… is from page 464 of F.A. Hayek’s profound and important 1964 article “Kinds of Order in Society ” (available without charge on-line here ) as it appears in Liberty Fund’s 1981 single-volume collection of New Individualist Review :
[I]f the overall character of an order is of the spontaneous kind, we cannot improve upon it by issuing to the elements of that order direct commands: because only these individuals and no central authority will know the circumstances which make them do what they do.
DBx: Undeniably true.
The kind of knowledge to which Hayek here refers is what in 1945  he called “knowledge of the particular circumstances of time and place.” It is not scientific knowledge of the sort that scholars learn in school, teach to students, and sometimes – when they advance it – earns for them Nobel Prizes. It is not knowledge of statistical data, regardless of how thoroughly the statistics or econometrics are done. (Statistics, by its nature, aggregates measurements of individual, specific instances into larger lumps of data.) It is not even wisdom acquired through experience. Instead, it is knowledge (Hayek later said “information”), almost always new and surprising, of very precise, often fleeting details found in local circumstances – the discovery that a particular iron-ore mine contains more ore than previously thought; knowledge that a machine in a catfish-processing plant in Breaux Bridge, LA, has just broken down and can best be repaired by paying Gerry Dugas to do the job; a hunch that changing ever so slightly the way some fracking machines are used will increase the daily rate of extraction by about two percent; finding out that skilled labor in some town costs more than expected and experimenting on the spot with ways to minimize the impact on production costs; knowing what specific menu items, and prepared just so, are likely to work best at a Silvio’s Italian Kitchen in Westchester County, NY; discovering that the wall of a grain silo is weakening and how best to strengthen it; noticing at a Petco in Pueblo, CO, that buyers there have an unexpectedly high demand for a particular kind of cat-litter box.
Knowledge of scientific propositions – and, even more, experience – often prime the human mind to be better able to recognize particular facts such as these and to understand their potential significance. But scientific knowledge and experience alone are not the sources of the kind of knowledge that Hayek here has in mind.
It is not too much to say that the most under-appreciated fact about modernity is the market’s astonishing success at routinely, every moment of every day, prompting individuals in their unique circumstances to notice and act on local, detailed knowledge in ways that change prices and, in turn, cause millions of strangers each to change his or her actions as if each of these strangers were consciously informed of some detailed piece of knowledge from far away and then persuaded to react to this knowledge as if his or her goal were to serve humanity as best as possible.
No serious person argues that the results of the market process are perfect in comparison to what the human mind can imagine. But no truly informed person denies that the results are truly marvelous. The irony is that the market works so well and so consistently that we take its successes for granted and notice only its relatively rare ‘failures.’