Economics Dictionary of ArgumentsHome
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| Coordination: Coordination generally refers to the process of organizing people or groups so that they work together effectively and efficiently to achieve a common goal or task. Coordination in economics refers to the organization of different elements of a production system or market to achieve efficient outcomes. It involves aligning the actions of consumers, businesses, and governments, to ensure optimal use of resources and meet collective goals, often facilitated by price signals, contracts, and other market mechanisms._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Friedrich A. von Hayek on Coordination - Dictionary of Arguments
Parisi I 276 Coordination/Hayek/Austrian School: The fundamental meaning of coordination is simply the mutual compatibility of plans. This requires two things. First, each individual must base his plans on the correct expectation of what other individuals intend to do. Second, all individuals base their expectations on the same set of external events (Rizzo, 1990(1), p. 17). >Planning. In this basic meaning, the existing dissemination of knowledge has led to a state of affairs where each party is able to implement her plans. All offers to buy are accepted by sellers. All offers to sell are accepted by buyers. This is to be distinguished from the process of coordination whereby, through trial and error learning and entrepreneurial discovery, agents are able to make their plans compatible or more nearly compatible with those of others. >Compatibility. Coordination is analytically different from, though not incompatible with, the concept of optimality. Pareto optimality implies that individuals exhaust all the potential gains from trade. This is a special case of coordination.9 However, there can be coordination, or the execution of mutually compatible plans, which do not exhaust all potential gains from trade, when “ … these plans are mutually compatible and that there is consequently a conceivable set of external events, which will allow all people to carry out their plans and not cause any disappointments” (Hayek, 1937(2), p. 39). A state of mutually compatible plans “represents in one sense a position of equilibrium, it is however clear that it is not an equilibrium in the special sense in which equilibrium is regarded as a sort of optimum position” (Hayek, 1937(2), p. 51). >Pareto Optimum. Everyone within a system may have mutually compatible plans and yet there may be better trading opportunities out there so that at least some parties can improve their positions by alternative trades. Thus if there is a sense in which the mutual compatibility of plans is an optimum, it is only a local optimum, that is, between the direct parties to an exchange. Parisi I 281 Coordination/Hayek: Hayek argued that common law is an order where the legal rules facilitate the “order of actions” for individuals in a society. The “order of actions” is essentially the coordination of plans of economic actors (Hayek, 1973(3), p. 113). The emphasis is not on the “order of the law” but on the “order of actions” in society constrained by such laws. Therefore, the question is not whether a particular law is “socially optimal” and leads to wealth maximization. The question is not even whether the various laws form a socially optimal system. The important question is whether the system of legal rules facilitates greater coordination in society by enhancing expectational certainty. When the law succeeds in enhancing the order of actions, it is “praxeologically coherent.” On the other hand, other approaches to legal analysis emphasize the “logical coherence” of the law. Prominent among these is the idea that common law areas (property, contract, and tort) can be understood in a unified way as the expression of social wealth maximization. Posner made a bold claim in the first edition of the Economic Analysis of Law (1973)(4), that common law rules are “efficient,” that is, wealth-maximizing. >Efficiency/Posner. 1. Rizzo, M. J. (1990). “Hayek’s Four Tendencies Toward Equilibrium.” Cultural Dynamics 3(1): 12–31. 2. Hayek, F. A. (1937). “Economics and Knowledge.” Economica 4(13): 33–54. 3. Hayek, F. A. (1973). Law Legislation and Liberty, Vol. I, Rules and Order. Chicago: University of Chicago Press. 4. Posner, Richard (1972). Economic Analysis of Law. Boston, MA: Little, Brown. Rajagopalan, Shruti and Mario J. Rizzo “Austrian Perspectives on Law and Economics.” In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Hayek I Friedrich A. Hayek The Road to Serfdom: Text and Documents--The Definitive Edition (The Collected Works of F. A. Hayek, Volume 2) Chicago 2007 Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
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> Counter arguments against Hayek
> Counter arguments in relation to Coordination
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