Giving Consumers What They Want?

Abstract

One of the best elements of market economies is the way in which producers quickly respond to consumer demand. Preferences that would be difficult to catalogue are efficiently met by companies that make consumer research and product development the center of their business. At the heart of this success is the ability of the economic system to make efficient use of a constant flow of information from the marketplace. Consumers share information about their preferences with every purchase, and firms share information about resource availability and cost through pricing decisions. Hayek famously argued that disaggregated decision-making was the only possible way to efficiently allocate goods in a complex society. At the heart of his argument is the observation that information can be processed by a social order without any one mind controlling or knowing what is happening. It is the responsiveness of that system to consumer demands that constitutes its greatest success.