Knowledge, Data & Fatal Conceit

Mon Oct 17 16:08:19 MDT 1994

     This is a reply to Paul Cockshott on the Hayekian
argument against socialist planning.  I hesitate to drudge up
all the arguments again, but I need to make a statement here
to correct a very profound misinterpretation of Hayek's
critique of planning.  The prime argument that Hayek offers
against planning is NOT that a single mind cannot know all of
the information that is necessary to implement plans.  If it
were Hayek's argument that planning could not be efficacious
simply because no one mind could ascertain all of the data
necessary to make a rational economic decision, then Paul
would be absolutely correct; all we would need is a
technologically advanced computing machine to process the
data and to plan accordingly.

     But this was NOT what Hayek argued.  Economic decision-
making on the market never depends on data exclusively.  It
depends on knowledge.  There is a distinction between DATA
and KNOWLEDGE.  Hayek saw knowledge as constituted by factors
both "objective" and "subjective," conscious and
subconscious, theoretical and practical, articulate and
tacit.  Indeed, knowledge is BOTH quantitative and
qualitative.  Knowledge is dialectically connnected to the
knowing subject, and dependent upon that subject's context,
values, "know-how," skills, and beliefs.  The market can make
use of such personal, essentially dispersed knowledge in a
manner that central administration cannot.  And because
economic knowledge, like all knowledge, evolves through the
interplay of many minds, it is that interplay, the dynamic
market process, that must be preserved if it is to generate
the kinds of information crucial to such decision-making.
Purely quantitative- or data-based decision-making is NOT the
essence of that process.

     On the market, prices play a cognitive role.  As Don
Lavoie argues in NATIONAL ECONOMIC PLANNING (Ballinger, 1985)
prices reduce the overwhelming number of feasible ways in
which things can be produced to the relatively smaller number
of ways that are judged by market actors as "economical."
The dynamic movement of prices occurs because of competitive
tugs exerted by countless multitudes of competitive bidders.
Hence, decision-making is not based on the "objective" raw
data accumulated from, what Paul has called, "written
records, forms, ledgers, etc."  Prices transmit not ONLY
data, but KNOWLEDGE of relative scarcities.  They gain
meaning BECAUSE they are related to the epistemic context of
each market participant.

     No central computing machine can quantify the tacit and
dynamic factors in human decision-making.  By processing
static bits of raw data, frozen in time, unrelated to the
contexts of millions of economic actors, a central planning
agency will generate decisions purely on the basis of
"objective" mathematical equations, that are TRULY abstracted
"from the real processes that make any form of administration
possible."  This is what Hayek aptly termed, "the fatal

                               - Chris

Dr. Chris M. Sciabarra
Visiting Scholar, N.Y.U. Department of Politics
INTERNET:  sciabrrc at
  BITNET:  sciabrrc at nyuacf


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