science

The Use of Knowledge in Society

The Use of Knowledge in Society is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand The Use of Knowledge in Society rather than just read about it. In short: "The Use of Knowledge in Society" is a scholarly article written by Austrian-British academic 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.

Key takeaways

The Use of Knowledge in Society belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect The Use of Knowledge in Society to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of The Use of Knowledge in Society from memory before moving on to harder problems.

Reference excerpt

"The Use of Knowledge in Society" is a scholarly article written by Austrian-British academic 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 is considered one of the most important in the field of modern economics. Hayek argues that information is decentralized and that that knowledge is unevenly dispersed among different members of society. As a result, decisions are best made by those with local knowledge rather than by a central authority. The article's influence extended beyond economics, Jimmy Wales, co-founder of Wikipedia, stated these concepts were "central" to his thinking about "how to manage the Wikipedia project".

Argument 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. 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. 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.

Reception Regarded as a seminal work, "The Use of Knowledge in Society" was one of the most praised and cited 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. 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. Tom Butler-Bowdon included "The Use of Knowledge in Society" in his 2017 book, 50 Economics Classics. 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. As of 2023, the article had over 22,000 citations in Google Scholar.

Influence Jimmy Wales, co-founder of Wikipedia, cites "The Use of Knowledge in Society", which he read as an undergraduate student, as "central" to his thinking about "how to manage the Wikipedia project". 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. The article "set the stage" for later use of game theory models. The article vitally influenced economist Thomas Sowell and served as his inspiration to write Knowledge and Decisions. 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.

Illustrations

Worked examples

Example 1 — a first encounter with The Use of Knowledge in Society

Start with the simplest possible case. Write down what The Use of Knowledge in Society claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to The Use of Knowledge in Society before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about The Use of Knowledge in Society ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of The Use of Knowledge in Society

In research: The Use of Knowledge in Society appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses The Use of Knowledge in Society in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: The Use of Knowledge in Society is common in secondary-school and first-year university syllabi. It links to neighbouring topics 1945 documents, 1945 in economic history, Austrian School publications, so understanding it makes those chapters shorter.
In everyday life: Look for The Use of Knowledge in Society outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study The Use of Knowledge in Society in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what The Use of Knowledge in Society means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain The Use of Knowledge in Society out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is The Use of Knowledge in Society in simple terms?

Why does The Use of Knowledge in Society matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study The Use of Knowledge in Society?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on The Use of Knowledge in Society.