Chapter 18 Chapter 2 Economics and Knowledge-7

seven In general formulations of equilibrium analysis, it is often expressed as though these questions of how the equilibrium occurs have been resolved.But if we look more closely, we soon see that these explicit statements are no more than obvious evidence of what has already been assumed.To this end, the generally adopted means is the assumption of a perfect market, in which every event is known by every member at the same time.What must be remembered here is that the perfect market that needs to satisfy the assumptions of equilibrium analysis should not be limited to a particular market for all individual goods, but the entire economic system must be assumed to be a perfect market; thing.Thus, the assumption of a perfect market means that, if we do not assume that all members of society are absolutely omniscient, at least we regard them as automatically knowing everything about their own decisions.It seems that our "monster in the house", the "Economic Man", who has been driven away by prayers and taboos, has slipped back through the back door in the guise of a similarly omnipotent individual.

If people knew everything, they would be in equilibrium, which is quite true, because that's how we define equilibrium.In this sense, the assumption of a perfect market is just another way of saying that an equilibrium exists, but it does not make it clearer when and how such an equilibrium will arise.Obviously, if we want to assert that under certain conditions people will approach equilibrium, then we must show by what means these people will acquire the necessary knowledge.Of course, any assumptions about the actual acquisition of knowledge in the process will also have a hypothetical character.However, this does not mean that all such assumptions are equally plausible.Here we must discuss assumptions about causation, so that the assumptions we make must not only be seen as possible (which is not to say, of course, that we want people to know everything) but also as very may be true; we must be able to show that these assumptions are true in special cases, at least in principle.

The key here is that these obviously ancillary premises or assumptions (exactly what one learns from experience. about how we acquire knowledge).These premises or assumptions form the empirical content of our accounts of what happens in the real world.They are often false and far from complete, as are the descriptions of the types of markets to which our discussion is concerned.But this is only one, albeit perhaps the most important, aspect of the more general problem of how knowledge is acquired and transmitted.An important point that economists often seem to fail to realize is that the nature of these assumptions is in many respects very different from the more general assumptions from which the pure logic of choice starts.In my opinion, there are two main differences:

First, the assumption that pure choice logic takes as its starting point is that what we know is common to human thought.They can be seen as axioms that define or delimit a domain within which we are able to understand or mentally reconstruct the thought processes of other people.They are therefore broadly applicable to our field of interest—although, here, indeed, the boundaries of the field are certainly a matter of experience.They concern types of human behavior (which we generally call "rational" or even just "conscious" to distinguish them from "instinctive" activities) rather than engaging in such Special conditions of the event.But the assumptions or hypotheses that we must introduce when we explain social processes are questions about the relation of someone's mind to the outside world, and to what extent and how his knowledge is consistent with external facts.These assumptions are therefore necessarily required in judgments about causality, about how experience creates knowledge.

Second, in the realm of pure choice logic, although our analysis can be exhaustive, that is, although we can here develop a method that can explain all conceivable situations, the auxiliary assumption is still There has to be selectivity, that is, we have to choose from an indeterminate variety of possible situations those ideal types that we consider for some reason to be particularly relevant to real-world circumstances.Of course, we can also gradually form an independent science, whose topics are limited to the scope of the definition of "perfect market", or mainly discuss some similarly limited objects, just as the logic of choice is only applicable to some People do like people who allocate their limited means among various ends.With this definition of the field, our proposition will again be an a priori truth, but since we cannot justify the assumption that the real-world situation is similar to our conceived situation, we will not be able to prove it either. is reasonable.