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Overview
  • Hayek knows that we cannot know enough to plan the economy, that if we insist on central planning we would create injustice and violence, that mainstream economists are only pretending to know, advising government conceit that becomes so destructive. The "Chops" section bookmarks additional works by other Austrian economists on the economic calculation problem.

    • To collect Hayek's writings about how we are limited by our inability to handle enough knowledge to plan society, 
    • To highlight how arrogance on this matter will lead to disastrous results and oppressive central government.
    • to collect other Austrian economists' arguments and critiques about the economic calculation problem (in the Chops section).
    • The Hayek articles are:
      • The Pretence of Knowledge (Nobel speech),
      • The Use of Knowledge in Society (article),
      • The Fatal Conceit - The Errors of Socialism,
      • The Road to Serfdom (condensed booklet)
  Dishes  - Limit of Knowledge
  • Dish 1 : Friedrich August von Hayek - Banquet Speech

  • A brief dinner table speech, apparently the night before the Nobel prize award ceremony: Was Hayek anticipating the deification of Paul Krugman by the press, and Keynes by mainstream academia? 

  • "... the Nobel Prize confers on an individual an authority which in economics no man ought to possess. ... But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.

    There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society - as the press tends to treat him till in the end he may himself be persuaded to believ

  • Dish 2 : Friedrich August von Hayek - Prize Lecture: The Pretence of Knowledge

  • Lecture to the memory of Alfred Nobel, December 11, 1974. On Nobelprize.org, The Official Web Site of the Nobel Prize. 

    Hayek's lecture must be really unpopular to his audience as he pointed out economists cannot supertitiously pretend to use math like the physical science, because there are way more interacting variables in society than they can handle, and they would make a mess of society trying. He used the current problem of inflation and unemployment to illustrate his points.

  • "If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

    He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environmen

  • Dish 3 : The Use of Knowledge in Society | Overview in Wikipedia

  • "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. 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.

  • The 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. He asserts that a centrally planned market could never match the efficiency of the open market because any individual knows only a small fraction of all which is known collectively. A decentralized economy thus complements the dispersed nature of information spread throughout society.

  • Dish 4 : Hayek, The Use of Knowledge in Society | Library of Economics and Liberty (HTML version)

  • By Hayek, Friedrich A. (1899-1992). This is a HTML version. We have also bookmarked a PDF version in the Refernces below.

    "What is the problem we wish to solve when we try to construct a rational economic order? ...

    The peculiar character of the problem of a rational economic order is determined precisely by the fact that 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 of society is thus not merely a problem of how to allocate 'given' resources—if 'given' is taken to mean given to a single mind which deliberately solves the problem set by these 'data.' It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its total

  • Dish 5 : The Fatal Conceit | Overview in Wikipedia

  • The Fatal Conceit: The Errors of Socialism is a non-fiction book written by the economist and political philosopher Friedrich Hayek and edited by William Warren Bartley.


    The book attempts to conclusively refute all forms of Socialism by demonstrating that socialist theories are not only logically incorrect but that the premises they use to form their arguments are incorrect as well. 

  • Dish 6 : THE FATAL CONCEIT - The Errors of Socialism (PDF book)

  • Hayek argues that the natural order of civilisation is founded in private property and free market, and that  "socialist aims and programmes are factually impossible to achieve or execute," and "logically impossible."


    From Volume I of The Collected Works of F.A. Hayek,

    EDITED BYW. W. BARTLEY, III.

    This PDF book contains 98 pages, 9 chapters, and 8 appendices. There is some controversy about how much the editor W. Bartley, III, added materials to the book.

  • This book argues that our civilisation depends, not only for its origin but  also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism. To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices ..

