經(jīng)濟事務(wù)研究所-哈耶克談競爭：數(shù)字時代的自由反壟斷

ThenewHOBARTPAPERSNo.1

HAYEKONCOMPETITIONAliberalantitrustforadigitalage?

CentoVeljanovski

July2023

InstituteofEconomicAairs

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Contents

Theauthor

Summary

Introduction

Hayekoncompetition

Themeaningofcompetition

Complexityeconomics

Bigdataanddigitalsocialism

Firmsandprices

Marketswithoutprices

Theinnovationmachine

Summary

Liberallaw

Lawandlegislation

TheEnglishcommonlaw

Freedomofcontractortrade?

Theruleoflaw

Hayek’slegalliberalism

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Hayekoncompetitionpolicy

Bigisnotbad

Monopolyasaminorproblem

Labourmonopolies

Hayek’sliberalcompetitionpolicy

Reformofcompanylaw

Intellectualpropertyrightsasmonopoly

Hayek’santitrustproposals

Contestabilityparamount

Banningexclusionarypricediscrimination

Privateenforcement

TheeffectivenessofHayek’santitrust

Summary

Assertiveantitrustandthedigitaleconomy

Bigtechhasamonopolyproblem

Someeconomicsofdigitalonlineplatforms

WhatHayekmayhavesaid.

Digitalmonopolies?

Mergersandbreakups

WherenowforHayek?

References

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Abouttheauthor

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CentoVeljanovskiistheManagingPartnerandfounderofCaseAssociates,andIEAFellowinLawandEconomics.Hehasover40years’experienceasanadvisertocompaniesoncompetitionandregulatoryeconomics,hasbeenadirectorofseveralmanagementandeconomicsconsultingfirms,ontheboardoflistedpubliccompanies,andisapasteditorialandresearchdirectorattheInstituteofEconomicAffairs.

Centohashadadistinguishedacademiccareer.HewaseducatedinAustraliaandtheUnitedKingdom,holdingseveraldegreesinlawandeconomicsandwasa‘CommonwealthScholar.’CentohasheldacademicpostsatuniversitiesandresearchcentresintheUK,NorthAmerica,andAustraliaincludingfull-timeappointmentsatOxfordUniversity,UniversityCollegeLondon,MonashUniversityandasVisitingProfessorattheUniversityofToronto.PublicationsincludeSellingtheState–PrivatisationinBritain(1987)EconomicPrinciplesofLaw(2008),TheEconomicsofLaw(2008)andCartelDamages(2020).

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Summary

●Competitionisadiscoveryprocessbetweenrivalfirmsandcanonlybeexplainediftheinformationisimperfect.

●Competitionisthemosteffectivewaytocoordinateeconomicactivitybydisseminatingtheinformationandknowledgeheldbymarketparticipantsinaworldofgeneralisedignoranceandchange.

●Thefreemarketandevolvedcustomarylawsoperatingwithintheruleoflawcreateaspontaneousordernecessaryforandsubjecttoindividualliberty.

●Hayekwasnotanadvocateoflaissez-faireortheunbridledfreedomofcontract.Hesawthenecessityforstateinterventiontofostercompetition,provideservices,andensureindividualliberty.

●Competitiondoesnotmeanamarketwillhavemanyfirms.Monopolyandoligopolymaybemoreefficient,providecheapergoods,andgreaterinnovation,andwillgenerallybeunderconstantchallenge.

●KeytoHayek’snotionofcompetitionandcompetitionpolicyiscontestabilityorpotentialcompetition.

●Anactivepro-competitionpolicyisconsistentwithliberalismwhichremovesgovernmentbarrierstoentry,reducesthelegalprotectiongiventointellectualproperty(patents,copyright,trademarks)andcorporations,andasupportivetaxandmonetarysystem.

●The‘bigisbad’mantranowinfluencingcompetitionpolicywasrejectedbyHayekasproducing‘essentiallyantiliberalconclusionsdrawnfromliberalpremises.’

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●Hayekproposedamodestcompetitionlawthatwouldprohibitexclusionarypricediscriminationbymonopoliesandrendercontractsinrestraintoftradeunenforceable.Theseprohibitionswouldbeprivatelyenforcedbygivingthoseharmedtherighttosuefor‘multipledamages’supportedbylawyerswhoarepaidcontingencyfees.

●Hayek’sfocusoninformationandknowledgeprocessingshouldmakehisapproachrelevantandadaptabletothetrendsnowexperiencedinthedigitalsector.

