Dispersed knowledge

In economics, dispersed knowledge, also known as partial knowledge, is information that is dispersed throughout the marketplace, and is not in the hands of any single agent. All agents in the market have imperfect knowledge; however, they all have a good indicator of everyone else's knowledge and intentions, and that is the price.

The price indicates information that the player does not know, and by deciding to buy, sell or abstain at that price it also gives the player a chance to bring their knowledge to bear and reflect itself in the price. Most of the knowledge, however, is tacit knowledge and people usually are not fully aware of the knowledge that they are sharing via price signals, nor do they fully perceive the knowledge that they use when they make a price decision.

When a buyer goes to market, the prices he or she finds therein for products and services have been set by the complex calculus that is the sum total of the tacit knowledge residing within the market. Price signals are one possible solution to the economic calculation problem. This viewpoint is popular especially among Austrian School economists such as Friedrich Hayek.

The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich Hayek, The Use of Knowledge in Society

Wikipedia itself provides an example of the dispersed knowledge concept. In fact, the founder of Wikipedia, Jimmy Wales, said that it provided the conceptual framework for Wikipedia...The Political and Economic Views of Jimmy Wales

See Also

• Blind men and an elephant
• Distributed knowledge
• Division of labor
• Invisible hand
• Opportunity cost
• The Fatal Conceit
• The Use of Knowledge in Society
• Tax choice
• Wisdom of the crowd