Friedrich Hayek vs. Reality

In 1945, Friedrich Hayek wrote "The Use of Knowledge in Society." Here he argued that knowledge is unevenly dispersed throughout society, that often people at the bottom of hierarchies, who are dealing hands-on with problems on an everyday basis, have more of a specific kind of information, including specifically acquired skills, than their "superiors" - what he calls "the knowledge of particular circumstances of time and place." It is impossible for any central authority to have all of the information at the "local" level, and for this reason, Hayek thought that central planning was effectively impossible, doomed forever to make fatal mistakes based on incomplete information. But all was not lost. Hayek's answer to this problem was free trade. He saw free trade as a means for information to flow freely throughout society. Fluctuations in price would reflect changes in supply and demand too subtle for the pollsters of central-command economies to detect, and through the prices of commodities, important economic information would be transmitted throughout the population.

Well, maybe in Hayek's utopian fairyland, this is true. But as yesterday's Supreme Court decision shows, it's not true here in grubby old reality. Here, capitalists do not want information flowing freely, and they will do everything in their power to stop it. In this case (Ohio v. American Express Co.), American Express charged significantly larger fees to restaurants and other businesses than their competitors, and further stipulated in their contracts that local businesses are not allowed to share information about this with their customers. The Justice Department brought an antitrust case against AmEx for this uncompetitive practice, but the Supreme Court sided with AmEx, declaring that it is perfectly within the rights of a corporation like AmEx to restrict the flow of this kind of information, and to reap the profits thereby.

Hayek was not completely wrong - workers on the ground do often have knowledge and skills that their superiors lack. What he failed to recognize was that government is not the only kind of hierarchy that fails to understand - or intentionally restricts - the flow of this information. Corporate hierarchies can be just as stupid, blind, and tyrannical.

[first posted to facebook, June 26, 2018]


Popular posts from this blog

The One, True, Correct Interpretation of Nietzsche (Aesthetic Materialism V)

Why I Love Religion

A Defense of the Ego