The problem of knowledge in society is ubiquitous. So are the means by which we cope with it. Perhaps this is why the knowledge problem is so easily overlooked as a problem in need of a solution. The particular problem of knowledge that I am interested in here concerns the knowledge of how to use physical resources in the world.

All human beings are confronted with a multitude of ways that they may use physical resources, including their own bodies. The challenge of making good choices regarding the use of resources would be difficult enough in an "atomistic" world where one's choices had no effect on the choices of others. Since this is not our world, the problem of a person or association making knowledgeable choices among alternative uses of physical resources is compounded by other persons and associations striving to make their own choices. Indeed, given the number of possible choices persons might make, the number of persons making choices, and the physical proximity of each to the others, it is remarkable that the world is not in complete chaos. The world is not in chaos, I suggest, because concepts and institutions have evolved to harness the diverse knowledge about potential uses of resources ins a manner that contributes to harmonious and beneficial interaction.

In this chapter, I discuss what I call the "first-order problem of knowledge." This is the problem of knowledgeable resource use that confronts every person in any society. No one has placed greater stress on this particular knowledge problem than Friedrich Hayek. As he explains:

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 from 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 those "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 those individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality [1].

Hayek's account does not assume that everything that people believe is true. Rather, it maintains that (a) there are many things each of us believes that are true and (b) access to these truths by others is severely limited. The limited access to each of these different kinds of knowledge gives rise to a problem of knowledge that every human society must cope with in some manner or other.

[1] Friedrich A. Hayek, "The Use of Knowledge in Society," Individualism and Economic Order (Chicago: University of Chicago Press, 1948), pp. 77-8 (emphasis added). Fro additional discussion of the knowledge problem see Don Lavoie, Rivalry and Central Palnning (New York: Cambridge University Press, 1985); Thomas Sowell, Knowledge and Decisions (New York: Basic Books, 1980). Return