I've been exploring data / information / knowledge / wisdom management a lot over the last couple months. I was surprised to discover how little consensus there is over the meaning of each of those terms. Or rather, subfields seem to have different takes on the meanings. "Data" and "information" I can kinda pin down. "Knowledge" and "wisdom" much less. Hayek in this article for instance does not seem to ever define what he means by "knowledge". Reading between the lines, he seems to think of it as being able to use data and information to make effective / economical decisions.
It's especially unfortunate that writers assume everyone is on the same page about what "knowledge" means because the meaning of the term seems to have changed a lot over the last few hundred years.
I’ve refrained from commenting on this one precisely because (I assume) his definition of “rational economic order” and his justification for “best”, in the first two paragraphs, are context a reader of this journal is expected to already have, since he doesn’t elaborate on them, and lacking that the rest of the paper’s basically pointless (though his protest that in 1945 it was widely denied that there is any knowledge but scientific knowledge seems deeply silly per se and exactly the kind of thing you often see from people trying to push a “rebel” image for marketing reasons…)
But yes the definitions of several other terms seem slippery and to change from one use to the next, including knowledge.
> (though his protest that in 1945 it was widely denied that there is any knowledge but scientific knowledge seems deeply silly per se and exactly the kind of thing you often see from people trying to push a “rebel” image for marketing reasons…
Look up "logical positivism" as a philosophical system. It became the dominant academic philosophy for a while (including around 1945). It asserted almost exactly that - that there was no knowledge apart from scientific knowledge (although I believe it did accept direct sensory input as knowledge, and also the operations of pure logic).
It's difficult now to see the water that he was swimming in then.
Isn't it precisely what makes knowledge and its management interesting? Just as the diversity of PKM solutions it has given rise to?
Its definition being difficult to pin down is a feature--not a single knowledge, but a multitude of (in)compatible knowledges and messy knowledge-making processes, and the many different interests that arise from it.
I guess I see this as an attempt or yearning to discredit him, but following in the work that sprung from Hayek and friends, the motivation for his work is clearly curiosity and wonder about how does anything get done in the world without coordination, never mind the wondrously complex things that are created nowadays.
His conclusion is that knowledge is dispersed, represented in prices that arise from markets which is simply understood as cooperation. Knowledge may frankly be expressed as whatever enables and motivates someone to offer something on the market. If that's too vague for your taste, too bad.
The wonder is that uncoordinated, independent cooperation gives rise to such abundant and sophisticated products. Not only that it's in a system that expresses everyone's individual preferences and competing interests. Central planning fails spectacularly to do this, and there's no reason to believe that it ever will even with fantastic computational power.
Definitely not trying to discredit him. I have no horse in that economic ideology race. I'm just honestly curious about what the heck we mean when we talk about knowledge. The background is that I'm a technical writer (TW), and a lot of us TWs are recognizing that knowledge management is becoming even more important than it already was before (and we already knew it was an important part of our role). So naturally as I begin this journey I am looking deeply into the meaning of the term and finding many different definitions. Your synthesis of this article for example gave me yet another new perspective on it.
Once you start on the path of semantics, it's often turtles all the way down. So, unless you want to be rigorous, it's best to go with the generally accepted best bet.
For sure, I know comments about semantics often don't go down well on HN. Was just sharing something I'm intellectually curious about. The act of trying to pin down a rigorous definition has exposed me to 5-10 different interpretations and each has given me different perspective on how to manage this nebulous thing we call knowledge.
I think I agree. Oddly, the one place where the terms gained some level of settling appears to be corporate, but I can't tell if it is due to the nature of corporations, cross-pollination or some other unknown factors.
What I personally find very interesting is the age of that paper and the fact that, the discrepancy between model most commonly presented in school ( in my case, variant of perfectly rational individual ) and real life has been voiced nearly eight decades ago and is not seriously discussed as foundational knowledge when it comes to economics.
Thanks for linking to this -- it highlights a fallacy that Hayek seemed to mire in whereas on one hand, he believed that the aggregate "market" forces would always be sufficient to stabilize pricing stability (/inflation) he railed against the ability for any 'manager' (i.e. the government) to do so.
Hayek doesn't talk about price stability or inflation at all in this article. There's no fallacy here.
This is basically the "prices are all we need" of economics. It's written in historical context when some still economists thought that a centrally planned economy could work. Hayek writes about the price system and how it enables an economy to function in a decentralized manner, and why it can't function without it. Hayek argues that it's essential that the decisions are made with local knowledge, because every individual possesses private and unique knowledge, which is not available to central planners.
On the other hand, all the information which an individual needs from other individuals is transmitted through prices, i.e. everyone only needs to know how to make best use of the prices they see. Thus, there's no need for any kind of oracle or central entity which knows what's going on in the economy to make it function.
This is still relevant of course, in the way that most people don't realize how magical the price system is, and how humans basically just stumbled upon it without anyone understanding it.
