The Use of Knowledge in Society

From Wikipedia, the free encyclopedia

"The Use of Knowledge in Society" is a scholarly article written by economist Friedrich Hayek, first published in the September 1945 issue of The American Economic Review.[1]

Written (along with The Meaning of Competition) as a rebuttal to fellow economist Oskar R. Lange and his endorsement of a planned economy, it was included among the twelve essays in Hayek's 1948 compendium Individualism and Economic Order.[2] The article is considered one of the most important in the field of modern economics.[3]


Hayek's article argues against the establishment of a Central Pricing Board (advocated by Lange) by highlighting the dynamic and organic nature of market price-fluctuations, and the benefits of this phenomenon.[4] He asserts that a centrally planned economy could never match the efficiency of the open market because what is known by a single agent is only a small fraction of the sum total of knowledge held by all members of society. A decentralized economy thus complements the dispersed nature of information spread throughout society.[5] In Hayek's words, "The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly; that is, they move in the right direction." The article also discusses the concepts of 'individual equilibrium' and of Hayek's notion of the divide between information which is useful and practicable versus that which is purely scientific or theoretical.[4]


Regarded as a seminal work,[6][7][8] "The Use of Knowledge in Society" was one of the most praised[9] and cited[10] articles of the twentieth century. The article managed to convince market socialists and members of the Cowles Commission (Hayek's intended target) and was positively received by economists Herbert A. Simon, Paul Samuelson, and Robert Solow.[11]

UCLA economist Armen Alchian remembers the excitement of reading Hayek's essay and stopping fellow economists in the hallway to ask if they had read Hayek's essay. In 2011 "The Use of Knowledge in Society" was selected as one of the top 20 articles published in the American Economic Review during its first 100 years.[12][13] Tom Butler-Bowdon included "The Use of Knowledge in Society" in his book, 50 Economics Classics.[14]

While calling the essay "powerful and luminous," economist George Stigler, in his Nobel Prize Lecture, stated that Hayek failed to address the principles of knowledge acquisition.[15]

As of 2023, the article had over 22,000 citations in Google Scholar.[16]


Jimmy Wales, co-founder of Wikipedia, cites "The Use of Knowledge in Society", which he read as an undergraduate student,[17] as "central" to his thinking about "how to manage the Wikipedia project".[18][19] Hayek argued that information is decentralized – that knowledge is unevenly dispersed among different members of society – and that as a result, decisions are best made by those with local knowledge rather than by a central authority.[18][20] The article "set the stage" for later use of Game theory models.[21] The article vitally influenced economist Thomas Sowell and served as his inspiration to write Knowledge and Decisions.[22] Swedish economist Assar Lindbeck, who chaired the prize committee for the Nobel Memorial Prize in Economic Sciences, testified that "The Use of Knowledge in Society" was the work that clarified the "advantages of well-functioning markets" for him.[23]

See also[edit]