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Introduction

HereIrevisitFriedrichHayek’s(1899–1992)approachtocompetitionandantitrust,andtheirrelevancetothedigitaleconomy.Iaskthequestionsofwhetheralgorithms,bigdata,andonlinedigitalplatformssupersedeoralterHayek’sfaithincompetitionasthemostefficientinformationdiscoveryprocessandwhetherhisviewsoncompetitionpolicyandantitrustprovideguidancetothepresenteffortstoreignin‘BigTech.’

Hayekwasaclassicalliberalandacontroversialthinkerinandoutsideliberalcircles.Hisliberalismisbasedonpromotingeconomiclibertywithinalegalframeworkwhichfacilitatesfreecompetitionandlimitsthecoercivepowersofthestate.Hayek’sliberalismstandsoutfromotherliberaltheoriesbecauseofitsevolutionaryfocusandthepositiverolehegavetothegovernmenttosetthelegalrulesfor,andwherenecessarysupplantandcomplement,themarket.Hewasnotanadherentoflaissez-faire,freeenterprise,conservatismnora‘neoliberal’(whateverthislasttermmeans).Hayekofferedamulti-layeredtheorythatdealswithaworldthatiscomplex,changing,andunpredictable.

HayekwrotehisfoundationalworksduringandafterWWIIwhenEuropeemergedfromtheyokeofNationalSocialismtoconfronttheriseofsocialismanditscommunistrealitieswiththeirdestructiveandanti-liberalpropensities.Evenignoringthesegeopoliticalfactors,Hayekwroteduringamechanicalandanalogueagedominatedbymanufacturingindustries.Hecouldnothaveimagined,letalonepredictedthedevelopmentsindigitaltechnologyandcomputingpowerthataretransformingtheeconomyandsociety.

Hayekregardedfreecompetitionasthebestmethodofdiscoveringanddisseminatingtheinformationneededtocoordinatemarketsandtheeconomy.ThepotentialchallengetoHayek’stheoryisevident.Withthemassiveincreaseincomputingpowerandtheaccumulationandprocessing

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1Weyl,G.(2012)Empiricsandpsychology:Eightoftheworld’stopyoungeconomistsdiscusswheretheirfieldisgoing.BigThink,July25

(/articles/

empirics-and-psychology-eight-of-the-worlds-top-young-economists-discuss-where-

their-field-is-going

).

ofmassiveamountsofdataathighspeedsusingsophisticatedalgorithms,thecostsofacquiring,processing,andusinginformationhavedeclinedmassively.SinceHayek’scaseforthesuperiorityofthecompetitivepricesystemwasbasedinpartontheclaimthatitdoesthesetasksmoreefficiently,itfollowsthatanytechnologicaladvancethatlowersthecostsofundertakingthesametaskswillinsomewayreplaceoratleastaugmentthefunctionsofthepricesystem.Somethinkthetimehascome.GlenWeyl,aneconomistatMicrosoftofferssuchaview:

Yet,increasingly,informationtechnologyisleadingindividualstodelegatetheirmost‘private’decisionstoautomatedprocessingsystems.Choicesofmovies,oneofthelastrealmsoftasteonewouldhaveguessedcouldbedelegatedtocentralizedexpertise,areincreasinglyshapedbyserviceslikeNetflix’srecommendersystem.Whiletheseinformationsystemsaremostlynongovernmental,theyaresufficientlycentralizedthatitisincreasinglyhardtoseehowdispersedinformationposesthechallengeitoncedidtocentralizedplanning.

Informationtechnologythusfundamentallychallengesthestandardfoundationsofthemarketeconomy.Formanyyearstocome,economistswillincreasinglyhavetostrugglewiththischallenge.Somewillharnessthepowerofthedataandcomputationalpowerprovidedbyinformationtechnologytoprovideincreasinglypreciseandaccurateprescriptionsforeconomicplanning.Others,whovaluethelibertariantraditionthathasoftenbeenassociatedwitheconomics,willbeforcedtoarticulateotherarguments,perhapsbasedonprivacy,thatarenotsusceptibletoerosionbytheincreasingpowerofcentralizedcomputation.1

Othersprofoundlydisagree.Thecaseforfreecompetitionisnotsimplythetechnicalconstraintsposedbyalgorithmsandcomputingpowerbutisinherentinthedecentralisedandlocalisednatureofknowledgeandinformationinanincreasinglycomplexdigitaleconomy.

