Economics Books

"Daß von gemeinwirtschaftlichen Unternehmungen kein Antrieb zu Reformen und Verbesserungen der Produktion ausgeht, daß sie sich den wechselnden Verhältnissen des Bedarfes nicht anzupassen vermögen, daß sie mit einem Wort ein totes Glied im Organismus der Volkswirtschaft darstellen, ist nun, da wir auf Jahrzehnte staats- und kommunalsozialistischer Versuche zurückzublicken in der Lage sind, allgemein anerkannt. Alle Versuche, ihnen Leben einzuhauchen, sind bis nun vergebens geblieben. Man hat gemeint, es durch Besoldungsreformen erreichen zu können. Man wollte die Leiter dieser Unternehmungen am Ertrag interessieren und dachte, daß man sie so den Leitern großer Aktiengesellschaften gleichstellen werde. Das ist ein großer Irrtum. Die Leiter der großen Aktiengesellschaften sind mit den Interessen der von ihnen verwalteten Unternehmungen in ganz anderer Weise verknüpft als dies bei öffentlichen Betrieben je der Fall sein kann. Sie sind entweder schon Besitzer eines nicht unbeträchtlichen Teiles des Aktienkapitals oder hoffen, es im Laufe der Zeit zu werden. Sie sind weiter in der Lage, durch Börsenspiel in den Werten ihres Unternehmens Gewinn zu erzielen. Sie haben die Aussicht, ihre Stelle zu vererben oder doch wenigstens ihren Erben einen Teil ihres eigenen Einflusses zu sichern. Nicht der behäbige, in seiner Denkungsart und seinem Empfinden dem öffentlichen Beamten einigermaßen ähnelnde Generaldirektor ist der Typus, dem die in Aktienform betriebenen Unternehmungen ihre Erfolge danken, vielmehr der durch Aktienbesitz interessierte Leiter und der Promoter und Faiseur, gerade jene also, die auszuschalten das Ziel aller Verstaatlichungs- und Verstadtlichungsaktionen ist."

"[I]n den einzelnen wirtschaftlichen Gütern sind außer der Arbeit auch Sachkosten enthalten. Ein Erzeugnis, für welches mehr Rohstoff verwendet wurde, < --Page 93-- >kann nicht einem anderen gleichgesetzt werden, für das weniger Rohstoff gebraucht wurde."

"[D]ie Arbeit keine einheitliche und gleichartige Größe darstellt. Zwischen den verschiedenen Arbeitsleistungen besteht qualitativ ein Unterschied, der mit Rücksicht auf die Verschiedenheit der Gestaltung von Nachfrage und Angebot nach ihren Erzeugnissen zu verschiedener Bewertung führt. Man kann das Angebot an Bildern caeteris paribus nicht vermehren, ohne daß die Qualität des Erzeugnisses leidet. Man kann dem Arbeiter, der eine Stunde einfachster Arbeit geleistet, hat, nicht das Recht geben, das Produkt einer Stunde höher qualifizierter Arbeit zu verzehren. Es ist im sozialistischen Gemeinwesen überhaupt unmöglich zwischen der Bedeutung einer Arbeitsleistung für die Gesellschaft und ihrer Beteiligung am Ertrag des gesellschaftlichen Produktionsprozesses eine Verbindung herzustellen. Die Entlohnung der Arbeit kann hier nur willkürlich sein; auf der wirtschaftlichen Zurechnung Ertrages wie in der auf dem Privateigentum an den Produktionsmitteln beruhenden freien Verkehrswirtschaft kann man sie nicht aufbauen, da, wie wir sehen werden, die Zurechnung im sozialistischen Gemeinwesen nicht möglich ist. Die ökonomischen Tatsachen ziehen der Macht der Gesellschaft, die Entlohnung des Arbeiters nach Belieben festzusetzen, eine feste Grenze: auf keinen Fall wird die Lohnsumme auf die Dauer das gesellschaftliche Einkommen übersteigen können."

"Jedermann, der, im wirtschaftlichen Leben handelnd, zwischen der Befriedigung zweier Bedürfnisse, von denen nur das eine befriedigt werden kann, wählt, setzt Werturteile. …Rechnen kann man nur mit Einheiten. Eine Einheit des subjektiven Gebrauchswertes der Güter kann es aber nicht geben. Der Grenznutzen stellt keine Werteinheit dar, da bekanntlich der Wert zweier Einheiten aus einem gegebenen Vorrat nicht doppelt so groß ist als der e i n e r Einheit, sondern notwendig größer sein muß. Das Werturteil mißt nicht, es stuft ab, es skaliert."

