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The Use of Knowledge in Society

In: Readings In The Economics Of The Division Of Labor The Classical Tradition

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  • F. A. HAYEK

Abstract

What is the problem we wish to solve when we try to construct a rational economic order?On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

Suggested Citation

  • F. A. Hayek, 2005. "The Use of Knowledge in Society," World Scientific Book Chapters, in: Guang-Zhen Sun (ed.), Readings In The Economics Of The Division Of Labor The Classical Tradition, chapter 25, pages 270-284, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812701275_0025
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    Keywords

    Division of Labor; Specialization; Extent of the Market; Knowledge; Political Economy; History of Economic Thought; Increasing Returns; Equilibrium; Price System; Coordination;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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