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Competitionlawandpolicyarealsoundergoingrevisionandchange,inlargepartbecauseofthegrowthoflargeonlineplatformssuchasMeta,Amazon,Googleandothers.Theirsize,influence,andactionsaretreatedasathreattocompetitioninsomequarters.Thishasledtodebatesaboutthepurpose,structureandenforcementofantitrustlawswhichareseenasantiquated,pricecentric,andfailingtoappreciatethecomplexnatureoftheso-calleddigitaleconomy.

HereHayek’sviewsoncompetition,monopolyandantitrustmeasuresareexplainedandchallenged,andtheirrelevancetothe‘digitaleconomy’iscriticallyassessed.ThediscussionbeginswithanexpositionofHayek’smeaningofcompetitiontogetherwithanassessmentoftheemphasisheplacedontheinformationalefficiencyofprices,dynamiccompetition,andinnovation.Hayeksawmarkets,theeconomy,andsocietyintheirinstitutionalandhistoricalcontext.Partandparcelofthiswaslaw,whichhedefinedascustomarylawsincontrasttodesignedlegislation,thathadevolvedthroughtheinteractionofeconomicforcesandindividualactions,whichhebelievedbetterfacilitatedfreecompetition,liberalismandeconomicgrowth.Themarketwasnotseeninisolation.Hayek’stheoryoflawandlegislationandtheinteractionbetweenthetwoarethenexplained,togetherwithanassessmentofwhytheEnglishcommonlawfailedtoprotectcompetitionasoneliberalconcept–thefreedomtocontract–battledinthecourtswithanother–thefreedomtotrade.Next,Hayek’sdiscussionofmonopolyandanticompetitivebehaviourisexplainedandcriticallyassessed,followedbysometentativestepstodevelopa‘Hayekian’competitionpolicyforthedigitalsector.Throughoutthediscussion,theUSterm‘a(chǎn)ntitrust,’whicharosefromthetrust-bustingoriginsoftheUSShermanActof1890,isusedforaconvenientshorthandforcompetitionlawandthetwotermsareinterchangeable.

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Hayekoncompetition

Hayek’smeaningofcompetitionwasdevelopedinthreearticleswrittenattheendofWorldWarII(1945a,1948):‘Theuseofknowledgeinsociety‘a(chǎn)nd‘Themeaningofcompetition’andhislaterarticle‘Competitionasadiscoveryprocedure’(Hayek1968).TheserepresentaminusculeproportionofHayek’svoluminouswritingswhichafterthe1950sfocusedmainlyonpoliticaltheoryandjurisprudence.

Hayek’s(1948)essay‘Themeaningofcompetition’wasaresponsetotheneoclassicaleconomists’modelofperfectcompetitionwithits‘unrealistic’assumptionsofperfectinformation,rationalbehaviour,instantaneousadjustmentandequilibrium.AsHayek(1948:96)putit:‘“perfect”competitionmeans…theabsenceofallcompetitiveactivities’notingthat‘competitionisasensibleproceduretoemployonlyifwedon’tknowbeforehandwhowilldobest’(Hayek1979:67).

Hayek(1948)madetheobviouspointthatcompetitionisacontestandthereforemeansrivalry.Hethenmadethelessobviousbutmoreimportantpointthatcompetitionwasanefficientmethodofdealingwithimperfectinformationanddecentralisedknowledge.Competitionamongmillionsofindividuals,firms,merchants,andconsumersgeneratedpricesthatencodedtheavailableinformationaboutthevalueofresourcesandmarketcircumstanceswhichenableindividualsandfirmstomakeinformeddecisions.AsHayek(1945a:527)aptlyputit,pricesarea‘systemoftelecommunications’ofthemarket.

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Themeaningofcompetition

ThekeyfeaturesofHayek’sviewofcompetitioncanbesetoutinmoredetail.

Competitionisatheartaninformationproduction,discoveryandtransmissionsystem.Theassumptionofperfectcompetition–thateveryoneknowseverything–ispatentlyunrealistic.AsHayek(1979:68)said‘[C]ompetitionmustbeseenasaprocessinwhichpeopleacquireandcommunicateknowledge.’Morespecifically,Hayek(1948:106)arguedthat:

Competitionisaprocessoftheformationofopinion:byspreadinginformation,itcreatesthatunityandcoherenceoftheeconomicsystemwhichwepresupposewhenwethinkofitasonemarket.Itcreatestheviewspeoplehaveaboutwhatisbestandcheapest,anditisbecauseofitthatpeopleknowatleastasmuchabout16possibilitiesandopportunitiesastheyinfactdo.Itisthusaprocesswhichinvolvesacontinuouschangeinthedataandwhosesignificancemustthereforebecompletelymissedbyanytheorywhichtreatsthesedataasconstant.

