The growth in interest in the economics of information has led to a greater stress on the informational role of prices. Instead of the conventional neo-classical view of prices as straightforward indicators of scarcity, information economics emphasizes that prices can be sources from which agents infer information and means by which they communicate information.Prices and Knowledge analyses different theoretical approaches to the role of prices in situations of imperfect information. Whilst the 'informational efficiency' approach of Grossman and Stiglitz and the 'bounded rationality' theory of Simon is shown to be useful, neither goes far enough in considering situations of disequilibrium.This book, in contrast, adopts a market-process perspective, viewing market activity as a continuing process of change rather than as a fully adjusted state. The informational role of prices is paramount in this context because agents are acting in conditions of uncertainty or ignorance. Disequilibrium prices can, in fact, turn out to be sources of profit opportunities that stimulate entrepreneurial discovery and the exploitation of previously unnoticed opportunities.