"Doch die Bedeutung dieser Rolle ist in der auf dem Gemeineigentum an den Produktionsmitteln beruhenden Gesellschaftsordnung eine andere als in der auf dem Sondereigentum an den Produktionsmitteln beruhenden. Sie ist hier unvergleichlich geringer, weil der Tausch in dieser Gesellschaft eine viel geringere Bedeutung hat, weil er hier überhaupt nur Konsumgüter erfaßt. Da kein Produktivgut im Tauschverkehre umgesetzt wird, wird es unmöglich, Geldpreise der Produktivgüter zu erkennen. Die Rolle, die das Geld in der freien Wirtschaft auf dem Gebiete der Produktionsrechnung spielt, kann es in der sozialistischen Gemeinschaft nicht behalten. Die Wertrechnung in Geld wird hier unmöglich."

"Welcher Grundsatz für die Zuweisung der Genußgüter an die einzelnen Genossen gewählt wird, ist für die Betrachtung der Probleme, die uns beschäftigen, ziemlich nebensächlich. Ob man dem Einzelnen nach seinen Bedürfnissen zumessen will, so daß der, der größere Bedürfnisse hat, mehr erhält als der, der kleinere hat, oder ob man die Würdigkeit des Einzelnen berücksichtigt, so daß der Bessere mehr bekommt als der Schlechtere, oder ob man in der tunlichst gleichmäßigen Verteilung das Ideal erblickt, so daß jeder möglichst die gleiche Menge erhält, oder ob man die dem Gemeinwesen geleisteten Dienste zum Maßstab der Verteilung nehmen will, so daß dem Fleißigeren mehr zukommt als dem Trägeren, immer wird die Sache so sein, daß jeder vom Gemeinwesen eine Zuweisung empfängt."

"Die Austauschverhältnisse, die sich im Verkehre zwischen den Genossen herausbilden, können von der Leitung der Produktion und Verteilung nicht unbeachtet gelassen werden."

"Der subjektive, Gebrauchswert des einzelnen ist als rein individuelle Erscheinung unmittelbar mit dem subjektiven Gebrauchswert anderer Menschen nicht vergleichbar. Er wird es erst im Tauschwert, der aus dem Zusammenspiel der subjektiven Wertschätzung aller am Tauschverkehr teilnehmenden Wirte entsteht."

"Viele Sozialisten haben sich nie mit nationalökonomischen Fragen befaßt, haben es nie versucht, sich über die Bedingungen unter denen die Menschen wirtschaften, Klarheit zu verschaffen Andere wieder haben sich sehr eingehend mit der Volkswirtschaft der Vergangenheit und der Gegenwart beschäftigt und haben sich bemüht, ein System der Wirtschaft der »bürgerlichen« Gesellschaft aufzustellen. Sie schwelgten in der Kritik der ökonomischen Verhältnisse der »freien« Wirtschaft, haben es aber regelmäßig unterlassen, die ätzende Schärfe, die sie hier — nicht immer mit Erfolg — bekundet haben, auch auf die Oekonomie der angestrebten sozialistischen Gesellschaft anzuwenden. In den farbenprächtigen Schilderungen der Utopisten kommt das eigentlich Oekonomische immer zu kurz. Sie verkünden, daß in ihrem Schlaraffenland die gebratenen Tauben den Genossen in den Mund fliegen werden, aber sie unterlassen es leider zu zeigen, auf welche Weise dieses Wunder zustande kommen soll Wo sie im Oekonomischen deutlicher zu werden beginnen, leiden sie schnell Schiffbruch — man erinnere sich etwa an Proudhons Tauschbank-Phantasien —, so daß es nicht schwer fällt, ihre logischen Schnitzer aufzuzeigen."

"In der sozialistischen Gemeinschaft sind alle Produktionsmittel Eigentum des Gemeinwesens. Das Gemeinwesen allein kann über sie verfügen und ihre Verwendung in der Produktion bestimmen. Selbstredend wird das Gemeinwesen seine Befugnisse nur durch ein besonderes Organ auszuüben imstande sein, da es auf andere Weise nicht handelnd auftreten kann."

