526 THE AMERICAN ECONOMIC REVIEW SEPTEMBER Fundamentally,in a system where the knowledge of the relevant facts is dispersed among many people,prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.It is worth contemplating for a moment a very simple and commonplace instance of the action of the price system to see what precisely it accomplishes.Assume that somewhere in the world a new opportunity for the use of some raw material,say tin,has arisen,or that one of the sources of supply of tin has been eliminated.It does not matter for our purpose-and it is very significant that it does not matter- which of these two causes has made tin more scarce.All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere.and that in consequence they must economize tin.There is no need for the great majority of them even to know where the more urgent need has arisen,or in favor of what other needs they ought to husband the supply.If only some of them know directly of the new demand,and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources,the effect will rapidly spread throughout the whole economic system and influence not only all the uses of tin, but also those of its substitutes and the substitutes of these substitutes. the supply of all the things made of tin,and their substitutes,and so on;and all this without the great majority of those instrumental in bringing about these substitutions knowing anything at all about the original cause of these changes.The whole acts as one market,not because any of its members survey the whole field,but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. The mere fact that there is one price for any commodity-or rather that local prices are connected in a manner determined by the cost of transport,etc.-brings about the solution which(it is just conceptually possible)might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process. VI We must look at the price system as such a mechanism for com- municating information if we want to understand its real function-a function which,of course,it fulfills less perfectly as prices grow more rigid.(Even when quoted prices have become quite rigid,however,the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract. The most significant fact about this system is the economy of knowledge