The Use of Knowledge in Society
F. A. Hayek The American Economic Review, Vol. 35, No. 4. (Sep., 1945), pp. 519-530.
The centennial research paper “The Use of Knowledge in Society”, by F. A. Hayek is a critical text for understanding the dispersion of information and its consequences within and outside society.1
The paper was set in a time of intense debate about institutional design after the demise of anti-market fascist regimes in 1945. Even market friendly societies switched in WWII to severe control instruments. The institution market was under fire. The paper gave essential guidance on the worth of markets for information allocation.
It is one of the most important economic texts of all time and should be understood. The timeless value is underscored by the debate about whether market mechanisms are conducive to averting climate change or leading to it.
AI may add a substantial dimension to markets as allocation mechanisms are altered due to market concentration and the economics of scale at the initiation stage.
The correlation between market and climate change may, going forward, have its causation outside the institution of the market as such. Vectors, in their time dimensionality and path dependency, must be considered for a thorough synthesis.
Additionally, it should form the basis of a debate on which institution should guide society in forward-looking issues.
Markets incorporate fresh information. The prerequisites for any good information transmission are functioning markets, especially internationally. Otherwise, the prices reflect GiGo, Garbage in, Garbage out, and lead to severe misallocations.
Therefore, functioning markets rely on a stable multilateral setting to function properly, in order to guide actions with efficient price mechanisms.
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„The Use of Knowledge in Society“ - Econlib: in: Econlib, 10.07.2018, [online] https://www.econlib.org/library/Essays/hykKnw.html.