Not in the article, but the body of work (that you're clearly familiar with).
If you believe the Fed/ability-of-the-Fed to smooth the boom/bust cycle, then you disagree with Hayek -- he wasn't (just) arguing for a generally free market -- he believed that all markets were perfect (especially/including the price value of Money).
Hayek makes no statement about the ability of market forces to stabilize prices.
On the contrary, his point is that the equilibrium price in a decentralized market is a good sufficient statistic that aggregates the current demand and supply situation.
Building on his example on page 525, if more screws of a particular size are suddenly in higher demand, then the price will increase, as it should!
The goal is not to stabilize the price but to have the price reflect the marginal opportunity cost.
Right, but for functional markets it turns out the marginal opportunity cost is not good enough.
Most famously interest rates without some government (or other, in the case of Crypto) hand in distribution and projected distribution, the market can fail (everyone is encouraged to hoard).
In Stiglitz' case (not looking it up, but from memory), used car markets fail. While the marginal net opportunity cost is what the price yields, it creates a negative feedback loop where people that have a used car that's more valuable than is verifiable exit the market, and then you get .... all the more 'lemons' -- i.e. only bad cars). Dealerships are one way to correct for that information loss, but markets don't always value sufficiently the information that will solve it.
We can be a bit more smug/hopeful nowadays, because information is a lot more easily aggregated/hosted. But we have to recognize the .... value of those components.
Stigliz’ enthusiasm for “correcting” markets never seemed to extend to reducing his hypothetical information asymmetries, but rather tipped toward intervention. This disposition plays well with bureaucracy with whom he enjoys the most fervent support. Meanwhile, the market sustains an unbounded global search to identify and remediate material information deficiencies. The examples he identifies form a limited caveat to the whole. Those who bring him to the front of the line consistently miss the economic forest for an ephemeral tree, and often do so to curry political favor.
Stiglitz specifically wrote about minimal interventions of e.g. just supporting/hosting (reliable) information exchanges.
His proof showed that there were some markets where there was no value for any individual player to "pay" for the information needed to improve a market, so it stayed bad. Stiglitz' career definitely moved in a direction of more interventionist policies (of which I'm probably more sympathetic than you to some/many of them).
Are you suggesting that I'm trying to curry political favor with...Stiglitz (or someone else)?
I've been exploring data / information / knowledge / wisdom management a lot over the last couple months. I was surprised to discover how little consensus there is over the meaning of each of those terms. Or rather, subfields seem to have different takes on the meanings. "Data" and "information" I can kinda pin down. "Knowledge" and "wisdom" much less. Hayek in this article for instance does not seem to ever define what he means by "knowledge". Reading between the lines, he seems to think of it as being able to use data and information to make effective / economical decisions.
It's especially unfortunate that writers assume everyone is on the same page about what "knowledge" means because the meaning of the term seems to have changed a lot over the last few hundred years.
I’ve refrained from commenting on this one precisely because (I assume) his definition of “rational economic order” and his justification for “best”, in the first two paragraphs, are context a reader of this journal is expected to already have, since he doesn’t elaborate on them, and lacking that the rest of the paper’s basically pointless (though his protest that in 1945 it was widely denied that there is any knowledge but scientific knowledge seems deeply silly per se and exactly the kind of thing you often see from people trying to push a “rebel” image for marketing reasons…)
But yes the definitions of several other terms seem slippery and to change from one use to the next, including knowledge.
> (though his protest that in 1945 it was widely denied that there is any knowledge but scientific knowledge seems deeply silly per se and exactly the kind of thing you often see from people trying to push a “rebel” image for marketing reasons…
Look up "logical positivism" as a philosophical system. It became the dominant academic philosophy for a while (including around 1945). It asserted almost exactly that - that there was no knowledge apart from scientific knowledge (although I believe it did accept direct sensory input as knowledge, and also the operations of pure logic).
It's difficult now to see the water that he was swimming in then.
Isn't it precisely what makes knowledge and its management interesting? Just as the diversity of PKM solutions it has given rise to?
Its definition being difficult to pin down is a feature--not a single knowledge, but a multitude of (in)compatible knowledges and messy knowledge-making processes, and the many different interests that arise from it.
I guess I see this as an attempt or yearning to discredit him, but following in the work that sprung from Hayek and friends, the motivation for his work is clearly curiosity and wonder about how does anything get done in the world without coordination, never mind the wondrously complex things that are created nowadays.
His conclusion is that knowledge is dispersed, represented in prices that arise from markets which is simply understood as cooperation. Knowledge may frankly be expressed as whatever enables and motivates someone to offer something on the market. If that's too vague for your taste, too bad.
The wonder is that uncoordinated, independent cooperation gives rise to such abundant and sophisticated products. Not only that it's in a system that expresses everyone's individual preferences and competing interests. Central planning fails spectacularly to do this, and there's no reason to believe that it ever will even with fantastic computational power.
