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Quotation of the Day…

… is from page 225 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, this quotation is from an essay of Hayek’s that, although it is relatively unknown, has long been among my favorites – namely, his June 1962 lecture, “The Economy, Science and Politics” (available on-line here):

That we can never know all that the people know whose actions determine the formation of prices and the methods and direction of production is, of course, of decisive importance not only for theory.  It has also the greatest significance for political action.  The fact that much more knowledge contributes to form the order of a market economy than can be known to any one mind or used by any one organization is the decisive reason why a market economy is more effective than any other known type of economic order.

The market economy is data-driven – far more data-driven than is any other means of arranging economic affairs.  Data – deeply detailed, highly nuanced, ever-changing data – are constantly being discovered, processed, and used by individuals each of whom has strong incentives to gather as much data as are appropriate for his or her purposes and to interpret these data as correctly as possible.  To override the decisions of these individuals with state-issued rules and restrictions – or with state-created “plans” – is to override with a puny and amateurish mechanism for gathering and processing relevant data an astonishingly well-calibrated system for gathering and correctly processing inconceivably large amounts of data.

The fact that people in the market almost never do data-processing that looks like econometrics (or that is econometrics) does not mean that in the market data are not gathered ceaselessly, processed competently, and used appropriately.