  1. ^ Friedrich Hayek (September 1945). "The Use of Knowledge in Society" (PDF). The American Economic Review. 35 (4): 519–530. JSTOR 1809376.
  2. ^ Hayek, F. A. (1996). Individualism and Economic Order. Chicago: University of Chicago Press. ISBN 0226320936.
  3. ^ Potts, Jason (2019). Innovation Commons: The Origin of Economic Growth. Oxford University Press. p. 114. ISBN 978-0190937522.
  4. ^ a b Bruce J. Caldwell, ed. (1990). Carl Menger and his legacy in economics. Duke University Press. pp. 392–395. ISBN 0822310872.
  5. ^ "The use of knowledge in society (abstract)". Ewing Marion Kauffman Foundation. Retrieved 2007-10-05.
  6. ^ Anderson, Terry L. (2015-01-01). "If Hayek and Coase Were Environmentalists: Linking Economics and Ecology". Supreme Court Economic Review. 23. University of Chicago Press: 121–140. doi:10.1086/686475. ISSN 0736-9921. S2CID 155772768.
  7. ^ Sobel, Russell S.; Lesson, Peter T. (2010). "The use of knowledge in natural disaster relief management". In Chamlee-Wright, Emily; Henry Storr, Virgil (eds.). The Political Economy of Hurricane Katrina and Community Rebound. Edward Elgar Publishing. p. 31. ISBN 978-1849806541. OCLC 682540036.
  8. ^ Von Krogh, George; Roos, Johan (1996). Managing Knowledge: Perspectives on Cooperation and Competition. London: SAGE Publications. p. 11. ISBN 978-1849206969. OCLC 464667143.
  9. ^ Vermeule, Adrian (2008-12-09). "The Hayek Fallacy". OUPblog. Oxford University Press. Retrieved 2022-01-31.
  10. ^ Özden-Schilling, Canay (2021). The Current Economy Electricity Markets and Techno-Economics. Redwood City: Stanford University Press. p. 115. ISBN 978-1503628229. OCLC 1247679217.
  11. ^ Mirowski, Philip; Nik-Khah, Edward (2017). The Knowledge We Have Lost in Information. Oxford University Press. p. 62. doi:10.1093/acprof:oso/9780190270056.001.0001. ISBN 978-0190270056.
  12. ^ Arrow, Kenneth J.; Bernheim, B. Douglas; Feldstein, Martin S.; McFadden, Daniel L.; Poterba, James M.; Solow, Robert M. (February 2011), "100 Years of the American Economic Review: The Top 20 Articles", The American Economic Review, 101 (1): 1–8, doi:10.1257/aer.101.1.1, hdl:1721.1/114169, JSTOR 41038778
  13. ^ Leeson, Robert (2018). Hayek. Part XI, Orwellian Rectifiers, Mises' 'Evil Seed' of Christianity and the 'Free' Market Welfare State. Palgrave Macmillan. p. 402. ISBN 978-3319774282. OCLC 1037813419.
  14. ^ Butler-Bowdon, Tom (2017). 50 Economics Classics : Your Shortcut to the Most Important Ideas on Capitalism, Finance, and the Global Economy. London: Nicholas Brealey. ISBN 978-1473660427. OCLC 986224463.
  15. ^ Stigler, George J. (August 1983). "Nobel Lecture: The Process and Progress of Economics". Journal of Political Economy. 91 (4): 529–545. doi:10.1086/261165. ISSN 0022-3808. JSTOR 1831067. S2CID 154788476.
  16. ^ "Hayek: The use of knowledge in society". Google Scholar.
  17. ^ Schiff, Stacy (July 31, 2006). "Know It All". The New Yorker. Retrieved October 31, 2008.
  18. ^ a b Mangu-Ward, Katherine (June 2007). "Wikipedia and beyond: Jimmy Wales' sprawling vision". Reason. Vol. 39, no. 2. p. 21. Retrieved October 31, 2008.
  19. ^ Beck, Naomi (2018). Hayek and the Evolution of Capitalism. University of Chicago Press. p. 2. ISBN 978-0226556147. OCLC 1083442585.
  20. ^ Tkacz, Nathaniel (2015). Wikipedia and the Politics of Openness. Chicago: University of Chicago Press. p. 178. ISBN 978-0226192277. OCLC 881386686.
  21. ^ Roth, Alvin E.; Wilson, Robert B. (2019). "How Market Design Emerged from Game Theory: A Mutual Interview". The Journal of Economic Perspectives. 33 (3): 118–143. doi:10.1257/jep.33.3.118. ISSN 0895-3309. JSTOR 26732324. S2CID 201335364.
  22. ^ Ebenstein, Alan O. (2003). Hayek's Journey : The Mind of Friedrich Hayek (1st ed.). New York: Palgrave Macmillan. p. 73. ISBN 978-1403973795. OCLC 232157522.
  23. ^ Offer, Avner; Söderberg, Gabriel (2016). The Nobel Factor : The Prize in Economics, Social Democracy, and the Market Turn. Princeton University Press. p. 187. ISBN 978-1400883417. OCLC 957655664.