The Use of Knowledge in Society

by Charlene Schupp

In the article “The Use of Knowledge in Society”, Friedrich A. Hayek analyzes economic changes and impact of the new economic system and market relations on the society. The author underlines the role of knowledge sharing and communication in new era of technology and the superiority of market economies. In the article, Hayek criticizes modern education stating that people do not receive sufficient information and knowledge during economic courses and unable to analyze and evaluate economic changes and the role of knowledge in society.

Primarily, Hayek underlines modern economists overestimate the importance of knowledge in strategic calculation. People can use information for specific purposes only limited by the situation and resource allocation. “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” (Hayek). Knowledge helps to connect people in global economies who operate in a distance. Knowledge is as much if not more concerned with people and how they acquire, exchange and disseminate knowledge as it is about information tech­nology. On the other hand, knowledge is not ‘centralized’ among people who have a great impact on decision-making and problem solving. Hayek states that knowledge “cannot enter into statistics” and for this reason cannot be measured and “conveyed to any central authority in statistical form”.

The growth of market economies is treated as the unintended consequence of short-sighted behavior largely directed towards meeting private needs and motivated by a persistent desire to improve both personal condition and social status. Hayek underlines that to explain distribution, it is not enough to identify the main determinants of the demand for, and supply of, factors of production and allow for any intervention into free markets caused by governments, unions, or other similar institutions. “The mere fact that there is one price for any commodity … brings about the solution which … might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process” (Hayek).  Although, estimating market size with available data presents challenging analytical tasks. Global marketers often find that certain types of desired data are unavailable. If this is the case, it is sometimes possible to estimate market size by analogy.

Hayek mentions that modern economists underestimate the role of change in market economies. According to Hayek, planning plays an important role in effective resource allocation. But this process should be based on “frequency of changes which will make substantial alterations of production plans necessary” (Hayek). Any consideration of costs requires knowledge about volume. Such a forecast enables a premise to be made from which knowledge can be devel­oped and enables the right objectives to be selected. It is in effect a special tool of planning and Hayek considered it so important as to state it was the essence of strategic calculation. On the other hand, Hayek proves that our knowledge “corresponds with the objective facts, systematically leaves out what is our main task to explain” (Hayek). In this case, knowledge are affected by many factors which include trends relating to the general economy, political, international and industrial trends, the strength of competitors and the government. For modern economics it is important to stress the need to examine the economic environment and knowledge in relations to perfect and imperfect “datum”. The main problem identified by Hayek is that information and knowledge cannot be simultaneously presented to one mind which limits objective understanding of economic systems.

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