March 14, 2010

Millions of facts which in their entirety are not known to anybody

Hayek makes his claim that economics must augment the attention paid to the division of labor with an appreciation of the fragmentation of knowledge that entails, and also his claim that in advanced society it is not so much the knowledge that any one individual can acquire but the greater benefit that individuals can enjoy because of the knowledge possessed by others.  This is the Hayekian twist on the benefits of specialization and exchange and social cooperation under the division of labour.  For institutional analysis, we are led to ask what rules of the game and mechanisms of enforcement best serve to enable a society to realize the benefits of fragmented knowledge.
Consider the following passage from the beginning of chapter 1 in Vol. 1:
"This structure of human activities constantly adapts itself, and functions through adapting itself, to millions of facts which in their entirety are not known to anybody.  The significance of this process is most obvious and was at first stressed in the economic field.  As it has been said, 'the economic life of a non-socialist society consists of millions of relations or flows between individual firms and households.  We can establish certain theorems about them, but we can never observe all.'  The insight into the significance of our institutional ignorance in the economic sphere, and into the methods by which we have learnt to overcome this obstacle, was in fact the starting point for those ideas which in the present book are systematically applied to a much wider field.  It will be one of our chief contentions that most of the rules of conduct which govern our actions, and most of the institutions which arise out of this regularity, are adaptations to the impossibility of anyone taking conscious account of all the particular facts which enter into the order of society.  We shall see, in particular, that the possibility of justice rests on this necessary limitation of our factual knowledge, and that insight into the nature is therefore denied to all those constructivists who habitually argue on the assumption of omniscience." (p. 13)

To me this is an amazingly powerful passage and does set the stage for so much of what Hayek does in Vol. 2 and even in Vol. 3.  But it also points back to his work (at least in the 1930s) on knowledge and coping with our ignorance.  It also reflects, in my mind, how Hayek situates his work in the broader context of the cultural sciences and the disciplines of philosophy and political and moral theorizing. 

Unreasonable Reason from Cafe Hayek by Don Boudreaux
Here’s a letter that I sent to the Washington Post:

George Will wisely warns against reason unreasonably applied (“As a progressive, Obama hews to the Wilsonian tradition,” March 11).  Pres. Obama and his ilk are guided by an irrational faith that human reason is so potent and encompassing that it permits the Best and the Brightest to consciously design society, or at least to successfully rearrange significant parts of society (such as the health-care industry). 
This hubris is dangerous. F.A. Hayek, defending reason reasonably applied, wrote more than 60 years ago that
the fundamental attitude of true individualism is one of humility toward the processes by which mankind has achieved things which have not been designed or understood by any individual and are indeed greater than individual minds.  The great question at this moment is whether man’s mind will be allowed to continue to grow as part of this process or whether human reason is to place itself in chains of its own making.  What individualism teaches us is that society is greater than the individual only in so far as it is free.  In so far as it is controlled or directed, it is limited to the powers of the individual minds which control or direct it.  If the presumption of the modern mind, which will not respect anything that is not consciously controlled by individual reason, does not learn in time where to stop, we may, as Edmund Burke warned us, ‘be well assured that everything about us will dwindle by degrees, until at length our concerns are shrunk to the dimensions of our minds.’” F.A. Hayek, “Individualism: True and False,” Chapter 1 of Hayek, Individualism and Economic Order (U. Chicago Press, 1948).

On Speaking In and Of Reality from One Cosmos by Gagdad Bob
I use the symbol "O" to stand for the infinite and unknowable ground of ultimate reality from which our existence is derived, the latter being like a spark thrown from a central fire. You are a spark in the dark responsible for that nasty business in the park, but that is a subject for a different post. O itself can never be known as it is. On the one hand, we can know "about" it, which I call (k), which refers to all of our profane, everyday knowledge up to and including the highest reaches of science. […]

We in the West suffer from a different problem than the one that afflicts so much of the (-n) Islamic world (mostly the unsufirabble parts). Unfortunately, our culture does more than honor (k). Rather, it elevates it to the highest. The secular world tries to eradicate O and replace it with mere (k), which automatically places one in an abstract, substitute, and counterfeit world at least one degree removed from reality.

Religions, properly understood, attempt to restore our primordial relationship to O. Fundamentally, they contemplate the holy and manifest mystery of Being by trying to enter it directly -- not talk about it but from within it. And when they do talk about the mystery, it is not in the manner of (k)-->O (or at least it shouldn't be). Rather, the direction is reversed, and it is O-->(n). 

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