ForHayekindividualsandfirmsinthemarketarelargelyignorantofthecircumstancessurroundingthesupplyanddemandofthegoodsandservicestheybuyandsell,andtheforcesresponsibleforchangingprices.Pricesconveythenecessaryinformationaboutthedemandandsupplyconditionsintheeconomyonwhichconsumers,producers,distributors,managersandotherdecision-makerscanrelytoplantheiractions.

ForHayekpricesareinformationallyefficientinthecomparativesenseasthebestavailablemeansforeconomisingonanddisseminatingthedispersedknowledgeandinformationonlocalconditionsknownonlybythoseinthemarket(Bowlesetal2017).Individualspursuetheirinterestsgiventheinformationconveyedbypricesandtheknowledgetheyacquire.HereHayekmadeanimportantdistinctionbetweeninformation,statisticaldata,andknowledge.Knowledgeisthelocalisedunderstandingofcircumstancesbyindividuals.Thiscannotbecapturedinstatisticalaggregatesor‘data.’

Competitionisadynamicprocess,nota‘perfect’outcome.Therearenosteady-statesetofprices,productionlevels,investment,and/orinstitutionsintherealworldthatiscontinuouslychanging.ForHayek(1984:325)‘[A]lleconomicproblemsarecausedbyunforeseenevents.’Thecompetitive

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marketisconstantlyinfluxandadaptingtochangingtechnological,economicandamyriadotherfactors.Thefocusontheshortrunisgrosslymisleadingasitfailstoincorporateunpredictableeffectsthatarisefromdevelopmentsinachangingmarketandtechnologicalprogress.Thus,pricingpoliciesandmarketstructuresthatlookanti-competitivecannonethelessbeessentialforthedynamicofthemarketeconomy.

Entrepreneursplayakeyroleinamarketeconomywhichbyitsnatureisinserialdisequilibrium(Kirzner1997,Thomsen1992,Littlechild1986).Entrepreneurssearchoutpresentandfutureprofitableopportunitieswhethertheyarisefrompresentsupplyshortages,arbitrageopportunities,andthesearchanddevelopmentofnewproductsandmoreefficientproduction.Inthiswaytheygenerateanadjustmenttopriceswhichotherscanrelyonassignalstoguidetheirpurchase,productionandinvestmentdecisions.

Hayek(1945a:526)sawfreecompetitionasgeneratingaspontaneousorder:‘Thewholeactsasonemarket,notbecauseanyofitsmemberssurveythewholefield,butbecausetheirlimitedindividualfieldsofvisionsufficientlyoverlapsothatthroughmanyintermediariestherelevantinformationiscommunicatedtoall.’Insteadofdecentraliseddecisionscausingchaos,freecompetitiongeneratesa‘spontaneousorder’inwhichtheexpectationsofbuyersandsellersarerenderedmutuallycompatible,andwhichadaptsquicklytothecontinuouschangesincircumstancesandnewinformation.Pricesmediateindividuals’expectationsbyencodingrelevantinformationonwhichtheycanact.Thereisnodeterministicequilibriumbutaneconomicprocessconstantlyadaptingtochangeandwherepricesadjusttocosts.Thecompetitiveprocessisseenastakingtimetoreacttochangingfactorssothatitmayneverreachastableoutcome,especiallyduringperiodsofrapidtechnologicalchangeandeconomicgrowth.TheideathatfreecompetitiongivesrisetoaspontaneousorderisadistinguishingfeatureofHayek’sconceptofcompetitionandliberalism.ItisinthetraditionofAdamSmith’s(1776)metaphorical‘invisiblehand’.SubsequentempiricalworkprovidessupportforHayek’sviewofthemarketprocessunderlimitedinformation(Smith1982;Al-Ubaydlietal2022).

Hayekwasawarethatmarketswereimperfect.AsHayek(1984:329)said:‘Theanalysisisnotsubstantiallymodifiedbytheundeniabletruththateventhemostperfectmarketpricesdonottakeintoaccountallthecircumstanceswewouldwish–oftendescribedas“external”conditions.’Hisresponsewasthatthemarkethandledthesesituationsbetterthan

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otherwaysoforganisingeconomicactivitywhenaugmentedbysensiblegovernmentinterventions.AsHayek(1984[1991]:329)said‘[T]ravellersdonotthrowawayamapofastrangecountrybecausetheyfinditisnotwhollyaccurate’.

