Stephen Caputo

11/10/14
Hayeks The Use of Knowledge in Society
Hayek first discusses the way that the economy uses information. He refutes the
traditional idea that economics is based on the principle idea that we are trying to allocate
a given amount of resources. Instead he argues that there is no such given. Information
within society is broken up between many, many different groups who all have
information about specific portions of society, but do not have information about the
whole.
He argues that a systems efficiency level is the result of the ability of a society to
effectively distribute this scarce information to all people. Economic planning is
something that must exist for Hayek, but the question that he raises is one of the who.
A central government may not possess the best information for an entire economy as
many so often think. This plays into his belief in larger market economics as a better
solution to economic problems. He believes that specific knowledge of certain areas is
not a bad thing and that there is nothing wrong with individuals having expertise.
The issue of change is also discussed further on in the reading. For Hayek, change
is the cause of economic problems in the current system because it forces people to adapt
to a new set of circumstances. If a market were allowed to fluctuate freely then they
would be able to quickly adapt to changes in the environment and not have the large
catastrophes that we have seen in the past. He especially also emphasizes the idea that we
often think that we know more than we do, using statistics and formulas to make
projections that would not stand up to reality. His ultimate conclusion is that the current

system of economic projection is problematic, but that nobody has designed an alternate
system that has worked out for the better.