"Der Wert wird ja nicht in Geld g e m e s s e n. Auch die Preise werden nicht in Geld gemessen, sie bestehen in Geld. Das Geld ist als wirtschaftliches Gut nicht »wertstabil«, wie man bei seiner Verwendung als standard of deferred payments naiv anzunehmen pflegt. Das zwischen den Gütern und dem Gelde bestehende Austauschverhältnis ist beständigen, wenn auch in der Regel nicht allzuheftigen Schwankungen, die nicht nur von Seite der übrigen wirtschaftlichen Güter, sondern auch von Seite des Geldes herrühren, unterworfen. … Die Unzulänglichkeit der Geldrechnung des Wertes stammt zum Hauptteil nicht daher, daß in einem allgemein gebräuchlichen Tauschmittel, im Geld, gerechnet wird, sondern daher, daß es überhaupt der Tauschwert ist, der der Rechnung zugrunde gelegt wird, und nicht der subjektive Gebrauchswert. So können in die Rechnung alle jene wertbestimmenden Momente nicht eingehen, die außerhalb des Austauschverkehres stehen."

"Wer soll genießen und was soll jeder genießen, das ist das sozialistische Verteilungsproblem."

"Der naheliegende Einwand, daß es für den einzelnen nur sehr wenig ins Gewicht fällt, ob er selbst fleißig und eifrig ist, daß es für ihn wichtiger ist, daß alle anderen es sind, wird von ihnen entweder gar nicht oder in unzulänglicher Weise berücksichtigt. Sie glauben, auf dem kategorischen Imperativ allein das sozialistische Gemeinwesen aufbauen zu können."

"The twentieth century has witnessed the beginning, development, and end of the most tragic experiment in human history: socialism. The experiment resulted in tremendous human losses, destruction of potentially rich economies, and colossal ecological disasters. The experiment has ended, but the devastation will affect the lives and health of generations to come."

"The real character of the so-called centrally planned economy is well illustrated by a quip I heard several years ago by Soviet economist Nikolai Fedorenko. He said that a fully balanced, checked, and detailed economic plan for the next year would be ready, with the help of computers, in 30,000 years. There are millions of product variants; there are hundreds of thousands of enterprises; it is necessary to make billions of decisions on inputs and outputs; the plans must relate to labor force, material supplies, wages, costs, prices, "planned profits," investments, transportation, storage, and distribution. These decisions originate from different parts of the planning hierarchy. They are, as a rule, inconsistent and contradictory to each other because they reflect the conflicting interests of different strata of bureaucracy. Because the next year's plan must be ready by next year, and not in 29,999 years, it is inevitably neither balanced nor rational. And Mises proved that without private property in the means of production, even with 30,000 years of computer time, they still couldn't make socialism work."

"The East Bloc’s disastrous experience with socialism has shown the world that Mises was correct all along."

"There was no place for private ownership, nor for the market. The only method of coordinating economic activity was government command and bureaucratic allocation. The result was a prolonged crisis, marked by stagnation or decrease of production, by inflation, ecological disaster (because of wasteful use of all types of resources—energy, water, forests, etc.), by falling standards of living, and by widespread public frustration and social pathology. This crisis, coupled with political developments including the rise of organized opposition, brought about the revolutionary changes we witnessed in 1989."

"What Friedman and Schwartz do in their monograph is try to link up these big episodes with large-scale monetary collapses. The idea is that all you have to do is stop the large-scale monetary collapse. The collapses aren't caused by the government–they're all private systems bank failures. Friedman's policy isn't exactly laissez-faire, since he's calling for government intervention in the banking sector to override events in the private sector. I don't think of the Friedman countercyclical policies as stemming from a general dislike for government as much as calling for a very specific, well-defined form of government intervention. That's all it takes. You don't need all of this fine-tuning; it's beside the point and dangerous as well."

"We know that monetary changes ought to be irrelevant, because units don't matter. Accepting the Friedman-Schwartz evidence that monetary changes are not only relevant, but the major cause of all these events, it is difficult to talk about a system responding in a very sharp way to something to which it "ought" not to have responded at all. These considerations lead into questions about information of some kind or another. That's a very old view. The particular mistake that people get led into by monetary changes is hard to determine, and the specific examples I've cooked up are dictated a lot by what's technically doable by me, given the methods I've got."

