At the Berger conference a question arose about the communicative properties of the price system. Dan Klein, both in his comments on Virgil Storr's paper, and in his own paper, asked the participants to unpack the communication metaphor in the analysis in price theory and the market system.
David Prychitko raised a similar point to Don Lavoie when we were graduate students and Don published a paper on the discovery, use, and conveyance of inarticulate knowledge through the price system. Dave pushed and pushed on this point, and I don't think he ever received an answer from Don (or me, or Steve) that satisfied. Yet in our textbook, The Economic Way of Thinking, we make the point about the market system as producing coordination of plans through the communicative properties of prices and profit/loss. When I summarize the point to my students I say: Property, Prices, and Profit/loss (3 P's) give us the I's of incentives, information, innovation. Without the 3 P's we get distortions to (often downright perversions of) the 3 I's that drive wealth creation and economic progress.
In Tyler and Alex's new textbook they argue that prices are a signal wrapped in an incentive. The precise meaning of the signal and the cost-benefit structure for interpretation of that meaning by economic actors, I would argue, is context dependent; an institutionally contingent by-product of specific time and place. That prices are in fact a signal wrapped in an incentive, however, is not a statement subject to historical-institutional contingency.
What is it that prices actually communicate to economic actors?