July 19, 2005 at 12:10am
Sunstein at Lessig Blog:
Cass Sunstein is guest-blogging at
, and is asking all sorts of interesting questions about blogging, wikis, and Friedrich Hayek. Check it out.
Charles Iragui (
"Two qualifications. 1) Wikipedia nonetheless works, at least for the most part. 2) The price system doesn't always work, in the sense that bad information, sometimes spreading like wildfire, can produce inflated and deflated prices. (So Hayek was too optimistic, as behavioral economists have shown.)"
He slyly wants to discredit libertarian thought. But:
1) "for the most part" is the same as "doesn't always work"
2) Unlike Wikipedia, where better alternatives are available, the market (eg stock market) EXISTS because it can't be beaten. Wikipedia is simply convenient; the price mechanism is irreplacable (eg death of communism).
That markets make mistakes is obvious. The real question is whether they can be improved on. Or, in a legal context, is there an available better methodology to calculate value than the market price? Van Gorkom certainly put back this simple proposition.
Wikipedia itself is only reliable because of market competition and the pressure this exerts on it to retain customers.
I find your criticism of Sunstein a bit bizzare. Your comment (especially point 1) seems to be suggesting that the point of Sunstein's post is that Wikipedia is somehow better than "the market". But, to the contrary, Sunstein explicitly states: "The upshot is that Wikipedia is different from the price system; it aggregates dispersed information in a distinctive and
less reliable way.
Where has Sunstein gone wrong here?
Charles Iragui (
Fair enough: I've been selective in quoting Sunstein. Still, he tries to put Wikipedia and market pricing in a kind of competition (my point) which I would maintain is basically false. How is Wikipedia "less reliable" than market pricing?
Market pricing may well not perfectly reflect value (debatable) but it is not essentially, like Wikipedia, a way of assembling information. The heart of market pricing theory is to say that if the answer (a price) is wrong, we also can't know that it's wrong. This is a difference in kind from Wikipedia.
Speculators can prove the market "wrong" but this is itself the market...
maybe you should be having this conversation over at Lessig's blog, where Sunstein is likely to see your comments, and where he has the ability to respond to any concerns.