Hayekdidnottreatthepricingsysteminisolationandseparatefromthelegal,institutionalandmoralfeaturesofsociety.Priceswerenotthesolemeansofimpartinginformationandincentives.Laws,morals,languageandpersonalrelationshipsservedasimilarfunctiontosupportthecompetitiveprocessandliberty.Hesawtheorganisationofproduction–thefirm,corporatestructures,verticalintegration,contracts,etc–andlawsasdeterminedbytechnologicalandeconomicforcesthatworkedtogethertocreatebothspontaneousmarketandlegalorders(discussedfurtherbelow)

Finally,ofparamountimportancetoHayek’sconceptionofcompetitionwasthatitpromotedindividualfreedomandaliberalsociety.AsHayek(1945b:45–6)states:

Liberalism…regardscompetitionassuperiornotonlybecauseinmostcircumstancesitisthemostefficientmethodknownbutbecauseitistheonlymethodwhichdoesnotrequirethecoerciveorarbitraryinterventionofauthority.Itdispenseswiththeneedfor‘conscioussocialcontrol’andgivesindividualsachancetodecidewhethertheprospectsofaparticularoccupationaresufficienttocompensateforthedisadvantagesconnectedwithit.

Complexityeconomics

Hayek’s(1967)attackonperfectcompetitionwasmorethanthecommonplacecriticismsoftheassumptionsofrationality,perfectinformationandstaticequilibrium.Itwasatheartadifferentvisionofeconomicsanditstheorising.Hayekeschewedthesimplification,mathematisation,anddeterministicpredictionsofmainstream‘neoclassical’economics.Itslargelymathematicalmodels,whichhavegrowningreaterprominencesinceHayekwrote,hadstrippedeconomicsofitshistorical,political,institutional,andpsychologicalcontextandrelevance.AsW.B.Arthur(2021:137)putsit:‘Bydefinition,equilibriummakesnoallowanceforthecreationofnewproductsornewarrangements,fortheformationofnewinstitutions,forexploringnewstrategies,foreventstriggeringnovelevents,indeedforhistoryitself.’InHayek’s(1974)NobelMemoriallecture,aptly

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entitled‘ThePretenceofKnowledge’,hewrites,‘thesocialsciences,likemuchofbiologybutunlikemostfieldsofthephysicalsciences,havetodealwithstructuresofessentialcomplexity,i.e.,withstructureswhosecharacteristicpropertiescanbeexhibitedonlybymodelsmadeupofrelativelylargenumbersofvariables’.Inshort,Hayekembracedthecomplexityoftheeconomyandsocietytodevelopabroadpoliticaleconomyandlegaltheoryofthedevelopmentofmarketsandtheirinstitutions.Hayek(1967)wouldhavemuchincommonwithtoday’sdevelopingfieldof‘complexityeconomics’(seeArthur2021).

Bigdataanddigitalsocialism

Hayek’sviewoncompetitionwasfashionedinthe1930sdebateoverthefeasibilityof‘efficient’centralplanningwherehejoinedMises(1934)tochallengetheviewsofAbbaLerner(1934),OscarLangeandFredTaylor(1938)(alsoDickenson1933,Taylor1929)whosawacentrallyplannedeconomy,andthenmarketsocialism,asviableandefficientalternatives.Theseeconomistsarguedthatacentralplannercouldgatherdatasuppliedbystate-runenterprisestoreplicateefficientmarketprices.Hayekshowedconvincinglythatcollectingmarketdatabyfiatwouldnotbefeasible,asmuchconsistedoflocalisedknowledgeonlyknowntoindividualparticipantsinthemarket.Adecentralisedmarketwassimplymoreefficientinproducingandprocessinginformationandknowledgethanacentralplanningorganisation.

Sincethe1930sdebateoverthepossibilityof‘socialistcalculation’,theworldhasradicallychanged.Thecommunicationsandinformationsystemsofthedevelopedeconomieshaveadvancedbeyondeventhemostoptimisticvisionsofevenadecadeago.Thedevelopmentofdataprocessing,computingpower,andthepenetrationofcomputers,smartphones,theinternet,andonlineserviceshavebeenphenomenal.Thesehavereducedtheprocessingcostsandaccessibilityofinformation.Algorithmsandartificialintelligence(AI)holdouttheprospectofcoordinationwithoutthedecentralisedformationofmarketprices.Immenseamountsofpersonalandotherdataarecollectedandusedbyonlineplatformswithpricesoftenplayingnodirectrole.Thesedevelopments,knownas‘bigdata,’raisethespectreofdigital‘markets’drivenbymachine-basedpricingsoftwarewithsomelegalscholarsexcitedlypredicting‘theendofcompetitionasweknowit’(EzrachiandStucke2016:233).Therearestrongreasonstobescepticaloftheseexaggeratedclaims(Veljanovski,2022c,d).Itisdoubtfulthatalgorithmic

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pricingalonewouldhavecausedHayektomodifyhisviewsorcallforantitrustintervention.

