The notion of private information in a modern perspective: a reappraisal of Hayek's contribution

Abstract

Hayek's critical attitude towards Walrasian modelling was based on informational considerations. In his view, a meaningful notion of equilbrium has to deal with the consistency of agents' plans which information is dispersed throughout the economy. He emphasized that only in this context could the role of market prices as aggregators of information be correctly analysed. Recent developments in general equilbrium theory with rational expectations have taken up the issue formally. In this paper, Haek's main ideas about the competiitive mechanism are compared with these recent results. It is argued that Hayek's notion of private information is different from that used in modern equilibrium theory, not only because of its dynamic content, as many critics observed ex post, as is usually in a general equilibrium framework. This issue of whether modern notions of private information, namel that used in conract theory, are good substitutes for Hayek' notion of personal knowledge is also examined in detail. From this analysis, it is possible to conclude that Hayek's notion of equilibrium neither entails Pareto optimality prperties nor full informational efficiency.

Keywords:

• Private information
• equilbrium
• knowledge
• Hayek
• Austrian economics

^* Paper prcrcntcd to the international colloquium ‘François Qucrnay (1694-1774)’ in Vcnaillcs, I-4June, 1994, with a grant from Gorhcnburg Busincv School Foundation. I am indcbtcd to the discussion and to a rcfcrcc for valuable commcnu.

^* Paper prcrcntcd to the international colloquium ‘François Qucrnay (1694-1774)’ in Vcnaillcs, I-4June, 1994, with a grant from Gorhcnburg Busincv School Foundation. I am indcbtcd to the discussion and to a rcfcrcc for valuable commcnu.

Notes

^* Paper prcrcntcd to the international colloquium ‘François Qucrnay (1694-1774)’ in Vcnaillcs, I-4June, 1994, with a grant from Gorhcnburg Busincv School Foundation. I am indcbtcd to the discussion and to a rcfcrcc for valuable commcnu.