![A Contradiction in Hayek's Famous 1945 Article](https://www.econlib.org/wp-content/uploads/2024/07/IMG_1463-scaled.jpg)
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In his “Quotation of the Day” yesterday, one of my favorite parts of CafeHayek, Don Boudreaux quotes from one of my favorite articles by Hayek, his “The Use of Knowledge in Society,” published in the American Economic Review in 1945. (Parenthetical note: Wouldn’t it be great if the AER started publishing articles with words and no equations, articles that make important points? A fella can dream.)
Here’s a key paragraph that Don quotes:
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 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 which is not given to anyone in its totality.
For approximately the last 20 years that I taught at the Naval Postgraduate School, I assigned this article and we worked through it in class, paragraph by paragraph. (
But you don’t teach an article over and over without noticing problems. Actually, for this article, I noticed only one, and it’s in the paragraph above.
It’s this: “frequently contradictory knowledge.”
Knowledge can’t be contradictory. Opinions can be. Assessments can be. But not knowledge.
Let me take an example. I’m at my cottage in Minaki, Ontario. One of the big changes here since last year is that the garbage dump has been closed. Bears used to go there to feast on people’s scraps of food. Now they don’t. So bears are now coming closer to cottages.
Let’s say that I know that there’s a bear in my yard. You know there’s not. If I really do know, then you’re wrong.
Or vice versa. You know there’s not a bear in my yard. I “know” that there isn’t. If you really know, then I’m wrong.
QED.
READER COMMENTS
Knut P. Heen
Jul 16 2024 at 7:30am
You are right if knowledge is defined as an objective set of information. Alternatively, you may define knowledge as your subjective interpretation of your information set. In the latter case, you are wrong. Two people may see an animal in the yard. One person thinks it looks like a bear. The other person thinks it looks like a big dog. Their knowledge is contradictory. It would not surprise me if Hayek used the latter definition of knowledge.
Jon Murphy
Jul 16 2024 at 9:57am
I see what you are saying, but I’m not sure this example works. Two reasons:
First: The knowledge isn’t contradictory here. The interpretation of evidence is.
Second: One (or both) of those interpretations are objectively wrong.
steve
Jul 16 2024 at 10:28am
At least in the sciences knowledge is confined to what we have been able to determine based on current tech and theory, so it’s not really that unusual to have stuff that is contradictory. So it depends upon how you define knowledge. If you use the usual common dictionary definition of knowledge we have contradictions occasionally. If you use the Platonic definition then we dont.
Steve
Jon Murphy
Jul 16 2024 at 10:44am
By way of example, do you mean a situation like heliocentrism versus geocentrisim? Geo was “known” to be the correct understanding given the tech and theory, but it was contradicted when new tech and new theory came that led to Helio?
Jim Glass
Jul 17 2024 at 4:33am
Well, a more contemporary example as to figuring out what’s going on up in the sky is the current so-called “Crisis in Cosmology” — there are two ways to measure the expansion rate (and thus age) of the Universe, and they disagree. At first it was assumed that as measurement accuracy improved the problem would go away — but as measurement accuracy has improved the problem has worsened.
You can see the data and hear a clear description of the problem right here. One measuring method uses the cosmic background radiation of the universe and the other observes the movement of distant objects. So what’s wrong? It could be a problem with either measuring method (in spite of both apparently steadily improving by many other tests) or with something basic about our understanding of how the universe is working.
If you watch the whole video you will see there is much knowledge in both methods, compiled, tested and proven over decades. Yet the knowledge is contradictory about the expansion rate. The reason is that the knowledge is incomplete.
The problem with Prof. Henderson’s “Knowledge can’t be contradictory” is that it assumes full knowledge. He looks in his yard and there is a bear there or not, he has full knowledge of the true fact. But full knowledge is rare, if we had full knowledge of the world we’d have nothing left to learn. Hayek’s “dispersed bits of incomplete knowledge” can certainly contradict each other, I’d say obviously.
Hey, we have 100+ years of knowledge embedded in Quantum Mechanics and Einstein’s General Theory of Relativity, the two most massively successfully tested theories of all time. But they contradict each other where they intersect. As built out, applied and tested as they are, our knowledge of them is incomplete. But can anyone really say that because they contradict we don’t have knowledge of them?
Jim Glass
Jul 17 2024 at 3:19am
I don’t see how this resolves anything.
Hayek says “disbursed bits of incomplete knowledge” can be “contradictory”, and this creates a “problem” for coordinating the economy. Does anyone really have much of an issue with either of those statements?
Say: our incomplete, partial knowledge A suggests pursuing policy X while our incomplete, partial knowledge B suggests pursuing policy not X. This is a contradiction. Which creates a problem in making a decision, in real time. (A kind of thing that happens all the time, including with me and my kids.)
Does observing ‘there is an unknown objective reality which mandates that either A or B or both must be wrong’, eliminate either the contradiction or the problem it creates in making the decision in real time?
Andrew_FL
Jul 16 2024 at 9:03am
I think I know the sort of situation which Hayek has in mind-when individual plans/intentions for the use of economic resources require the use of resources someone else has already planned to use. Their plans are contradictory. Market prices reconcile individual plans-they must bid against each other for the scarce resources.
Each individual “knows” how so much material, so much time, so much labor, “should” be used. But those “shoulds” contradict each other. The matter must be settled by the market mechanism.
Craig
Jul 16 2024 at 8:27pm
Wouldn’t ever changing consumer tastes and preferences save Hayek’s quote here?
