The knowledge problem, which Hayek explained most famously in his classic essay “The Use of Knowledge in Society” and his collection of essays Individualism and Economic Order — which includes “The Use of Knowledge in Society” — is at the heart of Hayek’s work from beginning to end. How, Hayek asks, do people possessing fragmentary knowledge dispersed over some 7.5 billion minds coordinate and reconcile their disparate and often-conflicting plans?
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Published September 1945
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Erraticus Must Reads 27 books — 4 voters
Best Libertarian Books 298 books — 245 voters
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Jun 05, 2014Laura Méndez added it
Summary:
'Each individual only knows a small fraction of what is known collectively – and that as a result, decisions are best made by those with local knowledge rather than by a central authority'
'Each individual only knows a small fraction of what is known collectively – and that as a result, decisions are best made by those with local knowledge rather than by a central authority'
Jul 30, 2018Alex rated it really liked it
Not as good an indictment of socialism as Economic Calculation in the Socialist Commonwealth, but still a valuable read. Hayek describes the knowledge-deficit of actors in a socialist economy quite well, and also offers valuable thoughts on the nature of the market. The market, he says, is spontaneous, decentralized, and it works for precisely these reasons. While I have moved on from some of Hayeks theories (I share Hoppes judgement that the knowledge-argument proves too much, at least when it'...more
Jul 09, 2013Sean Rosenthal rated it it was amazing
'The price system is just one of those formations which man has learned to use . . . after he had stumbled upon it without understanding it. Through it not only a division of labor but also a coördinated utilization of resources based on an equally divided knowledge has become possible. 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...more
No one knows everything, this begs the question: WHO then gets to organize our complex social systems, specifically our economic system?
A brief explanation on individual actions, unknowingly shared knowledge, prices and economy.
The whole world is connected and society can advance because of every single decision we make through our complete understanding of the world as a group - selfish individuals looking out for themselves.
Awesome!
A brief explanation on individual actions, unknowingly shared knowledge, prices and economy.
The whole world is connected and society can advance because of every single decision we make through our complete understanding of the world as a group - selfish individuals looking out for themselves.
Awesome!
Feb 08, 2019Richard Kemp rated it really liked it
Nice short read, minimal jargon. I feel very sorry for Professor Schumpeter to be badmouthed in such an enduringly important publication.
Highlights:
'The comparative stability of the aggregates cannot, however, be accounted for—as the statisticians occasionally seem to be inclined to do—by the 'law of large numbers' or the mutual compensation of random changes. The number of elements with which we have to deal is not large enough for such accidental forces to produce stability. The continuous flo...more
Highlights:
'The comparative stability of the aggregates cannot, however, be accounted for—as the statisticians occasionally seem to be inclined to do—by the 'law of large numbers' or the mutual compensation of random changes. The number of elements with which we have to deal is not large enough for such accidental forces to produce stability. The continuous flo...more
Jun 17, 2018Igor Stojanov rated it really liked it
Hayak simply advocates the use of Laissez Faire capitalism as a most efficient way to organize knowledge for the benefit of most of humanity. No single mind, entity, dictator, no matter how smart he is can make the best decision that delivers the most good to most people. Only when those decisions are made at the edge, by single individuals we have the optimal delivery of value. The invisible hand of Adam Smith does work and that is marvelous.
Quotes:
-The peculiar character of the problem of a...more
Quotes:
-The peculiar character of the problem of a...more
Feb 09, 2018Zeref Troussi rated it it was amazing · review of another edition
- لا يمكن ﻷحد أن يملك معرفة شاملة لﻷشياء، لذلك السلطة المركزية ستفشل في توجيه السوق بسبب جهلها وإغفالها على الكثير من اﻷمور، في حين ستكون القرارات التي تتخذ من طرف أشخاص لهم معرفة خاصة بمجال عملهم ستكون أفضل ﻷن لهم معرفة أفضل بالزمان والمكان والظروف الذين يشتغلون فيهم.
-يبين هايك أيضا أن التخطيط المركزي دليل على اﻹحتكار من طرف جهة واحدة 'الدولة' عكس المنافسة التي يكون فيها الكثير من الناس يخططون بطرق مختلفة.
- المعرفة كانت ستستعمل بشكل جيد لو أنها لم تكن محتكرة من طرف نوع واحد منها، بالضبط المعرفة...more
-يبين هايك أيضا أن التخطيط المركزي دليل على اﻹحتكار من طرف جهة واحدة 'الدولة' عكس المنافسة التي يكون فيها الكثير من الناس يخططون بطرق مختلفة.