  • Dish 7 : The Road to Serfdom | Overview in Wikipedia

  • The Road to Serfdom is a book written by the Austrian-born economist and philosopher Friedrich von Hayek (1899–1992) between 1940–1943, in which he "warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning", and in which he argues that the abandonment of individualism and classical liberalism inevitably leads to a loss of freedom, the creation of an oppressive society, the tyranny of a dictator and the ser

  Chops  - Economic Calculation Problem
  • Chop 3 : Economic calculation problem - Wikipedia, the free encyclopedia

  • The economic calculation problem is a criticism of using economic planning as a substitute for market-based allocation of the factors of production. It was first proposed by Ludwig von Mises in his 1920 article "Economic Calculation in the Socialist Commonwealth" and later expanded upon by Friedrich Hayek.[1][2] In his first article, Mises describes the nature of the price system under capitalism and describes how individual subjective values are translated into the objective information necessa
  • Chop 4 : Economic calculation problem - Mises Wiki

  • The problem referred to is that of how to distribute resources rationally in an economy. The free market solution is the price mechanism, wherein people individually have the ability to decide how a good or service should be distributed based on their willingness to give money for it. The price conveys embedded information about the abundance of resources as well as their desirability which in turn allows, on the basis of individual consensual decisions, corrections that prevent shortages and surpluses; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources. 

  • Chop 7 : The End of Socialism and the Calculation Debate Revisited

  • By Murray N. Rothbard. Murray N. Rothbard (1926–1995) was dean of the Austrian School. He was an economist, economic historian, and libertarian political philosopher.

  • On this day in 1991, the Soviet Union was dissolved. Murray Rothbard explains what led to the economic collapse. "If I may be pardoned a moment of nostalgia, four-and-a-half-decades ago, when I entered graduate school, the economics Establishment of that era was closing the book on what had been for two decades the famed 'socialist calculation debate.' And they had all decided, left, right, and center, that there was not a thing economically wrong with socialism: that socialism'
  • Chop 8 : Economic Calculation in the Socialist Commonwealth

  • Ludwig von Mises’s seminal essay, originally published in 1920 appears here in the 1990 edition published by the Ludwig von Mises Institute. This article appeared originally under the title “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen” in the Archiv für Sozialwissenschaften, vol. 47 (1920). The present translation was first published in F.A. Hayek, ed., Collectivist Economic Planning (London: George Routledge & Sons, 1935; reprint, Clifton, N.J.: Augustus M. Kelley, 1975), pp. 87-130. Some annotations appear in this edition and they are set aside in brackets. “Economic Calculation in the Socialist Commonwealth” advances a devastating critique against economic calculation in a socialist economy, inspiring a decades-long debate.

  • Introduction

    1. The Distribution of Consumption Goods in the Socialist Commonwealth
    2. The Nature of Economic Calculation
    3. Economic Calculation in the Socialist Commonwealth
    4. Responsibility and Initiative in Communal Concerns
    5. The Most Recent Socialist Doctrines and the Problem of Economic Calculation

    Conclusion

  • Chop 9 : Socialism by Ludwig von Mises

  • This masterwork is much more than a refutation of the economics of socialism (although on that front, nothing else compares). It is also a critique of the entire intellectual apparatus that accompanies the socialist idea, including the implicit religious doctrines behind Western socialist thinking, a cultural critique of socialist teaching on sex and marriage, an refutation of syndicalism and corporatism, an examination of the implications of radical human inequality, an attack on war socialism, and refutation of collectivist methodology.

  • Chop 10 : Socialism: A Property or Knowledge Problem? By Hans-Hermann Hoppe

  • A critique that Hayek's emphasis on the lack of knowledge problem is inadequate, that supports Mises' position that any lack of private property is a more fundamental problem for socialism.

    "... Joseph Salerno has argued in effect that Mises's original argument in the so-called socialist calculation debate was correct all along and was also the final word, whereas Hayek's distinct contribution to the debate was fallacious from the outset, and merely added confusion. ...

    Mises's well-known calculation argument states this: If there is no private property in land and other production factors, then there can also be no market prices for them. Hence, economic calculation, i.e., the comparison, in light of current prices, of anticipated revenue, and expected cost expressed in terms of a common medium of exchange-money-(thus permitting cardinal accounting operations), is literally impossible.


    Therefore, socialism's fatal error is the absence of private property in land and production factors, and, by implication, the absence of economic calculation. For Hayek, socialism's problem is not a lack of property but a lack of knowledge. ..."

  Desserts
  References and More

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