Use of knowledge

On certain familiar assumptions the answer is simple enough. Of course, if detailed economic plans could be laid down for fairly long periods in advance and then closely adhered to, so that no further economic decisions of importance would be required, the task of drawing up a comprehensive plan governing all economic activity would be much less formidable.

A recent statement by Professor Joseph Schumpeter in his Capitalism, Socialism, and Democracy provides a clear illustration of one of the methodological differences which I have in mind. But this, too, is not correct.

But, as I now see these problems, this is no accident.

As Alfred Whitehead has said in another connection, "It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking what we are doing. This, however, is emphatically not the economic problem which society faces.

The people who like to deride any suggestion that this may be so usually distort the argument by insinuating that it asserts that by some miracle just that sort of system has spontaneously grown up which is best suited to modern civilization.

The statistics which such a central authority would have to use would have to be arrived at precisely by abstracting from minor differences between the things, by lumping together, as resources of one kind, items which differ as regards location, quality, and other particulars, in a way which may be very significant for the specific decision.

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.

Of course, these adjustments are probably never "perfect" in the sense in which the economist conceives of them in his equilibrium analysis. We need to remember only how much we have to learn in any occupation after we have completed our theoretical training, how big a part of our working life we spend learning particular jobs, and how valuable an asset in all walks of life is knowledge of people, of local conditions, and of special circumstances.

The number of elements with which we have to deal is not large enough for such accidental forces to produce stability. Had he not done so, he might still have developed some other, altogether different, type of civilization, something like the "state" of the termite ants, or some other altogether unimaginable type.

Is it true that, once a plant has been built, the rest is all more or less mechanical, determined by the character of the plant, and leaving little to be changed in adapting to the ever-changing circumstances of the moment?

This misconception in turn is due to an erroneous transfer to social phenomena of the habits of thought we have developed in dealing with the phenomena of nature. When we find Leon Trotsky arguing that "economic accounting is unthinkable without market relations"; when Professor Oscar Lange promises Professor von Mises a statue in the marble halls of the future Central Planning Board; and when Professor Abba P.

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To gain an advantage from better knowledge of facilities of communication or transport is sometimes regarded as almost dishonest, although it is quite as important that society make use of the best opportunities in this respect as in using the latest scientific discoveries. Though the problem with which I want primarily to deal in this paper is the problem of a rational economic organization, I shall in its course be led again and again to point to its close connections with certain methodological questions.

In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. The halfway house between the two, about which many people talk but which few like when they see it, is the delegation of planning to organized industries, or, in other words, monopoly.

The Use of Knowledge in Society

Planning in the specific sense in which the term is used in contemporary controversy necessarily means central planning—direction of the whole economic system according to one unified plan.

The precise opposite is the case. Only to a mind to which all these facts were simultaneously known would the answer necessarily follow from the facts given to it. How much knowledge does he need to do so successfully?

I have deliberately used the word "marvel" to shock the reader out of the complacency with which we often take the working of Use of knowledge mechanism for granted. The belief that changes, or at least day-to-day adjustments, have become less important in modern times implies the contention that economic problems also have become less important.

What I wish to point out is that, even assuming that this problem can be readily solved, it is only a small part of the wider problem. There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger economic system.

But those who clamor for "conscious direction"—and who cannot believe that anything which has evolved without design and even without our understanding it should solve problems which we should not be able to solve consciously—should remember this:Hayek’s “The Use of Knowledge in Society” – A Summary I have been thinking a lot about the misunderstandings of Hayek’s “ The Use of Knowledge in Society ” essay.

Below I offer what I think is a quick summary of his argument that stresses both the importance of private property and the price system as jointly necessary for economic coordiation. The Online Library of Liberty A Project Of Liberty Fund, Inc.

Hayek’s “The Use of Knowledge in Society” – A Summary

Friedrich August von Hayek, “The Use of Knowledge in Society” [] The Online Library Of Liberty Collection This E-Book (PDF format) is published by Liberty Fund, Inc., a private, non-profit.

Hayek: The Use of Knowledge in Society - University of Chicago. Learn how to use Knowledge using many example sentences. Learn collocations of Knowledge with free vocabulary lessons. prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use.

Please contact the publisher regarding any further use of this work. If you want to learn as much as possible about economics from just one article, read Friedrich A. Hayek’s “The Use of Knowledge in Society,” published in the September issue of The American Economic Review.

First, no other article explains the economic problem as clearly.

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Use of knowledge
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