Economics of Public Policy

Only available on StudyMode
  • Topic: Economics, Economy, American Economic Association
  • Pages : 18 (5876 words )
  • Download(s) : 101
  • Published : February 23, 2013
Open Document
Text Preview
American Economic Association

The Use of Knowledge in Society Author(s): F. A. Hayek Source: The American Economic Review, Vol. 35, No. 4 (Sep., 1945), pp. 519-530 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/1809376 . Accessed: 09/01/2011 20:35 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www.jstor.org/action/showPublisher?publisherCode=aea. . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review.

http://www.jstor.org

The

American

Economic
SEPTEMBER,1945

Review
NUMBER FOUR

VOLUME XXXV

THE USE OF KNOWLEDGE IN SOCIETY
By F. A. HAYEK*

I What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses. This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the "data" from which the economic calculus starts are never for the whole society "given" to a single mind which could work out the implications, and can never be so given.

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 * The author is Tooke professorof political economy and statistics at the University of London (London School of Economicsand Political Science).

520

THE AMERICAN

ECONOMIC REVIEW

[SEPTEMBER

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 not given to anyone in its totality....
tracking img