ABSTRACT
Throughout the body of his economic writings it is clear that Hayek is preoccupied with the significance of the role of knowledge in the economy.1
Drawing on the arguments of the socialist calculation debates of the interwar years, Hayek notes that the successful functioning of a large society depends on the successful co-ordination of the knowledge held by millions of individual minds. The sheer volume and complexity of this knowledge is such that no one mind has the power to absorb it in its totality. No one human mind can possibly grasp all of the relevant data necessary to plan a whole economic system. Indeed it is an error (what Hayek calls the synoptic delusion) to proceed as if such a thing were possible. And this is Hayek’s chief complaint against his opponents in the socialist calculation debate: their assumption that a rational plan for the whole of the economy is a matter of rational study of the relevant data. The central point about economics is that the information necessary cannot be centralized; indeed, the study of economics is the study of how individuals without such perfect knowledge interact. Hayek and his fellow Austrians stress the key role of the information-carrying function of prices and the discovery or informationfinding function of entrepreneurs. They argue that these roles are missing from a system of socialist or command economics, leading socialist economists to the logically impossible assertion that one mind or group of minds is capable of controlling and acting on all the information previously held by millions of individuals. The argument is essentially that the complexity of social phenomena prevents efficient economic planning and it runs, in an abbreviated form, like this.