- المعرفة كانت ستستعمل بشكل جيد لو أنها لم تكن محتكرة من طرف نوع واحد منها، بالضبط المعرفة...more
Apr 23, 2019Vladislav Hramtsov rated it it was amazing
'some form of decentralization' = on-chain liquid democracy
'If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicat...more
'If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicat...more
Feb 04, 2019Favio Villaseñor rated it really liked it
there are 2 types of knowledge: the one being technical and analytical and the other the practical, one attemps to see the world as a big system and one focuses on details. society has choosen to give high regards for the former and neglected the importance of the latter. but by doing so we are neglecting one very important tool and thus we cut our selves short in our knowledge of the economical interactions.
i had never before read anything about economy, but this one short essay has made me thi...more
i had never before read anything about economy, but this one short essay has made me thi...more
Apr 19, 2019Jonathan Stein rated it really liked it
Hayek's essay on the deployment and dissemination of various types of knowledge from primary sources to the rest of society is a paramount read to understanding one of the main problems in economics. Although the efficient allocation of physical resources is at the center of the economic order, one of the most important non-physical resources is knowledge. Both his analogies and practical examples serve to be great representations of the 'economic planning' aspects of our world.
Apr 22, 2019Sean Hinnenkamp rated it it was amazing
Quick and good read on the reality of incomplete knowledge possessed by any one individual in the economy. Leading to the conditions that result in a poorly planned future, grounded on antiquated principles given the complexities of the time and place of which they occur.
The best explanation of how an impersonal order works I've ever read.
Jun 14, 2017Elequeni rated it liked it · review of another edition
I felt useless when I read this. Besides that, it was well-written and summed up perfectly.
Feb 15, 2019Mila rated it really liked it
Hayek is one of those thinkers that puts forth excellent premises with questionable conclusions. Not someone I’m in full agreement with; but the Use of Knowledge is quite a good one.
Dec 18, 2017Sathyanarayanan D rated it it was amazing
By far the simple yet powerful indictment of the stupidity of centralized economic planning or in other words the foolishness of Socialist Economic theory.'
Read on-line for free:
https://fee.org/articles/the-use-of-k...
To be honest - this didn't age well. The anti-central planning sentiment should not require 12 pages of printed text, because errors and misjudgments are seeping in with every unnecessary paragraph.
I appreciate the historic context and the novelty at the time, but time has shown that the world described isn't black and white.
I appreciate the historic context and the novelty at the time, but time has shown that the world described isn't black and white.
Sep 19, 2015Robert rated it it was amazing
An accessible essay on economics, one in which the layman can read and have a better understanding of (economic) decision making.
As for the writing itself, Hayek writes in long(er) sentences than (I would assume) most others. But if read carefully and deliberately, the sentence length does not obscure any idea or meaning.
In the essay, Hayek argues that the knowledge in society that is relevant for economic decision making is diffuse, and in particular the knowledge of 'time and place' and othe...more
As for the writing itself, Hayek writes in long(er) sentences than (I would assume) most others. But if read carefully and deliberately, the sentence length does not obscure any idea or meaning.
In the essay, Hayek argues that the knowledge in society that is relevant for economic decision making is diffuse, and in particular the knowledge of 'time and place' and othe...more
Feb 18, 2013Colin rated it liked it
More of a pamphlet really, as it turns out. I haven't read The Road to Serfdom, but this was recommended to me as an encapsulation of his ideas and it certainly seems to sum them up nicely. Hayek's work underpins a lot of libertarian political thought on both sides of the atlantic, with Ayn Rand doing the same job for the knuckle-dragging supporters of the same ideas in the tea-party movement in the US.
Sep 17, 2016Matthias rated it it was amazing · review of another edition Shelves: read-2015-2019, published-1940s, behavioral-sciences
An essential essay, in which Hayek argues that a decentralized market economy is superior to a centrally planned economy because of its better capacity in using knowledge (especially tacit knowledge - the type of individual knowledge that can't be communicated) and in efficiently adapting to continuous change in detailed circumstances (because the ones directly exposed to them will be the ones to adapt).
Genius
Nov 22, 2016Ruben Baetens rated it it was amazing · review of another edition
One of these rare historical texts which each 'scientific expert' should re-read once a year to put his reflections in perspective.
May 09, 2015Robert Heckner rated it really liked it
Oct 24, 2016Mina Soare rated it really liked it Shelves: non-fiction, economy
Very compact, not a light read, fairly pertinent and engaging
Adam Wenerski rated it really liked it
Feb 07, 2015
Feb 07, 2015
Bob van der Vleuten rated it really liked it
Jul 27, 2013
Jul 27, 2013
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Friedrich August von Hayek CH was an Austrian and British economist and philosopher known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought. He is considered by some to be one of the most important economists and political philosophers of the twentieth century. Hayek's account of how changing prices communicate signals which enable indivi...more
“To assume all the knowledge to be given to a single mind...is to disregard everything that is important and significant in the real world.” — 5 likes
“Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coördinate the parts of his plan.” — 4 likes
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