… is from pages 93-94 of F.A. Hayek’s September 1945 paper in the American Economic Review, “The Use of Knowledge In Society,” as this paper is reprinted in the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of Hayek’s essays on spontaneous-ordering forces (original emphasis):
[T]he “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given.
The peculiar character of the problem of a rational economic order is determined precisely by the fact that 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. The economic problem of society is thus not merely a problem of how to allocate “given” resources – if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” 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. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.
DBx: This point is profound. It is also routinely ignored, including by proponents of industrial policy. How will government officials empowered to decrease the scarcity of some goods, services, and opportunities – and, hence, to increase the scarcity of some other goods, services, and opportunities – know that the value of that which they create exceeds the value of that which they destroy? What is the information- or knowledge-generating process or mechanism that provides to industrial-policy officials signals that are more reliable than are the prices and other market signals that the interventions of these officials distort or suppress altogether?
Ask such questions and expect no answers beyond ones that boil down to “Trust us. Our scheme is destined to produce results that are superior to those produced by markets. We know what to do. For proof, compare the excellence of what we promise to achieve to the reality, as described by us, that we promise to replace. This reality clearly isn’t ideal and must be corrected. Furthermore, our motives are pure, and our understanding of human nature and society is richer, deeper, and more expansive than is that of the naively materialistic and reductionists neoliberals and market fundamentalists. Trust us.”
