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Kenneth J. Arrow
Knowledge, Belief and the Economic System
WIFO-Monatsberichte, 2013, 86(12), pp.943-951
Prices, according to one of the fundamental economic assumptions, contain all the information needed by market participants to make decisions. But this hypothesis does not withstand a reality check – a lot of very necessary information is not passed on in the price system. The prices of stocks immediately before the crash of a stock market bubble say very little about their true worth. For a perfect market system mar-kets for all products and for all points in time are needed. These markets do not always exist and some-times cannot exist – for example markets for products not yet in existence.
Research group:Macroeconomics and European Economic Policy

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