"I frequently tell students: If you buy only one economics book, it should be A Monetary History. The book is obviously important for our understanding of the Great Depression, but its impact goes far beyond that. Friedman and Schwartz show us that monetary events and monetary policy have affected real output throughout American history."

"Milton Friedman and Anna Schwartz’s monumental Monetary History of the United States eventually helped to displace Keynesian interpretations with a monetarist interpretation, especially after the stagflation of the 1970s worked to discredit Keynesian macroeconomics."

"We don't know what would have happened had [Federal Reserve Governor Benjamin] Strong lived; but what we do know is that the central bank of the world's economically most important nation in 1929 was essentially leaderless and lacking in expertise. This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. Associated with these decisions, we observe a massive collapse of money, prices, and output. … Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

"Friedman and Schwartz claimed that the fall in the money supply turned what might have been an ordinary recession into a catastrophic depression, itself an arguable point. But even if we grant that point for the sake of argument, one has to ask whether the Federal Reserve, which after all did increase the monetary base, can be said to have caused the fall in the overall money supply. [...] It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC’s failure as a demonstration of the superiority of free markets over big government. Yet many economists, and even more lay readers, have taken Friedman and Schwartz’s account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I’ve said, Friedman’s assertions grew cruder, as if to feed this misperception. In his 1967 presidential address he declared that “the US monetary authorities followed highly deflationary policies,” and that the money supply fell “because the Federal Reserve System forced or permitted a sharp reduction in the monetary base, because it failed to exercise the responsibilities assigned to it”—an odd assertion given that the monetary base, as we’ve seen, actually rose as the money supply was falling."

"Friedman’s A Theory of the Consumption Function, which appeared in 1957, was a major work by any standards; but monetarism, the doctrine that autonomous change in the supply of money is the main actor in the determination of aggregate nominal income, has not proved to be tenable analytically or empirically. His Monetary History of the United States, 1867–1960 (written with the late Anna Schwartz), while highly interesting, is not a towering intellectual achievement."

"If one writing contributed more than any other to the framework in which this work [Sowell's "Knowledge and Decisions"] developed, it would be an essay entitled 'The Use of Knowledge in Society,' published in the American Economic Review of September 1945, and written by F. A. Hayek … In this plain and apparently simple essay was a deeply penetrating insight into the way societies function and malfunction, and clues as to why they are so often and so profoundly misunderstood."

"Hayek’s point in his famous essay of 1945, “The Uses of Knowledge in Society”, is that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localised but connected knowledge, much of which is tacit. It is the essence of anti-elitism, of – dare I say it – populism, the prescient harbinger of what is sometimes called “dot communism” – the flattening of human society as a result of the internet."

"At the core of the failure of the socialist experiment is not just the lack of property rights. Equally important were the problems arising from lack of incentives and competition, not only in the sphere of economics but also in politics. Even more important perhaps were problems of information. Hayek was right, of course, in emphasizing that the information problems facing a central planner were overwhelming. I am not sure that Hayek fully appreciated the range of information problems. If they were limited to the kinds of information problems that are at the center of the Arrow-Debreu model consumers conveying their preferences to firms, and scarcity values being communicated both to firms and consumers then market socialism would have worked. Lange would have been correct that by using prices, the socialist economy could "solve" the information problem just as well as the market could. But problems of information are broader."

"Many economists have professed to analyze information; relatively few have considered carefully the problems of knowledge. Among those who have, Hayek is pre-eminent, and he has emphasized the value of a market system in providing encouragement to individuals to find and make use of knowledge, while simultaneously affording checks on its misuse."

"While in graduate school I encountered the writings of Friedrich Hayek and Ludwig von Mises, which shook me out of my then socialist beliefs. There was Hayek's book of essays, Individualism and Economic Order, and Mises's wide-ranging and unsettling Socialism, which showed me I had not thought through any details — economic, social or cultural — of how socialism would work. One of their arguments in particular, about the impossibility of rational economic calculation under socialism, dumbfounded me. Whether or not the argument was ultimately judged to be correct, it was amazing, something I never would have thought of in a million years."

"My concerns are two-fold: First, because Hayek (and his followers) failed to develop formal models of the market process, it is not possible to assess claims concerning the efficiency of that process, and second (and relatedly), in the absence of such modeling, it is not possible to address the central issues of concern here, the mix and design of public and private activities, including alternative forms of regulations (alternative "rules of the game" that the government might establish) and the advantages of alternative policies toward decentralization-centralization."

