----------------- HES POSTING ----------------- Lawrence, I wonder whether I was clear regarding my point about the perfect knowledge assumption as a counterfactual. When we say that the mind of the the human being is not a computer, we are led to identify characteristics of the mind that differ from those that we attribute to the computer. When we say that economic actors do not have perfect knowledge, we are led to identify characteristics of "real" economic knowledge. We are led to ask what economic knowledge is and how it is relevant to the way actors organize themselves in an effort to do better than they could do if they chose not to trade. These are the fundamental questions that using the perfect knowledge assumption as a counterfactual leads one to ask. I'm sorry that my reference to acquiring, using and communicating information led to you associate my comment with Hayek. That was not my intent, although I can see why you would interpret it in this way. It seems to me that the question of who started the assumption of perfect knowledge is not independent of the question of what the user of this assumption expected it to accomplish. I suggest that Knight's use was very different from that of Marshall. I agree with your Weberian "ideal type" interpretation of Marshall (and the British microeconomists who followed). But I do not think that this interpretation applies to Knight or the Austrians. (I realize that I am avoiding the broader philosophical implications that Knight often attached to the perfect knowledge assumption. See Ross's earlier comment. I am interested here only in the assumption's use as a tool of understanding economic interaction.) Robin's comment about policy is a good case to differentiate these uses because she seems to have adopted the Marshallian definition. Let me explain. Insofar as one assumes perfect knowledge, the outcome of a policy is entirely predictable but, of course, not very helpful in judging the outcome of policy in the real world. Insofar as one has some idea of how actual knowledge differs from perfect knowledge (the ideal type paradigm), the outcome is less predictable and there is room for speculation about whether the policy could succeed. This opens the door to a new profession of speculators and model builders who base their policy judgments on assumptions about the kinds of knowledge that people actually have. The field of micro-economic policy is born. However, insofar as one assumes (a) radical uncertainty or (b) that economic actors have and are likely to acquire, use and communicate knowledge that the policy maker could never hope to acquire; there is grounds for doubting that micro-management types of policies have any chance of succeeding even if they were adopted. The whole professional enterprise of devising micro- management policies may appear wasteful, fruitless, delusional, and a garden to be plundered by political hacks. I think that there are many economists who make the latter assumption. And many of them would not regard themselves as followers of Shackle or Austrians. Finally, I would like to recall my earlier point that the economics that followed the marginal (value) productivity theory of distribution revolution was gaining consensus at the turn of the 19th century and early 20th century was multi-faceted. I call this neoclassical economics, although definitions are not important. I agree with you that the dominant micro textbooks of today are largely Marshallian. Nevertheless, I think we would mark ourselves as narrow-minded if we disregarded the influence on these textbooks that mathematicization of the profession has had. Nor would it be sufficient to simply point to an edition of Marshall's _Principles_ in which mathematics was de-emphasized in order to show that the textbooks do not fully reflect neoclassical economics. The often brilliant works of the Austrians, J. B. Clark, Herbert Davenport, Frank Fetter, Frank Knight, and others were simply ignored in the drive to manufacture a textbook that bureaucratic teachers would require their students to buy. Many of these writers were strong critics of Marshall. Pat Gunning Sultan Qaboos University, Oman ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]