Notes on Friedrich August von Hayek’s “The Use of Knowledge in Society”, 1945.
“It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know”
“it is a problem of the utilization of knowledge which is not given to anyone in its totality”
- An economy cannot be planned by a central authority, because there is no way that a central authority can have all of the necessary knowledge to make the best decision at any single point in time, let alone all points in time
- Therefore, the economic problem of society is not “how do we allocate all of the resources available?” a. approaching an economy from this perspective assumes that “all of the resources available” is quantifiable. Hayek argues that it is not, and I would strongly agree, unless you have a God as a resource.
- The problem instead is “how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know”
“the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”
“It is a dispute as tho whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals”
“Competition…means decentralized planning by many separate persons”
“Is it true that, with the elaborate apparatus of modern production, economic decision are required only at long intervals, as when a new factory is to be erected or a new process to be introduced? 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?”