Notsurprisingly,somehavebeguntoresuscitatethecaseforaplannedeconomyoratleastsomeformof‘digitalsocialism,’e.g.,WangandLi(2020)andPlaka(2020).AsOscarLange(1967),aprincipalprotagonistinthe1930sdebate,claimednearlythreedecadeslater(andahalf-centuryago):‘Letusputthesimultaneousequationsonanelectroniccomputerandweshallobtainthesolutioninlessthanasecond.Themarketprocess…appearsold-fashioned.’

Hayek(1982[1984]:59)indeedsawtheproblemconfrontingthecentralplannerasinpartoneofthelimitationsofcomputingpower.Hedidsuggestthatthenumberofequations,parametersandalgorithmsneededtocoordinateaneconomywithoutmarketswoulddefythe(then)processingcapacityofcomputers:‘[E]ventoday[in1982]thesolutionof100,000equationsisstillanunachievedambitionoftheconstructorsofcomputers’statingthattheonlywaytosolvetheseequationsisto‘observethepracticalsolutiongivenbythemarket‘a(chǎn)ndthat‘therealproblemistheimpossibilityofconcentratingalltheinformationrequiredinthehandsofasingleagency.’

Thisremainsso,asseenfromthegeneralinabilityofthemostsophisticatedmacroeconomicmodelstocomeclosetoforecastingeconomicgrowth,productionandinflationforthenextyearletaloneinreal-timeorinthefuture.Butevenifcomputershadthetechnicalcapacitytomodelandprocesstheactionsofmillionsofindividuals,firmsandintermediariesinreal-timethiswouldnotsolvethe‘knowledgeproblem.’Hayek’scorethesiswasnotaboutcomputingpowerbutrathertheinaccessibilityofknowledgewhichisdecentralised,fragmented,ever-changingandonlyrevealedwhenacteduponbyindividualswhopossessthatknowledge(Lavoie1985[2015]).Asonecommentatorputit:

Informationisnotknowledge.Takeawaythemarketthatproduceseconomicdata,andgovernmentswouldbeflyingblind.Whattoproduce?Howmuchshouldbeproduced?Whatproductionprocessesshouldbeused?Whoshouldbeemployedinproduction?Eliminatethefreedomofindividualstochoose,andcentralplannerswouldhavenowaytoanswerthesequestionsdespitepossessingmountainsofpastinformationontheirharddrives.

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2Kelly,M.and

Lew

,P.(2018)Whybigdatawon’tsavecentralplannersfromthe

knowledgeproblem–Consumerdatahavetocomefromsomewhere,andthatsomewhereismarkets.FreeEnterpriseEducationFEEBlog,April11.

(/

articles/why-big-data-won-t-save-central-planners-from-the-knowledge-problem

).

Suchknowledgesimplycan’tbegeneratedotherwisethanbythemarketprocess.Allthedataintheworldcan’tchangethat.2

Firmsandprices

Hayek’scaseforfreecompetitionwasoftenexplainedincontrasttocentralplanning,andhencetopresentitasanuncompromisingchoicebetweenthetwopolareconomicsystems.Inlaterlife,heofferedamorenuancedanalysiswhichbetterdrewouthiscentralclaimthatmarketsandinstitutionsevolvetoeconomiseoninformationcostsandfostereconomicgrowth.

ItfollowsfromHayek’sfocusontheinformationprocessingcosts,thatanytechnologicalinnovationthatchangesthecostsandbenefitsofassembling,processinganddisseminatingdatawillinfluencethewayproductionisorganised.Theywillaffecttheboundarybetweenthemarketandnon-market,andthelawsandinstitutionsthatarisespontaneouslytosupportorsupplantthemarket

ThiswastheNobelwinninginsightmadebyRonaldCoase(1937,1992)whichreceivesnorecognitionfromHayek.Coase(1937:388)askedthequestion–Ifmarketsarecostlesswhydofirmsexist?Hayek’sanswerwasthattheyev