Knowledge, Data & Fatal Conceit

Paul W. Cockshott cockshpw at
Tue Oct 18 10:46:53 MDT 1994

This is not supposed to be a discussion group on Hayek, but since
Hayek is Chris's chosen vehicle for attacking Marxism I feel that
I have to respond.

Chris claims that I have got Hayek wrong, that he was not
concerned with the impossibility of one mind comprehending
the immensity of the economic problem. In that case why did
he keep going on about it as in:

 [T]hose who clamour for ``conscious direction''---and who cannot
 believe that anything which has evolved without design (and even
 without our understanding it) should solve problems which we should not
 be able to solve consciously---should remember this: The problem is
 precisely how to extend the span of our utilization of resources beyond
 the span of the control of any one mind; and, therefore, how to provide
 inducements which will make individuals do the desirable things without
 anyone having to tell them what to do. (Hayek, 1945, p. 527)

Chris, like Lavoie wishes to underemphasise what Hayek said
about the computational intractability of solving the
large number of equations necessary to determine economic
equilibrium, but that wont wash. As late as 1955 in the
Counter Revolution of Science, he was still arguing that
the computations were impossible - it is convenient for
his present followers to ignore this.

Hayek does go on at length about dispersed knowledge and the difficulty
in concentrating it. He cites for example the specialised localised
knowledge of shippers and arbitragers. But these are precisely the
areas that have proven themselves most amenable to computerisation.
American Airlines became the leading US airline because it was the
first to capture the specialised information of airline agents and
put it in a centralised information system. No airline company can
now compete if it relied upon tacit human knowledge instead of
centralised databases. The banks devote huge resources to developing
software for automated trading in the currency and securities markets.
These are just the sort of areas where genetic algorithms and neural
net systems can outperform the human expert.

Hayek seems to overlook the possibility that very specific local
knowledge may be used locally, without prejudice to the operation of
a central plan. The question here concerns the degree of
recursiveness of planning, that is, the extent to which plans can be
formulated in general terms by the higher planning authorities, to be
specified in progressively fuller detail by successively lower or more
local instances. Nove  has argued persuasively that
as regards the composition of output, the degree of recursiveness of
planning is rather small. If a central authority sets output targets in
aggregated terms, and leaves it to lower instances to specify the
details, the result is bound to be incoherent. In the absence of the sort
of horizontal links between enterprises characteristic of the market
system, the enterprises simply cannot know what specific sort of
output will be needed, unless they are told this by the higher authority.

This may be granted  but low recursiveness with respect to
decisions on the composition of output does not imply that all
decisions relating to production have to be taken centrally. Consider
the knowledge, at the level of the enterprise, of which particular
workers are best at which tasks, who is the fastest worker and who
the most reliable and so on (and similarly for the particular machines
operated within the enterprise). Why shouldn't such knowledge just
be used locally in drawing up the enterprise's own detailed schedules
for meeting an output plan given from the `centre'? Isn't this precisely
what happens at plant level in the context of planning by a large
(multi-plant) capitalist enterprise?

Hayek's distinction between scientific knowledge (knowledge of
general laws) and knowledge of specific circumstances of time and
place is not exhaustive. Importantly, it leaves out of account
knowledge of specific technologies. Much technological knowledge
embodies general scientific knowledge, but is not reducible to the
latter, yet neither is it so specific that it is non-communicable. The
licensing and transfer of technologies in a capitalist context shows
this quite clearly. A central registry of available technologies would
form as essential component of an efficient planning system.


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