There is something of a parallel here with the work of Leonid Hurwicz and Joseph Stiglitz and George Stigler — take an aspect of Hayek’s recalculation problem / knowledge problem / coordination problem, put it into a formal “model” built up out of mathematical “givens” (e.g. “given” probability distributions and “given” costs, etc.), and then look for “market failures” within this God’s-eye-view construct, failures which theoretically can be ameliorated by a benevolent government “intervention” looking and acting from something like a God’s-eye-view of the world.
The New York Times article is here.
UPDATE: Ed Glaeser provides an excellent explication of the work which has been awarded the Nobel Prize. Where Hayek has open-ended discovery processes and knowledge problems in the real world, here we have a further development of the Stigler paradigm where Hayekian discovery processes and knowledge problems are transformed into “given cost” and “given information” math “models” that eliminate open-ended entrepreneurial learning and non-given, non-quantifiable discovery problems of the sort hinted at by Kling.
MORE: Another explication.
UPDATE II: Peter Boettke on the “perfect market” strawman and Diamond’s Nobel Prize.