Sunday, June 19, 2011

Hayek's "The Use of Knowledge in Society" and How I abridged the 1945 Free-Market Article that inspired Wikipedia

Quick Links:

Wikipedia

"'The Use of Knowledge in Society' by Austrian School economist Friedrich von Hayek was central to [Jimmy Wales'] thinking about how to manage Wikipedia." (source)

How is it that one of the most successful egalitarian projects of our time was inspired by the work of the free market economist Friedrich Hayek? To some it may seem like a contradiction. However, one could also say that Wikipedia is an excellent example of free market principles at work. After all, Wikipedia has been so successful explicitly because the foundation has always attempted to minimize its central authority and instead it encouraged the 'market' of contributors and consumers to find their own, organic solutions.

What is in this essay that helped inspire Wikipedia? Who is Hayek? Is there an accessible, abridged version of the essay?

… and will there be a music video? (yes!)


Hayek vs Keynes Rap Anthem

In 2010 I ran across a piece on NPR about a rap video that pitted Keynes against Hayek (listen on NPR). I was surprised at the video's high production value, but what was particularly great was how it gave both economists fair and equal representation. If you agree with me after watching the video that Hayek wins the argument, it will be based on the merit of his arguments in this honest intellectual debate set to the background of a surprisingly compelling rap video.

The video was a tremendous success. It now has over 5.5 million views on YouTube (2016), has been translated into a dozen languages, and has led to an equally great sequel. Best of all, since it is a fair representation of both theories, it has been used in schools as a teaching aid. If you haven't already, watch the video now. You won't regret it.

    EconTalk with Russ Roberts

    After watching the video I looked into the podcast by the video's co-creator, economist Russ Roberts. Much like the video itself, the EconTalk podcast has a free market bias, but Russ Roberts consistently is honest about his own biases and presents the opposing view in a respectful light. I have been hooked on EconTalk ever since, and have learned a lot.

    In January, 2011 Roberts interviewed Bruce Caldwell regarding Hayek’s life and ideas (listen on EconTalk). At the end of the talk they recommended the best place to start reading Hayek was a short essay written in 1945 called “The Use of Knowledge in Society.” Though Hayek's ideas are excellent, lucid and well thought through, as a writer I have found him verbose and often inscrutable. Having read some of Hayek’s books including “The Road to Serfdom,” “The Constitution of Liberty,” and “The Fatal Conceit,” the idea of a “short work” that concisely presented his ideas was very appealing. I was hoping I might finally have a piece of Hayek’s work I could recommend to people.


    Abridging a Great Work

    After reading “The Use of Knowledge in Society” I can agree with Roberts and Caldwell. It is an excellent, stand alone piece that gets at the heart of the most fundamental questions of economics: How is it possible for a society as complex and diverse as ours to function and thrive?

    The essay is short, for Hayek. However, it is still not very accessible to the average reader. It isn’t that the material is inaccessible. Hayek did an excellent job of presenting his case in a way didn’t require any special knowledge. However, his prose requires a lot of work to understand.

    I couldn’t help but think, with full respect to Hayek, if only the prose could be reworked, this essay would more accessible and could reach a broader audience. With that thought I decided to try my hand at writing an abridge version of his article. It took me many months, spending an hour here and there, but I am please with the result. I believe I managed to cut the length of the article almost in half while maintaining the clarity and intent of Hayek’s original work.

    Here are the links again. Enjoy! I welcome feedback.


    4 comments:

    1. Fantastic, thanks for sharing this. As a modern reader I found your version much more enjoyable and didn't experience my usual "austrian drift" as I struggle to maintain focus through the complex sentence structures and academic references. Maybe in the next decade you can take on Von Mises' Human Action or Theory of Money and Credit. :D

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    2. I read the essay this morning and really appreciated it! I love viewing the economy as exchange of information rather than mere allocation of resources - that cuts directly to the "essence" of the concept and illustrates its function. As history would attest, central planning can never achieve the fidelity and throughput of massively parallel and local individual decision. However, I don't believe the essay's truths can be used to argue against all government regulation, as many might attempt.

      The problem I'm concerned with is this: what happens in aggregate when the individual decision itself is based on incomplete, flawed, or fraudulent information? From anecdotal experience, I believe that this condition is more the rule than the exception. I guess I believe that the function of government must be to support the integrity of the information used to make the individual decision, since fraud and mistruth are so apt to run rampant.

      Thoughts?

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    3. Jason, your comment closely mirrors my own thinking. I think the role of regulation is to promote and enforce "honesty in trade". I don't think regulation* should ever tell you what you can and cannot do. However, when "designing a society", if we allowed people to get ahead through fraudulent trade, we wouldn't be much better off than if we allowed people to get ahead through threat, intimidation and physical harm.

      I like regulation like requiring food products to have nutrition labels. Even such hands-off regulation is vulnerable to corruption and lobbying. However, it is much less likely to be significantly corrupted than overt "you can't do" or "you must do" regulations because the rewards of manipulating the system are so much smaller.

      I don't like regulation like saying you can't bring a drug to market unless it is FDA approved. Just require a label clearly stating the known risks, how well researched, or poorly researched, the drug is, and let consumers and their doctors decide.

      * When I say "regulation" I am excluding core laws and rights such as Property Rights and the Bill of Rights, etc.

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    4. I just found there is an EconTalk interview of Jimmy Whales specifically about how Hayek influenced him with Wikipedia: http://www.econtalk.org/archives/2009/03/wales_on_wikipe.html

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