Even Ricardo's most famous accomplishment, the law of comparative advantage in foreign trade, is incomplete, though not wrong. - Kenneth Arrow

There are many unknowns in the creation and use of knowledge as a factor of production. Still, two main lessons stand out:
* Every country or firm must have education and training in technology and science, even if the research is not on par with that being conducted elsewhere. Knowledge cannot be absorbed unless some knowledge is already possessed.
* Countries and firms must be open to new ideas, have multiple sources of new ideas, and see that ideas are diffused. This point strongly argues for freedom of entry, even when it seems to forgo economies of scale.

If the state of information (the set of signals received) is given and constant, then optimal choice is a problem of decision making under a given uncertainty, a situation that has been the subject of considerable analysis in the last thirty years. The problems of the economics of information proper arise when the probability distribution of states of the world is a variable. In the language adopted here, the signals received can vary. The existence of signals creates two important possibilities for the improvement of decision making. The first is taking advantage of the existence of signals. If the individual knows that a signal will be received before the decision has to be made, his optimal choice should be a function of the signal. We can think, alternatively but equivalently, of making the decision after the receipt of the signal and basing it on the probability distributions of consequences conditional on the signal, or of making the decision in advance for all possible values of the signal.

The only rational defense of what may be termed a liberal position, or perhaps more precisely a principle of limited social preference, is that it is itself a value judgment. In other words, an individual may have as part of his value structure precisely that he does not think it proper to influence consequences outside a limited realm. This is a perfectly coherent position, but I find it difficult to insist that this judgment is of such overriding importance that it outweighs all other considerations. Personally, my values are such that I am willing to go very far indeed in the direction of respect for the means by which others choose to derive their satisfactions.