The Use of Knowledge in Society

From Wikipedia, the free encyclopedia

The Use of Knowledge in Society is a scholarly article written by renowned Austrian-school economist Friedrich Hayek, first published in the September 1945 issue of The American Economic Review.[1] Written (along with The Meaning of Competition) as a rebuttal to fellow economist Oskar R. Lange and his endorsement of a planned economy, it was included among the twelve essays in Hayek's 1948 compendium Individualism and Economic Order.[2] The famed article argues against the establishment of a Central Pricing Board (advocated by Lange) by highlighting the assiduously dynamic and organic nature of market price-fluctuations, and the benefits of this phenomenon.[3] He asserts that a centrally planned market could never match the efficiency of the open market because of the relatively egalitarian distribution of information (i.e., each individual knows only a small fraction of all which is known collectively). A decentralized economy complements the decentralized nature of information.[4]

The essay reflects Friedrich Hayek's belief that the sharing and synchronization of information which arises when diverse individuals interact for their own varying goals results serendipitously in order and universal benefit;[5] in other words, that cooperation is an inevitable outcome of social interaction because of the benefits of distributed knowledge.[6] Also discussed within are the concepts of 'individual equilibrium' and of Hayek's notion of the divide between information which is useful and practicable versus that which is purely scientific or theoretical (which he views contemptuously).[3]

The Use of Knowledge in Society met with a poor reception from fellow economists because of the contemporary political climate and its perception as being overly trivial in its critiques. Partly as a result of this disappointing outcome, Hayek had by the end of the 1940s ceased to target his literature at the established economic community. Twenty years later these ideas had become more tolerable;[3] today several are accepted as basic economic tenets. Specifically, the essay's central argument that market price fluctuations promote efficient distribution of resources is embraced by most modern economists.[7]

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[edit] References

  1. ^ Book Review: The Use of Knowledge in Society by Friedrich A. Hayek | The Foundation for Economic Education: The Freeman, Ideas on Liberty
  2. ^ Hayek, F. A. (1996). Individualism and Economic Order. Chicago: University of Chicago Press. ISBN 0226320936. 
  3. ^ a b c Bruce J. Caldwell (editor) (1990). Carl Menger and this legacy in economics. Duke University Press, 392-95. ISBN 0822310872. 
  4. ^ The use of knowledge in society (abstract). Ewing Marion Kauffman Foundation. Retrieved on 2007-10-05.
  5. ^ Mangu-Ward, Katherine (June 2007). Wikipedia and Beyond. Reason Online. Retrieved on 2007-10-05.
  6. ^ Clark, Dick (19 September 2007). Wikipedia: What Is It Good For?. Ludwig von Mises Institute. Retrieved on 2007-10-05.
  7. ^ Mitra, Barun S. (1999). Hayek's Road to Freedom. Liberty Institute. 

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