… is from page 311 of my late Nobel laureate colleague Jim Buchanan‘s 1982 paper “Cultural Evolution and Institutional Reform,” as this paper is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:
The mismatch between the hierarchically organized decision-making institutions that presume and require a centralization of knowledge that simple does not exist is an identifiable and reformable source of inefficiency.
DBx: Saying “Let the market handle it” is not – contrary to popular belief – a simplistic mantra repeated by those with a simplistic understanding of reality. Quite the contrary. The truly simplistic solutions are those that rely upon top-down direction – ‘solutions’ that substitute the unavoidably paltry knowledge and information of those who do the top-down directing for the vast amount of nuanced knowledge and information that is dispersed among market participants and that is used effectively only if each market participant is free to respond, on the spot, as he or she deems best in light of the feedback generated by the similar actions of millions of others.
