Hayek’s Warning against Playing God
“The Use of Knowledge in Society” is Hayek’s reminder to us that we are not God.
“What is the problem we wish to solve when we try to construct a rational economic order?” asks F. A. Hayek at the start of his classic 1945 essay, “The Use of Knowledge in Society.” The point that Hayek is best known for making in this article is that central planning can’t work. However, there is an even more basic point that can be inferred from Hayek’s line of argument. It’s that planners aren’t God.
He wrote, “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.” But that’s not actually the problem. “The reason for this is that the ‘data’ from which the economic calculus starts are never for the whole society ‘given’ to a single mind which could work out the implications and can never be so given,” he wrote.
Instead, Hayek elaborated, “The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” The economic problem, therefore, is “the utilization of knowledge which is not given to anyone in its totality.”
Even economists who disagree with Hayek’s conclusions much of the time are often complimentary about “The Use of Knowledge in Society.” The insight presented in the article was and remains profound, and it changed the framing with which economic problems are viewed.
“there is knowledge outside the realm of learned expertise that a planner would have to be privy to if he were to plan the economy successfully.”
There was a temptation in the early- to mid-20th century, with early computers starting to make an appearance and industry becoming increasingly mechanized, to believe that economic problems could be solved by mathematicians and engineers. Put all the economic data into a machine, and it could spit out the solutions that would optimize production and consumption.
Of course, a computer is only as good as the data fed into it, so the data would have to be high-quality. But the accuracy of data is a technological problem, one that fine-tuning of methodologies can improve upon over time.
Hayek rejects that premise. But note carefully the terminology he uses to do so. In examples throughout “The Use of Knowledge in Society,” he does not use the language of mechanical processes or computing. In the quotations previously mentioned, he wrote of “a single mind” and knowledge “given to anyone.”
Elsewhere in the essay, he wrote of “the planner,” which does not seem to mean a computer program, but rather a person. He also wrote of a “single central authority,” which seems to imply a group of people tasked with planning the economy.
Hayek stipulated that “as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available.” But scientific knowledge is not the only kind of knowledge. He wrote that it is “almost heresy” to suggest such a thing, but it is nonetheless true.
In other words, there is knowledge outside the realm of learned expertise that a planner would have to be privy to if he were to plan the economy successfully. Hayek called that “the knowledge of the particular circumstances of time and place.” That knowledge requires not mere study, but rather presence. You have to be there, wherever “there” is, to acquire it. This knowledge, Hayek wrote, “by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form.” Only the “man on the spot” can have access to it and act upon it.
“Believers and nonbelievers alike should be able to agree that they, themselves, are not God.”
The element of time is key as well. Hayek wrote that “economic problems arise always and only in consequence of change.” He wrote of “day-to-day adjustments” that are vital to sound management. Those changes and adjustments necessarily take place along a timeline. Planning must take the future into account, since that is when these changes will occur, along with the needed adjustments in response to them.
Therefore, a successful central planner, according to Hayek, would need to be a single mind with all relevant knowledge, sufficient authority to exert his or her will over all of society, presence in every circumstance, and the ability to see the entire timeline of the events as they transpire — something only an omniscient, omnipotent, omnipresent, eternal being would be capable of.
That’s not a description of a human being or a group of human beings. That’s not even a description of a computer. That’s a description of God.
Hayek doesn’t mention God in “The Use of Knowledge in Society,” but the reader can make inferences by a process of elimination. What other being, if we’re being philosophically honest, possesses Hayek’s listed characteristics of what a central planner would need to be successful?
Read in this way, “The Use of Knowledge in Society” is Hayek’s reminder to us that we are not God. This is not a point only for the religious. Believers and nonbelievers alike should be able to agree that they, themselves, are not God. Whether you arrive at that conclusion from the humility that comes with belief in God or due to a rejection of the entire concept of God is, in this case, immaterial.
The promise of central planning then is that flawed human beings will play God sufficiently well to engineer a better outcome than the decentralized market system of prices and dispersed information. The market system did not arise from human design, Hayek said, but is rather a “marvel” that “man has learned to use... after he had stumbled upon it without understanding it.”
To a nonbeliever, that stumbling would be yet another example of the evolutionary development of mankind. To a believer, though, perhaps there’s a little bit of providence in the marvel of the market.