Hayek (and Fukuyama) on the Use of Knowledge in Society

by Don Boudreaux on June 10, 2009

in Complexity and Emergence

Reviewing Matthew Crawford's Shop Craft as Soul Craft, Francis Fukuyama writes, in this past Sunday's New York Times Book Review:

Highly
educated people with high-status jobs – investment bankers, professors,
lawyers – often believe that they could do anything their less-educated
brethren can, if only they put their minds to it, because cognitive
ability is the only ability that counts.  The truth is that some would
not have the physical and cognitive ability to do skilled blue-collar
work, and that others could do it only if they invested 20 years of
their life in learning a trade. “Shop Class as Soulcraft” makes this
quite vivid by explaining in detail what is actually involved in
rebuilding a Volkswagen engine: grinding down the gasket joining the intake ports to the cylinder
heads, with a file, tracing the custom-fit gasket with an X-Acto knife,
removing metal on the manifolds with a pneumatic die grinder so the
passageways will mate perfectly. Small signs of galling and
discoloration mean excessive heat buildup, caused by a previous owner’s
failure to lubricate; the slight bulging of a valve stem points to a
root cause of wear that a novice mechanic would completely fail to
perceive.

Indeed so.  This insight that a successful economy must
continually use knowledge that is dispersed, unimaginably detailed, and often
unable to be articulated fueled F.A. Hayek's skepticism of government
intervention.  Here's Hayek, from his 1945 article "The Use of Knowledge in Society":

Today it is almost heresy to
suggest that scientific knowledge is not the sum of all knowledge.  But
a little reflection will show that there is beyond question a body of
very important but unorganized knowledge which cannot possibly be
called scientific in the sense of knowledge of general rules: the
knowledge of the particular circumstances of time and place.  It is
with respect to this that practically every individual has some
advantage over all others because he possesses unique information of
which beneficial use might be made, but of which use can be made only
if the decisions depending on it are left to him or are made with his
active cooperation.  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.  To know of and put to use a machine not fully employed, or somebody's
skill which could be better utilized, or to be aware of a surplus stock
which can be drawn upon during an interruption of supplies, is socially
quite as useful as the knowledge of better alternative techniques. And
the shipper who earns his living from using otherwise empty or
half-filled journeys of tramp-steamers, or the estate agent whose whole
knowledge is almost exclusively one of temporary opportunities, or the arbitrageur
who gains from local differences of commodity prices, are all
performing eminently useful functions based on special knowledge of
circumstances of the fleeting moment not known to others.

No fact about an advanced economy is more vital to understand than this one – and very, very few are as vital.

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  • Eidolon

    I must confess I find myself often falling into the category of individual that, having gone through a curriculum that is as much about learning to learn as it is learning to ply a particular trade, believes that I could learn to do most anything. I am a computer engineer.


    That said, such a statement must be tempered by obvious reality. My mind and physical talents will naturally be bent toward one trade over another, and hence I am an engineer rather than an artist or musician by trade. And while I believe that I could well learn to be an artist, the lack of talent in that particular arena would mean I would spend years learning a base set of skills that another individual would be able to master in mere months or even days. For disciplines closer to my own, my mind will be sharper and more apt. For those further beyond the scope of my knowledge and experience, the time required to learn and ply that trade will rise proportionately, perhaps even exponentially.


    It is also worth stating, then, that it is highly likely that the individuals upon whose trade I look and say, "I could do that," could as well, given the time and education, do my job!


    That set of talents with which every individual is born, however, makes certain career paths easier or more likely. It is worth noting, for instance, that I spent my time in grade school connecting fans and switches and wires for the mere fun of it! I was doomed to be an engineer from an early age.


    Your experiences in childhood and early adulthood truly are critical. As a youth, I spent years assisting my father with sound and video production in my home church. That knowledge and experience are still with me and I am able to begin picking up the workings of a new sound system in mere minutes, while an individual without that same experience learns more slowly simply because their mind has never been previously bent to such a task.


    Hence, I would posit that there are two key factors in the typical specialization of labor:

    1. Personal inclination and talent


    2. ... shaped and molded into a far more specific pursuit by experience and opportunity.


    Of course, my entire post does raise a question. Are there certain skills that simply cannot be taught? By this I mean the creativity of an artist or the pitch-sensitive ear of a master musician.

  • Randal Samstag

    I had a quite different reaction to Fukuyama's review. I found it tragically ironic that the author's praise of the skills of the industrial working class comes from someone with a PhD in political philosophy from the University of Chicago and who, according to Fukuyama, was a fellow of the Committee on Social Thought. This environment, the US refuge for F. A. Hayak, as readers of this blog well know, is the home of the US version of monetarism, which J. M. Keynes called "simply a campaign against the standard of life of the working classes" and a bastion of the doctrine of free trade, which has cheered the de-industrialization of Britain and now the US. Could it be that the author's "progressive republican" (small r) views as presented in the book are a rebellion against his mentors, rather than a recapitulation of their beliefs, as Fukuyama and other contributors here seem to think? Otherwise how to explain the apparent contradictions? Perhaps we should all read the book.

