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F. A. Hayek



Friedrich von Hayek was awarded the Nobel Prize in Economic Science in 1974,
not 1976 as I mentioned in class.

http://www.nobel.se/laureates/economy-1974-press.html


I did some cursory searches through Hayek's writings for his thoughts on
privacy, but I found nothing.   This bibliographic essay, however, relates
to our class discussion.



Knowledge, prices, and competition as a discovery procedure.

Hayek's writings on dispersed knowledge and spontaneous order are also
widely known, but more controversial. In "Economics and Knowledge" (1937)
<http://www.virtualschool.edu/mon/Economics/HayekEconomicsAndKnowledge.html>
and "The Use of Knowledge in Society" (1945)
<http://www.virtualschool.edu/mon/Economics/HayekUseOfKnowledge.html> Hayek
argued that the central economic problem facing society is not, as is
commonly expressed in textbooks, the allocation of given resources among
competing ends. "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 those individuals know. Or, to put it briefly, it is a
problem of the utilization of knowledge not given to anyone in its totality"
(Hayek, 1945, p. 78).

Much of the knowledge necessary for running the economic system, Hayek
contended, is in the form not of "scientific" or technical knowledge--the
conscious awareness of the rules governing natural and social phenomena--but
of "" knowledge, the idiosyncratic, dispersed bits of understanding of
"circumstances of time and place." This tacit knowledge is often not
consciously known even to those who possess it and can never be communicated
to a central authority. The market tends to use this tacit knowledge through
a type of "discovery procedure" (Hayek, 1968a), by which this information is
unknowingly transmitted throughout the economy as an unintended consequence
of individuals' pursuing their own ends.(17) Indeed, Hayek's (1948b)
distinction between the neoclassical notion of "competition," identified as
a set of equilibrium conditions (number of market participants,
characteristics of the product, and so on), and the older notion of
competition as a rivalrous process, has been widely influential in Austrian
economics (Kirzner, 1973; Machovec, 1995).

For Hayek, market competition generates a particular kind of order--an order
that is the product "of human action but not human design" (a phrase Hayek
borrowed from Adam Smith's mentor Adam Ferguson). This "spontaneous order"
is a system that comes about through the independent actions of many
individuals, and produces overall benefits unintended and mostly unforeseen
by those whose actions bring it about. To distinguish between this kind of
order and that of a deliberate, planned system, Hayek (1968b, pp. 72-76)
used the Greek terms cosmos for a spontaneous order and taxis for a
consciously planned one.(18) Examples of a cosmos include the market system
as a whole, money, the common law, and even language. A taxis, by contrast,
is a designed or constructed organization, like a firm or bureau; these are
the "islands of conscious power in [the] ocean of unconscious cooperation
like lumps of butter coagulating in a pail of buttermilk" (D. H. Robertson,
quoted in Coase, 1937, p. 35).(19)

Most commentators view Hayek's work on knowledge, discovery, and competition
as an outgrowth of his participation in the socialist calculation debate of
the 1920s and 1930s. The socialists erred, in Hayek's view, in failing to
see that the economy as a whole is necessarily a spontaneous order and can
never be deliberately made over in the way that the operators of a planned
order can exercise control over their organization. This is because planned
orders can handle only problems of strictly limited complexity. Spontaneous
orders, by contrast, tend to evolve through a process of natural selection,
and therefore do not need to be designed or even understood by a single
mind.(20)

http://mises.com/hayekbio.asp

James