Information and Markets: Toward a Critical Sociological Appreciation of F.A. Hayek

F.A. Hayek’s famous critique of the socialist planned economy turned on the role of information in markets. In competitive markets, decision-making is decentralized and relies on locally available market signals. Decision-makers do not have to be omniscient or predict the future; they simply have to focus on market prices. By contrast, socialist planners face a much more demanding situation where they have to acquire and process vast amounts of information in a centralized fashion. The author revisits Hayek’s early work in light of the contemporary revolution in information technology, using recent research on organizational decision-making. The author argues that a great deal of market information is produced by public and private institutions, and includes much more than market prices. The boundary between tacit knowledge and formalized knowledge changes as IT enables the spread of the latter. Furthermore, the growing “knowledge economy” underscores the importance of intellectual property, and the legal institutions that support it. Overall, some of Hayek’s early insights hold up well while others need updating.