Chapter 4. INFORMATION, THE INTERNET, -COMMERCE, AND FINANCIAL MARKETS. 1. Information and Prices. Frederick Hayek writes:
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About the efficiency with which markets process information“to secure the best use of resources known to any member of society, for ends whose relative importance only these individuals know.”
Of the price system: ”The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly.”
The Internet requires billions of dollars of investments in switching technology, mainframe computers, Web browsers, satellites, fiber-optic cables, large-capacity exchange points, routers and capacity circuits.
The federal government funded the early stages but now it is privately owned and operated.
The cost of the Internet must either be paid by someone or disappear.
Rarely is anyone forced to use the service of an intermediary: therefore intermediaries must provide information at a lower cost than if the individuals involved had to gather the information themselves.
Intermediaries certify the quality of complicated goods, such as:
a reputable used-car dealer versus a fly-by-night car dealer;
major department stores that allows you to return defected purchased products; and
manufacturers with brand name products that certify quality.
Financial markets, in which stocks and bonds and other financial instruments are traded, provide information about the future.
Thus, buyers of stocks and bonds are speculators; even if they are small individual buyers earning modest incomes.
Speculation in financial markets takes place on the major stock and bond exchanges, where current owners of stocks and bonds consider whether to sell, and at what price, and potential buyers consider whether to buy, and at what price.