Prices are the outcome of a decentralised discovery process

• Quote from Bitcoin is Venice

  • The power of prices is the process of dynamic discovery that underpins their emergence, not the fleeting consensus of a specific moment in time. The price is never right, but prices are as right as can be hoped for at that moment. Attempts to coerce prices without the ability to change the reality they communicate are, therefore, bound to run into trouble.

• Being willing to pay the price acts as a proof of the importance something has to a person. The only way to prove what you value is by your actions.
  • The decentralised discovery process is discovering what people value taking into account how reality works. id:: 653be362-5b66-4096-82d2-60a3859c6241
    • If you just take into account what people want you have “everybody according to their needs”.
    • If you take into account that fulfilling needs is only possible if people are creative and put in the work. To incentivise people to put in the work, you need to reward them for fulfilling needs of others.
    • Because most things have marginal costs you end up with the problem of how to distribute the things that have been produced. Combining those two, you end up with “everybody according to their ability”.
• Phrak phrased it

  • Markets are computers; they compute prices, valuations, and the allocation of resources in our society
• From: https://blog.headlandstech.com/2024/05/01/opinion-rationalizing-latency-competition-in-high-frequency-trading/?ref=thediff.co

  • In the context of capitalism, HFT serves as a low-level optimization layer in the global price discovery process. Capitalism can be viewed as a distributed and decentralized system for resource allocation, in contrast to centrally planned economies. Solving the Nash Equilibrium of an economy is NP-complete (Christos Papadimitriou, 2008). Central planning often leads to accumulated pricing errors and societal collapse, as seen in the Soviet Union and Chile. Committees of experts struggle to determine the costs and supply chains for even basic goods (Leonard Read, 1958). Price discovery is a non-trivial problem.

• A financial system is a production/distribution mechanism (as in, it is the central piece, not as in there is a central place that makes).
• From yonson

  • The “signal” of profit is derived from the input and output prices. Prices are signals across space. They are decentralized spontaneous order, they do not depend on a central authority. When microchip demand increases in Taiwan, the rising prices signal to manufacturers in South Korea, Japan, and the United States to increase production or redirect shipments to meet demand. If steel becomes more valuable for constructing solar panels than for making cars, its price rises, causing car manufacturers to economize on steel usage while solar panel makers expand production, all without any central coordination. Prices are the interface between hubs of specialized knowledge and they allow resources to be efficiently allocated across space.