From a recent article about Wikipedia’s founder Jimmy Wales:
"Wales says the essay 'The Use of Knowledge in Society' by Austrian School economist Friedrich von Hayek was central to his 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. There are many articles and books on the success of Wikipedia. Instead, I’d like to look at it’s inspiration. What is in this essay? Who is Hayek? Is there an accessible, abridged version of the essay?
… and will there be a music video? (yes!)
Hayek and Keynes
I've been interested in economics for a very long time. I've used economic models in my personal research in programming language design and distributed computing. I actually read Hayek for fun as early as high school.Unfortunately, most people have never heard of Hayek. If they've heard of any economist at all, they've heard of Maynard Keynes. He provided the theory that governments can spend money to stimulate the economic and turn around recessions. I have never agreed with that theory. Governmental stimulus creates economic uncertainty and actually weakens the economy, lengthening any recovery. Hayek's theories opposed Keynes’. He worked to show the futility of central control, no matter how benign. He wrote about how to set up fertile environments so that economic recovery and growth can occur without direct intervention of any central authority.
The counter productive use of Keynesian theory in the handling of the recent global recession has been a sad thing for me to watch. So, when I ran across a piece on NPR a year ago about a rap video that pitted Keynes against Hayek I was immediately intrigued (listen on NPR). Mentioning Hayek at all on NPR immediately had my attention. When I got home I had to check out the video and was surprised at it'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 2 million views on YouTube, 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.
- "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem
(YouTube, ~7 minutes)
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.About six months ago Roberts did a cast with Bruce Caldwell that focused on 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 his ideas are excellent, lucid and well thought through, as a writer I have found Hayek 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 not only function but 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.
I only recently discovered that Jimmy Whales' inspiration from this great essay led to Wikipedia. I hope that endorsement to encourage you to read my abridged version. I don’t think it is too presumptuous to say Hayek’s ideas could fundamentally change your understanding of the way the world works.
- “The Use of Knowledge in Society” F.A. Hayek (abridged by S. Brinkman-Davis) (PDF)
- “The Use of Knowledge in Society” F.A. Hayek (unabridged)
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
ReplyDeleteI 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.
ReplyDeleteThe 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?
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.
ReplyDeleteI 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.
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
ReplyDelete