Key concepts in Hayek’s thought

The article about central planning is influenced by the economist F.A. Hayek. Here is an excellent summary of his key ideas I found on the website of the Adam Smith Institute:

Markets versus planning Market exchange works because people value thing differently. The planned economy rests on the unlikely assumption that everyone can agree what to produce, and how.

Importance of prices The price system reflects the imbalance of demand and supply, and automatically steers resources to where they are most needed – without the need for planners to discover, understand, and correct the imbalance.

We’re all planners We all plan, and we do so on the basis of our own knowledge of local conditions. There is far more useful and current information in this dispersed knowledge base than could ever be collected in a central planning agency.

Competition is dynamic Competition is not a textbook ‘given’ but a dynamic process, in which people constantly search to discover the cheapest mix of resources to produce the most desired outputs.

Human action but not human design The social order is like language. It is a product of human action, but not something that we have deliberately designed. It evolves and changes, but endures because it is useful to us.

Limits to our understanding Just as language is built on complex rules of grammar that we follow with ease but cannot necessarily articulate, the social order is built on complex regularities in our behaviour – common law, ethics, customs, manners – whose importance we only faintly understand.

The fatal conceit The totalitarian disasters that have occurred when utopians attempt to redesign society according to their rational plan shows just how little we know about the workings of the complex system of rules on which the social order is based.

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2 Responses to Key concepts in Hayek’s thought

  1. Alberto says:

    Thanks. This should be taken as seriously as the ten commandments…

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