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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (36358)	7/27/2005 3:47:54 AM
From: gpowell	Read Replies (1) \| Respond to of 306849

…but times change and it seems several make assumptions about what the CPI tracks that is not necessarily true. Even perhaps key decision makers who don't have a good grounding in economics. Hedonics may have more closely represented the real picture than they do today, the moving target is possible varying to a much wider degree than the past. Some of the estimations or projections may be very wrong, unfortunately it would only take a small amount of certain estimates to be wrong to really skew things with even great economists getting most of the other number right. That’s right. The knowledge problem faced by decision makers is insurmountable. I think Hayek said it best: “What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses. This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the "data" from which the economic calculus starts are never for the whole society "given" to a single mind which could work out the implications and can never be so given. The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality. “ Fredrich Von Hayek, Use of Knowledge in Society, AER, 1945