Certainly one function of financial markets and prices is to convey information, but that's not "solely" their purpose. They also provide a mechanism for resource allocation, risk management, wealth generation and collective action, among other things.
Your point about centrally planned economies, while historically corroborated in cases like the Soviet Union, might be an overgeneralization. The effectiveness of an economic system depends on numerous factors, including its degree of flexibility, the effectiveness of its institutions, and its ability to adapt to changing circumstances.
Not all centrally planned economies are doomed to failure; some have been quite successful, notably in East Asia where countries like China and Vietnam have managed a mixed economy with elements of central planning and market mechanisms.
Many capitalist corporations are centrally planned economies larger than many nation states. While everything fails eventually, these centrally planned organizations can last multiple human generations, and can be more durable than many markets and market-oriented economies.
The assertion about the feudal Middle Ages also needs some nuance. The Middle Ages, and the feudal system in particular, had complexities beyond simple information and incentive problems. Numerous sociopolitical factors were at play, including a rigid class structure, the influence of the Church, and the lack of certain technological innovations. Ascribing the issues of a historical period mainly to its economic structure oversimplifies the multitude of factors that influenced societal development.
Moreover, while financial markets do help in transmitting information from consumers to producers, they are not infallible. They can, and often do, suffer from issues like information asymmetry, where one party in a transaction has more or better information than the other. This can lead to problems like adverse selection and moral hazard. Financial markets can also be subject to speculation, which can distort the "signal" provided by prices.
The focus on profit as the sole incentive in the market might be somewhat limited. People's decisions to buy, sell, and produce are influenced by a host of factors beyond profit, including societal and environmental concerns, personal values, and ethical considerations. Financial systems, to be truly effective, need to take into account this wide range of motivations.
Resource allocation, risk management, and collective action are all information transmission problems. It's arguable whether wealth is being generated by the people who actually do the work or the people who decide what work is being done, but that's the subject of this thread.
China isn't really centrally planned. They call themselves that so that the government and previous communist ideology can avoid losing face, but anyone who's visited there or done business with Chinese companies will say that it's intensely capitalistic, just with the potential for random state interference at a whim. I suspect the same is true for Vietnam, but know less about the country.
Information asymmetry issues are exactly why certain types of financial transactions are illegal - that's why we have things like SEC disclosure and insider trading laws.
Certainly one function of financial markets and prices is to convey information, but that's not "solely" their purpose. They also provide a mechanism for resource allocation, risk management, wealth generation and collective action, among other things.
Your point about centrally planned economies, while historically corroborated in cases like the Soviet Union, might be an overgeneralization. The effectiveness of an economic system depends on numerous factors, including its degree of flexibility, the effectiveness of its institutions, and its ability to adapt to changing circumstances.
Not all centrally planned economies are doomed to failure; some have been quite successful, notably in East Asia where countries like China and Vietnam have managed a mixed economy with elements of central planning and market mechanisms.
Many capitalist corporations are centrally planned economies larger than many nation states. While everything fails eventually, these centrally planned organizations can last multiple human generations, and can be more durable than many markets and market-oriented economies.
The assertion about the feudal Middle Ages also needs some nuance. The Middle Ages, and the feudal system in particular, had complexities beyond simple information and incentive problems. Numerous sociopolitical factors were at play, including a rigid class structure, the influence of the Church, and the lack of certain technological innovations. Ascribing the issues of a historical period mainly to its economic structure oversimplifies the multitude of factors that influenced societal development.
Moreover, while financial markets do help in transmitting information from consumers to producers, they are not infallible. They can, and often do, suffer from issues like information asymmetry, where one party in a transaction has more or better information than the other. This can lead to problems like adverse selection and moral hazard. Financial markets can also be subject to speculation, which can distort the "signal" provided by prices.
The focus on profit as the sole incentive in the market might be somewhat limited. People's decisions to buy, sell, and produce are influenced by a host of factors beyond profit, including societal and environmental concerns, personal values, and ethical considerations. Financial systems, to be truly effective, need to take into account this wide range of motivations.