Much of Hayek's essay, The Use of Knowledge in Society, focuses on problems of power and authority. At the beginning of this piece, he identifies the first problem of making an effective economic order as the random and chaotic dispersion of knowledge and information in society, "...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" (H3). This complicates another important aspect of the economic order in establishing the leaders of such a society. Whether there should be one centralized plan or competition among many different planning groups is problematic, Hayek writes that the most effective plan will be the one "under which...we can expect that fuller use will made of the existing knowledge" (H7). I found his argument about the differing types of knowledge to be very observant, he differentiates scientific knowledge (which many think of as the only type of knowledge) from the knowledge of 'time and place' (H8). There is definitely some apprehension or lack of respect for knowledge that individuals might gain just from being very familiar with their circumstances or situation in life; instead there is definitely a focus on formal education and 'scientific' (and therefore, valid or legitimate) knowledge.
Hayek uses the distinction between different types of knowledge to address how specific economic problems might be addressed. First of all, he states that economic problems "arise always and only in consequence of change" (H12). As change is essentially inevitable, it seems safe to say that there will probably always be economic problems of some kind or another. What is not as easy to determine is who who will have the knowledge to correct or face the challenges of such problems - will it be a man of scientific knowledge or someone who has a great knowledge of 'time and place'? Hayek writes, "If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them" (H17).
At last, I see some reference to the media, when Hayek highlights the problem of how an individual (or even a group) might communicate with others to get information they need in order to best deal with specific circumstances. I found it odd, but true, that a person doesn't actually need to know what happens in order for the information to reach him or why certain events are taking place - instead, "all that is significant for him is how much more or less difficult to procure they have become compared with other things with which he is also concerned..." (H19). A system of communication in the economic system is the price system, which conveys information to a large group without giving specific reasons for why prices might be high or low. Indeed, this information is basically irrelevant. I definitely appreciated Hayek's unique perspective on mass communication as an economist. I found it much easier to understand than some of our previous theorists and I also found it, perhaps incorrectly, to be more grounded in fact and more accessible to a contemporary economic system and audience.
I definitely agree with a lot of what you've written here, Lisa. As the world economy has expanded massively in terms of both size and complexity in the last century, so too have the number and severity of crises associated with the economic order grown in correspondence. Events such as recessions or downturns usually result in a renewed call for a central authority that can regulate the chaos that is the modern economy and, in effect, prevent other disasters from occuring. While Hayek's essay doesn't really introduce any groundbreaking new theory or philosophy, he does explain in a unique and very understandable manner why a leftist solution such as a central planning board would be disasterous. Not only does the sheer size of the nation's economy make it improbable, but, as you alluded to in your post, there is no way any single authority could possess all the minute detail and knowledge needed to sustain economic harmony the way several automous operators with first-hand experience in their field could, and the way these operators communicate sudden changes is through the pricing system. Being a leftist myself, I have to say Hayek does make a very strong argument for a decentralized economy that is regulated not by interventionist state practices but by stable and known public law.
ReplyDeleteHey Lisa! Thanks for your post!
ReplyDeleteAs a lot of others posters pointed out, it seems that mass communications finally gets filtered through Hayek when he discusses the price system. I love that you (as well as others in our class) saw this, because I definitely did not latch onto that point as one on communication. Once pointed out, though, it makes perfect sense, even as a consumer (rather than a consumer-producer): when I go to the gas station and see prices at $3.20, I know that something is going on in the oil industry that has driven up prices. I don’t necessarily need to know what or why it happened; what’s important to me as a consumer is knowing that gas is more costly for me (so that I can then plan around that).
Your first point on knowledge and the necessity of particular knowledge as well as general knowledge reminded me a lot of our philosophy of science course last year. We learned about the relative definitiveness of scientific knowledge, and how it is some of the most reliable information we have (because it came out of critical thinking!). I think Hayek sees, however, that the social world (which includes the economic and political realms) lacks the same straightforward, hard-and-fast rules of the natural world. Humans do consistently follow social patterns, but there are so many (think how the society of the University of Tulsa alone is different from other societies; how a frat at TU is even different from the rest of TU) that overlap and run into natural-biological patterns, that human behavior becomes more difficult to study and predict than, say, rocks. Sociology takes of the task of predicting and studying human behavior in the context of society and does it rather well; but, it does it so well by expanding knowledge beyond mere numbers. While quantitative sociology deals with statistics, numbers, and charts, qualitative sociology conducts specific research projects, often studying a small group of individuals (in a social setting). That is, it seeks broad, generalized knowledge, but also particular knowledge that can be integrated with those generalizations. In Hayek, then, we see sociology seeping through, which is, I think, what makes his ideas of economics so fascinating.
Great post, Lisa! Thanks again!
-Kerry