U just won't a calculative answer in just one direction.

Ah, but that’s the catch. All information is supposed to have been priced in. For instance, if the lady from the supermarket example had indeed known about the means by which the coffee is produced, which we will suppose to be unethical for example, then she will choose not to buy the coffee. From here, two things can happen: either the rest of the consumer side of the market behaves the same or it doesn’t. If it does, then everybody will be willing to pay less for the good, so producers will have to lower prices, in which case the new, lower price, reflects society’s judgment about the unethical means of production. If the rest of society instead doesn’t care, then the lady from the example will just leave the market herself and the information about the unethical means of production will not be priced in because the market deemed it irrelevant. It is thus that all relevant information about the product comes to be factored into its price.

Well you've done something very subtle to make your sentence look like it makes sense: you introduced the word "solely". Hayek doesn't say you SOLELY make decisions based on price. But that price gives a signal to all market participants that allows them to coordinate and communicate effectively. What you're talking about is the issue of Perfect Information or access to information, and price has nothing to do with that. When the price is the fair market price it only CONVEYS information. That's it. If anything prices would conceal information when the government steps in: if the government established a price ceiling in this example to keep the price of coffee beans from going up, the low price would give the illusion of abundance of those coffee beans (high supply compared to demand) when it's not the case and when prices are only low artificially. Which would lead to a bad allocation of that resource. That's the only time prices conceal information: when the government messes with the signal.

@@CStrik3r Let me correct the OP. The video is saying we would make the same decision whether we actually knew the reasoning behind pricing or not. However: If she knew the lower price was 'cuz child labor, she might not buy the cheaper one. If she didn't know, she would buy it without hesitation. This example contradicts the video, revealing a flaw in its logic.

@@alanarmstrong3186 certainly but you've misunderstood what hayek is saying is that the market gives us the ability to act in such a way as though we all knew the current state of our resources the point isn't that she doesn't know its that she acts as if she did understand the global coffee supply. Your example misses the point what Hayek's saying the market is after all both a rationing system and it generates prices which allow us to assume and understand relative value thats as true in a situation with child labor as without its not a moral statement it's an attempt at understanding the economy.

@@horstnietzsche1923 But the market doesn't give us that ability. What if the increased price in the video was bc they switched to non-child labor? Sara might be inclined to keep buying it over the other--still child-labor--options. In this case, the market fails to give us the ability to act as if we knew what was going on. To assume it did would be to say that no one cares about child-labor in other countries, which could lead to misunderstanding, not understanding.

Do you or any of your friends/family own any apple products?

Maybe in Columbia (DIstrict of...) make some good coffe :=)

People confuse the woman Columbia (symbol of America) with the country Colombia

The difference between true price that you are alluding to and nominal price is that true price is often not immediately quantifiable and is usually only extrapolated when a causality connection could be made between something that was at a nominal price ends up creating a situation that requires additional cost that is sometimes born by third parties. Some things we can generalize that there is real cost in such as an individual smoking or abusing alcohol imposes a real cost later on that person's health that will have to be paid in the future in the form of preventable medical treatments but there's no way to know what that true real cost will be until later for an individual. Human industrial development can also impart a real cost but the cost of that is not something we can know with any certainty. The use of chemicals to treat field against pests may have an environmental cost but its one that we usually trade for even if it has unintended consequences, generally we do this to secure our position before the position of other creatures. This doesn't mean we should deliberately destroy the environment just to grow crops or extract resources, but it does mean that we have a limit to how often we can split the hairs on what constitutes serious environmental damage.

You are alluding to the idea of externalities

Your reason is correct but aludes to another situation that isn't the case here. The coffee example is only a vessel to make the idea more easily understood. The theory concerns equal or substitute goods, so one one the premises is that they reach similar accepted standards.

+Keine Keine The result would be that large quantities of people would stop buying the coffee and go with an acceptable alternative, which would undermine the profits the company would expect from a manipulated price.

+Kendrick Melville Really just think about the oil prices now around 30 dollar per barell, it used to be above 100, and we still used oil.......

Keine Keine That's because there was no true viable alternative to oil, so consumers had no choice but to pay it, or mitigate the cost by buying more fuel efficient cars such as hybrids and electric vehicles. People also moved to services like Lyft and Uber to offset the cost of transportation.

Much government action is compelled by and for the benefit of business. To blame government is to blame the gun for the murder and not the wielder. In the landscape of the market, government is just one of the tools and obstacles. Your examples demonstrate that as much.

@todd dyer those are government examples and as long as the government has a monopoly on force only a government can enforce a monopoly for example insulin prices went up because a different company bought the patent well whats stopping other companies from making insulin? The government is. However not all monopolies are in my opinion government creations just 99% of them. Also Hayek doesn't address nationalist economics because mises already did. These things dont disprove Hayek's theories in fact they strengthen them because they evolved from Mises.