I am doing some work on the economics of information. It is a fascinating field and I will have more posts soon. I just wanted to share this great comment from Pete Boettke's 2002 article, "Information and Knowledge: Austrian Economics in Search of Uniqueness."
"The knowledge that defines the equilibrium state of affairs emerges within the process leading to that equilibrium state rather than existing anterior to that process. Without the market process to generate it, the relevant knowledge would not exist. Economists, Hayek warned, cannot continue to assume given knowledge. A secondary point of that essay1 was to suggest that the logic of choice is a necessary component of an explanation of the market process, but it is not sufficient. The logic of choice must be complimented with empirical examination of how learning takes place within alternative institutional settings." (Pg 267, Emphasis Added)
Boettke is reminding us of two important things. First, the market process generates information that is not "given." It does not exist ex ante, waiting to be discovered by actors who are willing to pay the search costs. It definitely is not "given" in the perfect and complete information sense. Instead, it comes from within the market. Most economists do not appreciate or understand this point.
Secondly, Boettke urges economists, even those who understand the first point, to remember the institutions. Different arrangements generate different information and only through empirical analysis can we know the types of information generated. "Markets" tend to generate information about profit opportunities, that is opportunities for mutual gain between people. Extractive regimes tend to generate information about profit opportunities, that is opportunities for self gain through extraction.
1. Hayek's 1937 essay "Economics and Knowledge."