  • Chuck

    This is something the schemers will not concede lightly because it completely invalidates the idea of any form of central planning. Ask Bernanke why the rates he comes up with are better than what the market would set based on the combined decisions of all lenders and borrowers and his head would probably explode.

  • Martin Price

    This reminds me very much of Leonard Read's essay "I, Pencil". I really, really wish more people could grasp the concept that groups of people can do amazing things without waiting for detailed instructions and coordination "from above".

  • I don't think that's the same as saying the people in government think they "know better".


    I don't know what people in government think. Maybe some of them don't even think about it. But, like most people, they become socialized to the culture that they are part of.


    IAC, the core of the problem is not people in government, but people who look to government as the default solution to social and economic problems.

  • K Ackermann

    I'll be attending a meeting today designed to teach me to be a project manager...


    The last time I was employed full time was nearly 8 years ago, and I turned in my resignation the day they signed me up for a Dale Carnegie course. They were 'grooming' me for management and wanted me to lose the Boston accent.


    I said, "waddaya, retahded? I'm outa hea" ;-)


    I have so much respect for good managers that I would never sully the position.


  • To Methinks,


    You wrote: [ It may be the detailed ] knowledge that leads to such successful black markets and innovation that by-passes regulation entirely even in completely top down economies.


    You might like this story about the market that existed for burned out light bulbs in Russia.




    Selling Burned-Out Lightbulbs



  • Robert

    Don,


    Great post. So true. What seems to be lacking in the discussion of the current "crisis" is an understanding that problems lay beyond mere tinkering with fiscal and monetary policy. If it were so with the right monetary and fiscal policy ecuador can become belgium. What is lacking is an understanding of organizational charactersistics and their inimical effect on productivity and initiative. How in large oranizations you will spend 75% of time with pointelss meetings, HR impeding hiring people you know can do the job, herd behaviors and norms precluding the best rise. In effect, organizations are now full of arogant highly degreed beta males and females smug in their superiority yet unable to fix a toaster. The problems lay in our organizations--bureacrices whether public or private.

  • erp

    In "getting things done," don't forget personal connections. Favors given and favors returned.


    The higher one goes up the academic ladder, the more concentrated the knowledge and in many cases, the more arrogant the attitude. A certain professor of Chinese thought he was the smartest guy on campus because he was an expert in the Chinese language and culture. A colleague finally shut him up by pointing out that in China even two year olds speak Chinese.

  • Randy

    Timely. I'll be attending a meeting today designed to teach me to be a project manager as well as an installer. The problem now; not enough project managers. The problem that will result if they try to make me a project manager/installer; not enough installers. The core problem; management doesn't understand what I do, but they think that they do. To them, what I do is just a checkbox on a checklist. My task today will be to try to explain it without being percieved as negative. Its going to be an interesting day, but at least this article gave me a good laugh to get it started.

  • Daniel Kuehn

    This book is really intriguing to me... if anyone else is interested in learning but doesn't have time for his book, I found an essay that Crawford wrote in the New Atlantis on the same topic:


    "http://www.thenewatlantis.com/publications/shop-class-as-soulcraft"

  • Methinks

    Thank you, Don. Great post.


    People in government do think they know better. If they didn't they wouldn't try to control everything from health care to auto bankruptcies to compensation. This prejudice clearly isn't confined to politicians. Even now, I have history professors pontificating on how the financial industry should be run and how the employees should be compensated. The fact that they can't so much as balance their own check book let alone understand what a trader or a banker actually does doesn't concern them in the least.


    I'm guessing that it is this unimaginably detailed and dispersed knowledge that leads to such successful black markets and innovation that by-passes regulation entirely even in completely top down economies.

  • And then of course we should not ignore the risk that when acquiring knowledge we get the wrong knowledge or enter into a process of deknowledgefication and which could actually imply that those who have not studied actually know more.

  • Daniel Kuehn

    Excellent post Don! We have a very odd "one size fits all/four year degree" concept of human capital acquisition in this country that is really very inaccurate. Granted, as we move into the future those four year degrees and advanced degrees ARE going to be more important for the economy, but it's not everything.


    Countries like Germany have strong apprenticeship and technical training systems to keep these so called "middle skilled" jobs supplied (really just "different skilled"). We have a strong community college system in this country to do that as well, but I strongly agree that Americans need to reorient the way they think about human capital.


    I do agree with K Ackermann - while I strongly agree with Hayek's insights, I don't think that's the same as saying the people in government think they "know better". I think that's a red herring.

