Zoo Station

Very few economics papers have influenced my thinking as much as F.A.Hayek's brilliant, "The Use of Knowledge in Society." A friend of mine had asked for it earlier today, and while searching for it, I found that the entire paper is now available online for free at the Library for Economics and Liberty. I would still recommend that you read the print version at the American Economic Review (Sept 1945), if you can, and if not, read the paper online. To give you a taste of what to expect in the paper, here's a little bit extracted from my doctoral dissertation about the centrality of the price system to a market economy.

In his seminal paper, “The Use of Knowledge in Society,” Hayek (1945, 526, 527) writes that “in a system where the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.” He goes on, “the most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on, and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change.”

Hayek (1945, 528) drives home the point about the signaling and coordinating role of prices by quoting the great mathematician Alfred North Whitehead from his book “An introduction to Mathematics”:

It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they make speeches, that we should cultivate the habit of thinking what we are doing. The precise opposite is the case. Civilization advances by extending the number or important operations which we can perform without thinking about them.