The Use of Knowledge in Society

Authors: F.A. Hayek
Reviewers: Linfeng Wang

I

The author first suppose a question: What is the problem we wish to solve when we try to construct a rational economic order?[1] It is so complicated for a single person to explain and the solution would not merely "given" by society as a totality.
On the contrary, all individuals in our society possess some part of the answer to this question. The author believes that there may not have a simple, mathematics logic to explain "why it happens," but he could say, as an individual, the diverse paths of reasoning have converged, because of their vision.

II

Anyway, there must be someone need to decide what the whole system should do. We call that process: planning. Usually, planning means "central planning" - a direction of the whole system according to one unified plan. And the other side of central planning is competition, a decentralized planning processes. These two process decide the organization of modern industries and companies.

III

So the first problem is merely shifting the difficulty to the problem of selecting the experts which have a suitable position and appropriate aspects of knowledge(mostly scientific knowledge these days). Though we find those experts, it is only a small part of the wide problem.
Except scientific knowledge, there is some knowledge that could not conclude as "scientific": the knowledge of the particular circumstances of time and place. This kind of knowledge is possessed not only the experts but also almost everyone because its bases on special experience of circumstances of some moments that not known to others.
It comes back to response the idea of the last chapter: each one holds some knowledge of the "truth," they may not even realize it is valuable. Furthermore, I think to find someone to gather that knowledge is a better way to find someone to make a big plan and aollocate detail tasks to those people to use their knowledge. It may delay the time of planning, but it would make the whole system more balance. There won't be a head of an eastern dragon with a body of a western dragon.
There is another method to solve this problem is, well, sharing. If all people have those required knowledge before they get to work, this problem is solved naturally. But the author mentioned that this method is precisely what we have to find an answer. (So that's why we need education. :)

IV

Economists increasingly minimize the importance and even ignore the constant small changes. It becomes a trend these days. Though we don't need to change fairly long period in advance due to some detailed economic plan, those details quietly change everything.
The special attribute that this sort of knowledge is that it could not be easily, objectively shared with others. Because it could not write or talk as an absolute, statistical form. The best choice for the manager is to gather all knowledge from his team since it is impossible to do that, he has to transfer power and planning work to a lower level, even the person who is actually doing this thing.

V

Then the solution naturely comes: decentralize. But giving his power to employee does not mean losing power. The measuring method of keeping the balance called "economic calculus" -- the price system. Go back to chapter 4, for those constant small changes, the manager, the central planner needs to count the quantitive of value that is influenced by those changes. price system as such a mechanism.

VI

Here, the author uses a whole chapter to tell us an example of price system, one of those knowledge that we need to learn to use. None of us born to be an expert of any mechanism or system that we build. So is the build process. The price system seems to be perfect and robust today, but whatever it building and developing process is hard and endless, since it is naturally a kind of knowledge that we have to share to learn.

VII

The author against the statement of Professor Joseph Schumpeter that the value of what the consumer think it possess effect the real value of production that the consumer want. I don't think I got the whole idea of author's talking point since he simply against it by thesis, no argument at all. He also talks about that it may due to the limit of view of a single man. Knowledge could not be so "given" to one person. A group of people who gain this knowledge could reveal the truth.

Citation:

[1] Hayek, Friedrich A., The Use of Knowledge in Society, American Economic Review. XXXV, No. 4. pp. 519-30. American Economic Association.