  • geoih

    Quote from K Ackermann: "Here is a quote of his that is at odds with the idea that he wants the government to do everything for people:"


    Unfortunately, his actions do not live up to his words. I'll believe his rhetoric, when he starts following it.


    Quote from K Ackermann: "Division of labor can be at odds with creativity. Some of the best ideas come from the fusion of disciplines."


    Sounds like a new opportunity to divide the labor further, to me.


  • Bob Smith - Fort Worth

    While stationed at Ft Stewart, in the mid-70's, we had a young man that needed to get promoted to E-5 on a Friday afternoon so that he could leave for NCO Academy the next day. The Battalion Commander didn't think it could be done in less than a week. I got it done in less than two hours. Not because I had a college degree, but because I knew how to walk it through the system. Private knowledge is immeasurable and omnipresent. This is why bottom up organization is preferrable over top down for an economy .

  • AdamSmithDisciple

    Wow Don!!! Its for articles like these that I keep coming back to your blog.


    Thanks.

  • K Ackermann

    People like Obama, of which I know and am related to far too many, are unable to seriously consider that there is any job (oil company CEO, football coach, running the local post office) that they cannot do as well or better than the person currently in the role, should they ever exert the effort to do so.


    Andrew, I'm not sure that describes Obama. Bill Clinton, yes.


    Obama has not staffed up with a bunch of cronies. He has delegated to people who are (reputed) to be effective, and he doesn't micro-manage.


    Here is a quote of his that is at odds with the idea that he wants the government to do everything for people:


    We need to steer clear of this poverty of ambition, where people want to drive fancy cars and wear nice clothes and live in nice apartments but don't want to work hard to accomplish these things. Everyone should try to realize their full potential.


    Here is one where he does talk like a socialist. I believe the assertion can also be viewed as an investment where the gains cannot be taxed by the government:


    We must make sure that people who have the grades, the desire and the will, but not the money, can still get the best education possible.


  • The Solution is Simple


    I particularly like this insight into the simple view that many people have of the world, although they are educated and aware of the complexities and challenges of their own field. An explanation why hope and change is so attractive. An evaluation of President Obama's abilities. Just an excerpt of what Joe Y experienced in party conversation.




    [edited] The oddest thing about this election, was the continual leitmotif of Obama’s genius, from people that should have known better.


    People like Obama, of which I know and am related to far too many, are unable to seriously consider that there is any job (oil company CEO, football coach, running the local post office) that they cannot do as well or better than the person currently in the role, should they ever exert the effort to do so.


    It’s not a matter of faith, as faith requires a conscious effort; rather, it is a prejudice in the true sense of the word.





  • K Ackermann

    Cognitive ability does not address motivation, or all aspects of creativity.


    Division of labor can be at odds with creativity. Some of the best ideas come from the fusion of disciplines.


    Limits are limiting, and self-limits are an avoidable tragedy.


    A baseball scout is evaluating 2 players for their speed. The first player runs down the line to first base in impressive time. The trained eye of the scout can spot no flaws in the player's running mechanics - he's an excellent runner. The second player performs the same exercise and is barely in control. His form is terrible but he still manages to hit the bag in the same impressive time.


    Everything being equal, the choice of the two players is obvious: one has room for improvement, and the other one doesn't.


    John McCain called himself a maverick because nobody likes a radical. Being a maverick is seen as an admirable trait in others, but the reality is that most people do not want to stand outside the accepted norms. Fear of being singled out, fear of failure... it's all the same thing.


    A less-educated person with motivation and courage is just like the second runner - he's got the right stuff, and anybody can learn.

  • vikingvista

    Not everyone who is capable of advanced degrees chooses to pursue them. And not everyone who has them knows his arse from a hole in the ground.


    It is wiser to judge the product of the credentialled, than the credentials themselves.

  • The High personal cost of acquiring expertise, and the opportunities it presents for displaying individual talent or genius, make it a more dramatic form of knowledge, but not necessarily a more important form of knowledge from a decision-making point of view. Certainly expertise is not sufficient in itself without the additional direct knowledge of results obtainable closer at hand, and at lower cost, by great numbers of individuals who acquire no personal distinction from possession or that kind of knowledge. -Thomas Sowell, Knowledge and Decisions, page 41
  • Beyond Hayek's more focused insight, Fukuyama is right (words I never thought I'd be writing). My brother-in-law would never impress anyone who met him as being very intelligent, and he has no formal education beyond high school. Yet he's a mechanic for Continental Airlines and can read the wiring schematic for an MD-80, which I, with a Ph.D. in the social sciences, find no more readable than a 3 year old's scribblings. He's also fixed my car for me a few times, when I had zero idea what was wrong (and I'm not a total idiot about cars).


    As well, I have at times been fortunate to know especially good secretaries whose skills amaze, and who can perform miracles of bureaucratic maze-navigating that leave me breathless. I am sure I'm not the only person who's been so lucky.

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