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Knowledge, Belief and the Economic System

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  • Kenneth J. Arrow

Abstract

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.

Suggested Citation

  • Kenneth J. Arrow, 2013. "Knowledge, Belief and the Economic System," WIFO Monatsberichte (monthly reports), WIFO, vol. 86(12), pages 943-951, December.
  • Handle: RePEc:wfo:monber:y:2013:i:12:p:943-951
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    Cited by:

    1. Karl Aiginger, 2014. "Industrial Policy for a Sustainable Growth Path. WWWforEurope Policy Paper No. 13," WIFO Studies, WIFO, number 47261, February.
    2. Annie Tubadji & Toby Denney & Don J. Webber, 2021. "Cultural relativity in consumers' rates of adoption of artificial intelligence," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1234-1251, July.
    3. Karl Aiginger, 2016. "Political Rebound Effects as Stumbling Blocks for Socio-ecological Transition," WIFO Working Papers 519, WIFO.
    4. Karl Aiginger, 2014. "Industrial Policy for a Sustainable Growth Path," WIFO Working Papers 469, WIFO.

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    Arrow Nobelpreisträger;

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