QuestionsWhat is a just society?Knowledge is dispersed: no central plan can gather it
What is a just society?Tradition

Knowledge is dispersed: no central plan can gather it

Dispersed knowledge; spontaneous order; the economic calculation problem

Friedrich Hayek 1899 · 1992No single mind holds all the knowledge a society needs: it is scattered among millions of people.
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What it claims

A just society relies on evolved rules and institutions (market, prices, law, customs) more than on a plan drawn up by a central authority.

Why

Useful knowledge is scattered among millions of people: no central plan can gather it, while prices make it circulate.

The same idea through history
Edmund Burke1790Burke already thinks each individual reason is a small stock, and that inherited customs hold more knowledge than we can see.
Friedrich Hayek1945
In short

"Knowledge is dispersed: no central plan can gather it" is an argument by Friedrich Hayek (The Use of Knowledge in Society, 1945, 1945) on the question "What is a just society?" (answer: tradition). Its claim: A just society relies on evolved rules and institutions (market, prices, law, customs) more than on a plan drawn up by a central authority. According to AskPhilosophy's logic check (Z3 solver), the argument is valid only if one grants a premise the author leaves unstated (P5). AskPhilosophy presents 3 objections, 1 of them with a documented reply, and the original text behind each premise, checked word for word.

The Use of Knowledge in Society, 1945
Valid with an implicit premise

In 1945, as a war in which states planned everything comes to an end, Hayek asks a simple question: who knows what should be produced, and where? Economists, he says, have treated the problem as if all the data were gathered in one head. But this knowledge exists only as scattered pieces held by millions of people. From this comes an idea of a good society: the best society leaves decisions to those who know, and its rules have grown through trial and error rather than being designed from above.

P1The knowledge needed to organise a society never exists in concentrated form: it exists only as dispersed bits, incomplete and sometimes contradictory, among all the individuals.
P2A large part of this knowledge is knowledge of the particular circumstances of time and place, which statistics cannot summarise. A central planner must therefore leave these decisions to "the man on the spot".
P3The price system passes on this information without anyone needing to know everything: each person receives only the signal useful to his action, and thousands of strangers adjust without any order being issued.
P4This mechanism, like many rules and institutions of civilisation, was not designed: it arose by building on habits that had proved successful.
P5 · implicit premiseA just society is one that can use all this dispersed knowledge. It therefore leaves coordination to evolved rules and institutions rather than to a central plan.
Therefore a just society relies on evolved rules and institutions (market, prices, law, customs) more than on a plan drawn up by a central authority.

click a premise to reject it

If you accept every premise, logic forces you to accept the conclusion. So the debate is about the premises.
Checked by a logic solver: the premises cannot all be true while the conclusion is false.
Without the implicit premise: Without P5, the computer finds a case where knowledge is dispersed and the market uses it well, and yet a just society must change these rules, for instance because they produce results its members judge unjust.
With P5 the argument is valid. Without P5 it remains true that knowledge is dispersed, but it does not follow that justice lies in evolved rules: one might want to improve the price system or correct it by collective choices. Hayek speaks first of efficiency (using knowledge). Making efficiency a criterion of justice is a step his critics dispute.
Analogy. No one runs a city's traffic with a single plan. Each driver sees his own street and adjusts his route, and the whole keeps moving: the local knowledge of thousands of drivers beats a central dashboard that could not see the details.

Objections

3

Each objection is a conversation: click to see who replies and where the debate stands.

O
Oskar Lange 1937 · attacks premise 2

A central board can imitate the market: it sets prices, lets public firms produce by simple rules, then corrects prices when there is shortage or surplus, by trial and error. It does not need to know local detail, only prices, as a market does.

a defender replies
Friedrich Hayek defender of the argument · 1940
Summary: Hayek answers Lange in "Socialist Calculation: The Competitive 'Solution'". A board that sets prices will change them too slowly and too rarely. It will have to set one price for goods that differ in quality, place and time. And managers of public firms, who do not risk their own money, do not have the same reasons to react well.
Where the debate stands (our summary)The core disagreement: does a price set by a board and corrected by trial and error carry the same information as a price born of exchanges between people risking their own money? Both camps pursued the discussion over decades without settling it.
J
Joseph Stiglitz and Bruce Greenwald 1986 · attacks premise 3

When information is imperfect and unevenly held (insurance, credit, jobs), markets are in general not efficient: prices do not carry all the useful knowledge, and well-designed public intervention can improve the result. The price is thus not the reliable messenger Hayek describes.

no reply
No reply possible: objection raised in 1986, after the author's death (1992).
The debate goes on (our summary) Hayek wrote in 1945, forty years before this work. His own text admits that the price system works less well when prices are rigid. His defenders argue that a state correcting the market is itself subject to the problem of dispersed knowledge; Stiglitz's supporters reply that correcting one specific failure is not planning the whole economy.
K
Karl Polanyi 1944 · attacks premise 4

In The Great Transformation, published the same year as Hayek's The Road to Serfdom, Polanyi argues that the market did not arise spontaneously: it was created and maintained by laws and by the state, and it destroys social bonds if left to extend to land, labour and money. Speaking of an order born without design hides the role of political power.

no reply
We have not yet found a direct reply by Hayek in the texts.
The debate goes on (our summary) Hayek does not cite Polanyi in this article. He writes that the price system is a formation man learned to use after stumbling upon it "without understanding it": he does not deny that laws and institutions surround it, he denies that any mind designed it. The core disagreement: are evolved rules enough to protect people, or must they be contained by conscious political choices?