For decades, Friedrich von Hayek's famous critique of central planning has underpinned objections to all kinds of regulation. But even if Hayek was right about the desirability of economic decentralization, the rise of artificial intelligence may have fundamentally changed the nature of the game.
BOSTON – Friedrich von Hayek is best known for his influential 1944 polemic The Road to Serfdom. But his most celebrated work in economics is “The Use of Knowledge in Society,” a rather short article on how society uses and acquires dispersed information about economic fundamentals such as preferences, priorities, and productivity.
The article develops a powerful critique of central planning, arguing that no centralized authority can adequately collect and process “the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” Without knowing each individual’s preferences among millions of products, let alone their ideas about where to use their talents most productively and creatively, central planners are bound to fail.
By contrast, market economies can process and aggregate such information both efficiently and effectively. Price signals seamlessly convey data about market participants’ priorities and preferences. When tin becomes scarcer, its price rises, and Hayek explains, all that “users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin.”
BOSTON – Friedrich von Hayek is best known for his influential 1944 polemic The Road to Serfdom. But his most celebrated work in economics is “The Use of Knowledge in Society,” a rather short article on how society uses and acquires dispersed information about economic fundamentals such as preferences, priorities, and productivity.
The article develops a powerful critique of central planning, arguing that no centralized authority can adequately collect and process “the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” Without knowing each individual’s preferences among millions of products, let alone their ideas about where to use their talents most productively and creatively, central planners are bound to fail.
By contrast, market economies can process and aggregate such information both efficiently and effectively. Price signals seamlessly convey data about market participants’ priorities and preferences. When tin becomes scarcer, its price rises, and Hayek explains, all that “users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin.”