Definitely not trying to discredit him. I have no horse in that economic ideology race. I'm just honestly curious about what the heck we mean when we talk about knowledge. The background is that I'm a technical writer (TW), and a lot of us TWs are recognizing that knowledge management is becoming even more important than it already was before (and we already knew it was an important part of our role). So naturally as I begin this journey I am looking deeply into the meaning of the term and finding many different definitions. Your synthesis of this article for example gave me yet another new perspective on it.
Ah got it. I think the idea of knowledge management is maybe misguided when applied to economics.
Knowledge in economic terms is much less definite because prices reflect subjective value.
Once you start on the path of semantics, it's often turtles all the way down. So, unless you want to be rigorous, it's best to go with the generally accepted best bet.
For sure, I know comments about semantics often don't go down well on HN. Was just sharing something I'm intellectually curious about. The act of trying to pin down a rigorous definition has exposed me to 5-10 different interpretations and each has given me different perspective on how to manage this nebulous thing we call knowledge.
I think I agree. Oddly, the one place where the terms gained some level of settling appears to be corporate, but I can't tell if it is due to the nature of corporations, cross-pollination or some other unknown factors.
What I personally find very interesting is the age of that paper and the fact that, the discrepancy between model most commonly presented in school ( in my case, variant of perfectly rational individual ) and real life has been voiced nearly eight decades ago and is not seriously discussed as foundational knowledge when it comes to economics.
Thanks for linking to this -- it highlights a fallacy that Hayek seemed to mire in whereas on one hand, he believed that the aggregate "market" forces would always be sufficient to stabilize pricing stability (/inflation) he railed against the ability for any 'manager' (i.e. the government) to do so.
I'd strongly recommend to folks interested in this to pick up the Stiglitz, et al 2001 Nobel Prize on information asymmetries-research https://www.nobelprize.org/uploads/2018/06/advanced-economic...
Hayek doesn't talk about price stability or inflation at all in this article. There's no fallacy here.
This is basically the "prices are all we need" of economics. It's written in historical context when some still economists thought that a centrally planned economy could work. Hayek writes about the price system and how it enables an economy to function in a decentralized manner, and why it can't function without it. Hayek argues that it's essential that the decisions are made with local knowledge, because every individual possesses private and unique knowledge, which is not available to central planners.
On the other hand, all the information which an individual needs from other individuals is transmitted through prices, i.e. everyone only needs to know how to make best use of the prices they see. Thus, there's no need for any kind of oracle or central entity which knows what's going on in the economy to make it function.
This is still relevant of course, in the way that most people don't realize how magical the price system is, and how humans basically just stumbled upon it without anyone understanding it.
Not in the article, but the body of work (that you're clearly familiar with).
If you believe the Fed/ability-of-the-Fed to smooth the boom/bust cycle, then you disagree with Hayek -- he wasn't (just) arguing for a generally free market -- he believed that all markets were perfect (especially/including the price value of Money).
It turned out Keynes was right.
Hayek makes no statement about the ability of market forces to stabilize prices.
On the contrary, his point is that the equilibrium price in a decentralized market is a good sufficient statistic that aggregates the current demand and supply situation.
Building on his example on page 525, if more screws of a particular size are suddenly in higher demand, then the price will increase, as it should!
The goal is not to stabilize the price but to have the price reflect the marginal opportunity cost.
Right, but for functional markets it turns out the marginal opportunity cost is not good enough.
Most famously interest rates without some government (or other, in the case of Crypto) hand in distribution and projected distribution, the market can fail (everyone is encouraged to hoard).
In Stiglitz' case (not looking it up, but from memory), used car markets fail. While the marginal net opportunity cost is what the price yields, it creates a negative feedback loop where people that have a used car that's more valuable than is verifiable exit the market, and then you get .... all the more 'lemons' -- i.e. only bad cars). Dealerships are one way to correct for that information loss, but markets don't always value sufficiently the information that will solve it.
We can be a bit more smug/hopeful nowadays, because information is a lot more easily aggregated/hosted. But we have to recognize the .... value of those components.
Stigliz’ enthusiasm for “correcting” markets never seemed to extend to reducing his hypothetical information asymmetries, but rather tipped toward intervention. This disposition plays well with bureaucracy with whom he enjoys the most fervent support. Meanwhile, the market sustains an unbounded global search to identify and remediate material information deficiencies. The examples he identifies form a limited caveat to the whole. Those who bring him to the front of the line consistently miss the economic forest for an ephemeral tree, and often do so to curry political favor.
Stiglitz specifically wrote about minimal interventions of e.g. just supporting/hosting (reliable) information exchanges. His proof showed that there were some markets where there was no value for any individual player to "pay" for the information needed to improve a market, so it stayed bad. Stiglitz' career definitely moved in a direction of more interventionist policies (of which I'm probably more sympathetic than you to some/many of them).
Are you suggesting that I'm trying to curry political favor with...Stiglitz (or someone else)?
My comment is broad-based and not directed at you specifically.
nice to see this.