The information needed for coordination is dispersed, tacit, and local, so no central body can assemble it however capable or well-intentioned.
Hayek's 1945 essay used the tin market: a shortage anywhere raises the price, and every user economises without knowing why. No planner could gather what the price conveys.
In practice
- A central purchasing team cannot know that one depot's loading bay floods in October, and the depot manager cannot explain why it matters until it does.
- A national curriculum cannot encode which explanation works for the four pupils in one classroom who are stuck.
- Standing
- The core epistemic argument against central planning, and the counterweight to Munger's unicorn fallacy.
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money