A Contradiction in Hayek’s Famous 1945 Article

 

In his “Quotation of the Day” yesterday, one of my favorite parts of CafeHayek, Don Boudreaux quotes from one of my favorite articles by Hayek, his “The Use of Knowledge in Society,” published in the American Economic Review in 1945. (Parenthetical note: Wouldn’t it be great if the AER started publishing articles with words and no equations, articles that make important points? A fella can dream.)

Here’s a key paragraph that Don quotes:

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.

For approximately the last 20 years that I taught at the Naval Postgraduate School, I assigned this article and we worked through it in class, paragraph by paragraph. (

But you don’t teach an article over and over without noticing problems. Actually, for this article, I noticed only one, and it’s in the paragraph above.

It’s this: “frequently contradictory knowledge.”

Knowledge can’t be contradictory. Opinions can be. Assessments can be. But not knowledge.

Let me take an example. I’m at my cottage in Minaki, Ontario. One of the big changes here since last year is that the garbage dump has been closed. Bears used to go there to feast on people’s scraps of food. Now they don’t. So bears are now coming closer to cottages.

Let’s say that I know that there’s a bear in my yard. You know there’s not. If I really do know, then you’re wrong.

Or vice versa. You know there’s not a bear in my yard. I “know” that there isn’t. If you really know, then I’m wrong.

QED.

 

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