than imagined in Paul Samuelson’ s small little mind. Max Borders explains. Choice bits:
“there is more to The Road to Serfdom than concerns about the political economy that leads to totalitarianism. A lot, in fact. Hayek goes over many of the vital concepts that constitute his true legacy:
- Spontaneous Order – Complex society and open markets cannot be planned. Period. Human beings just ain’t smart enough. Instead, the extended order emerges – unplanned and undesigned – due to humans interacting in complex ways according to simple rules. These rules do not specify certain social ends, but rather bring order to the diverse ends of billions of people pursuing happiness.
- The Knowledge Problem – It is impossible for a single mind or group of minds to predict, plan or control the innumerable inputs, outputs and actions in a market. Instead, knowledge is dispersed among billions of people. Entrepreneurial opportunities are seized by individuals with particular, local insights, and/or expertise in some specific area the bureaucrate cannot possess.
- Price System – Entrepreneurs also respond to information flows communicated through the price system. Bureaucratic control of an economy is impossible due to the loss of information communicated through prices, and due to the inability of one to gain the right kinds of information at the right times and right places. “Prices are signals, not marching orders.”
- Competition as a Discovery Procedure – The circumstances of time and place are critical to the success of competitive market actors. The idea that we can aggregate economic data – like macroeconomic data – in order to say something meaningful about how things should to be coordinated is, well, a bad idea. Competition among market actors looking for opportunities to offer a previously unnoticed value to consumers is basically crowd-sourcing value creation. Innovators compete, you win.
I’d tell you that Hayek is a Nobel Laureate, but I don’t want that to reflect poorly on him. Suffice it to say he is one of the greatest political philosophers and economists in history. He taught us that the economy is not a machine.