David Henderson
Jul 16 2024 at 9:09pm
No, but I’m curious why you think so.
Craig
Jul 16 2024 at 10:49pm
I read the portion a few times and my thought was:
“the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form” <–I take this to mean I’m stuck making my decisions based on some quantum of information less than perfect information.
“but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess”
So if we say that every bit is 1…..N and I possess all of bit 1 which we will say is the price of cheese and all of bit 10 which is the price of pizza dough but we only know some portion, the incomplete portion of 20 which is the weather and the forecast differs slightly between accuweather and weather.com indeed both aren’t 100% sure of a sunny day but give different percentage chances of rain the following day and if its rains less people come to the beach to buy your pizza. Indeed their plans as to whether they may or may not be coming to the beach might themselves be influenced by the weather reports themselves. If Jim Cantore is your only customer tomorrow, probably not a good day for pizza sales.
robc
Jul 17 2024 at 12:03am
[insert Goedel reference here]
Jim Glass
Jul 17 2024 at 2:16am
You are equating “knowledge” = “true factual reality”. (There’s a bear in the yard or not. One can’t have knowledge of it being there if it isn’t.) Whatever remnants of my undergraduate philosophy degree may still be in my head tell me that the “=” is not true … but as I left all that behind in my rear view mirror decades ago over debates like this (and its market value in the off-campus real world) I won’t argue that point.
What is undisputable is that all knowledge — as absolutely true and accurate as it may be (ahem) — is finite. Nobody anywhere has such full knowledge of any “full situation” that is more than trivial. Much less of an entire economy to be efficiently coordinated. And I think most will agree that differing “disbursed bits of incomplete” knowledge held by different people can indeed lead them entirely rationally to contradictory beliefs and policy opinions. Thus, “contradictory knowledge”. (An argument that reality can’t contradict itself, thus bits of incomplete knowledge can’t contradict each other in some final, omniscient, unknowable sense doesn’t help, because that sense isn’t known today when we must act. Absent the unknown resolution, we are left with “contradictory” incomplete knowledge.)
I’m thinking now of a real situation in the US Civil War. Two field generals had knowledge of their separate combat fronts. The staff general above them had knowledge of logistics and coordination concerns. The politician above them all had knowledge of political effects becoming critical. (Let’s assume all the knowledge of each was perfect, cough.) All shared the same objective of victory. Yet each had knowledge different from the three others, each set of knowledge had different implications, and this “contradictory knowledge” led them rationally to desire sharply conflicting courses of action. How were they to tell which was best? It was life and death! Historians today still argue.
This seems to square pretty well with Hayek’s statement:
Plus, knowledge is probabilistic. Those Civil War guys had plenty of “knowledge” of their own business, but did *not* “know” all of what was going on, and knew they didn’t. They were thinking: probably this, maybe that, risk of the other thing, hope not. Add different views of probabilities and there’s a whole lot more scope for rational “contradiction” on the same facts. It’s the same with coordinating an economy, no? How many times have I heard “economists can’t even predict the present”. And even as to that bear in your yard, there’s a 1/zillion chance it’s Schrodinger’s Bear — there and not at the same time!
Max Molden
Jul 17 2024 at 10:15am
David, your take is good! But I think “knowledge” is simply a peculiarity of Hayek’s. I don’t believe it is particularly fortunate, but he simply did not subscribe to the common meaning of knowledge but relied on an idiosyncratic understanding. See Scott Scheall’s recently published paper “A Hayekian Social Science of Science” in the latest C+T issue and in his 2020 book p. 116f!
V Colvin
Jul 17 2024 at 1:10pm
My son enrolled at NPS last January and will graduate in December. A pity he won’t be able to take any of your classes but he’s on a physics track anyway. I’ve been reading your writings off and on for a few years, originally linking to you through the Cafe. Please don’t retire from that endeavor yet.
Regarding the problem noted above I can’t help but feel we are arguing semantics. I try not to parse others words to closely, although ironically I wish others would do so to mine. I get very frustrated when people misinterpret what I say or write when I know I was very precise in my language. To be honest, I can’t help but agree with both you and Hayek. How’s that for a contradiction?
DR Jensen
Jul 17 2024 at 8:55pm
The author’s argument depends on his incorrect assertion that all knowledge must be objective facts.
Check out any dictionary and you will find no definition that fits the author’s.
For example, one definition of knowledge says “The sum or range of what has been perceived, discovered, or learned.”
Mark Twain once said, “The trouble with the world is not that people know too little; it’s that they know so many things that just aren’t so. ”
Clearly, even in the 19th century, people understood that what some people considered “knowledge” was, in fact, a greatly mistaken belief.
Todd Jeffrey Lorenz
Jul 18 2024 at 12:41am
That is too picky. “Knowledge” may be gleaned from many types of data. It doesn’t necessarily imply that the “knowledge” holds in all situations.
Jon Guze
Jul 19 2024 at 2:44pm
You seem to assume that by “knowledge,” Hayek means “certain knowledge” or “true knowledge.” Thanks to Popper, however, Hayek knew that no one has access to knowledge in that sense. “Objective knowledge,” in the sense that Popper and Hayek use the phrase, means ideas that have been given concrete expression using symbolic systems. Such knowledge is always riddled with contradictions. It is by identifying and eliminating such contradictions that our stock of objective knowledge grows and improves. Science accomplishes those things self-consciously and systematically, but markets accomplish those things too. See pp. 16-21 in https://docs.google.com/document/d/1CrtC9yvBPx06DDd7ULQ6–gDvMmpBJZO/edit.
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