"Since I shall be indicating my disagreement with some of the points made by Professor Israel Kirzner, let me stress that I am in complete sympathy with his point of departure, namely, the emphasis on the dispersion of information among economic decision-making units (called by him, "Hayek's knowledge problem") and the consequent problem of transmission of information among those units. Much of my own research work since the 1950s has been focused on issues in welfare economics viewed from an informational perspective. The ideas of Hayek (whose classes at the London School of Economics I attended during the academic year 1938-39) have played a major role in influencing my thinking and have been so acknowledged."

"When I look back, it seems so have all begun, nearly thirty years ago, with an essay on “Economics and Knowledge” in which I examined what seemed to me some of the central difficulties of pure economic theory, Its main conclusion was that the task of economic theory was to explain how an overall order of economic activity was achieved which utilized a large amount of knowledge which was not concentrated in any one mind but existed only as the separate knowledge of different individuals. But it was still a long way from this to an adequate insight into the relations between the abstract rules which the individual follows in his actions and the abstract overall order which is [thereby] formed....It was only through a reexamination of the age-old concept of freedom under the law, the basic conception of traditional liberalism, and of the problems of the philosophy of the law which this raises, that I have reached a tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking."

"A number of papers emerged which focussed on the role of knowledge in market processes, culminating in the 1945 paper "The Use of Knowledge in Society." These papers were to form the core of Hayek's Individualism and Economic Order (1949). A second series of papers, published during the war, focused on the role of subjectivism in the social sciences, and formed the core of The Counter-Revolution of Science: Studies on the Abuse of Reason (1952). Together these two strands of contributions constitute, in this writer's opinion, Hayek's most profound explorations of the foundations of economic understanding. Taken together with Mises's contemporaneous work, these contributions represented a most significant deepening and extension of the subjectivist Austrian tradition. There can be little doubt that it was this work that was responsible both for the fact that Austrian economics survived the midcentury dominance of Keynesian thought, and for the renewed late-century interest in Austrian economics, despite the dominance of neo-classical equilibrium theory."

"Hayek thought that the social sciences are capable of greater knowledge than the natural. He wrote in “The Facts of the Social Sciences” in 1943—after, significantly, his “Economics and Knowledge” essay, which he considered to have constituted his decisive breakthrough and departure from Mises (though Mises, as already noted, did not think this):“While at the world of nature we look from the outside, we look at the world of society from the inside.” Because we look at the world of society from, in Hayek’s view, the “inside,” we are capable of more knowledge of it than of the external world of nature. Similarly, Hayek considered the fundamental divide between the social and natural worlds not to be in kind of phenomena (notwithstanding that we experience the former from the inside and the latter from the outside), but in complexity. [...] From Hayek’s perspective, the natural sciences move from complexity to individual elements; the social sciences move from individual elements to complexity."

"Hayek’s great contribution is this: Competitive markets without externalities populated by well-informed self-regarding rational individuals generate highly productive outcomes because the market has powerful emergent properties that make it an extremely powerful and incentive-compatible societal mechanism for eliciting the revelation, aggregation, and transmission of information about resources, capabilities, needs and desires."

"You’ll see the same thing in The Use of Knowledge in Society (1945), where Hayek pits central planning against individuals making use of local knowledge: the tool he uses to explain that individuals acting independently make better use of knowledge than central planners, must also (though he neglects to mention this corollary) “explain” that an individual acting independently in the market must make better use of knowledge than they would within any organization – a large firm, a middle-sized firm, a university, the post office (local knowledge: always better than ZIP codes). We’re accustomed to critiquing Hayek’s antipathy to things collective in the political realm (“he believes in liberty, but not the liberty of workers to act collectively”), but there’s more involved here than his evident animus towards the organized lower orders: he doesn’t seem to understand the collective aspect of discovery at all. To anybody who knows anything about the processes of discovery in organizations or networks, this looks just clueless."

"The Austrian School of Economics traditionally underestimates, if not neglects macroeconomics (or at least its importance), and Hayek understood that he was not going to win the debate accepting the Keynesian macro economic playground. He decided to attack the interventionist doctrine of Keynes by moving to microeconomics, to the defence of the irreplaceable role of markets and prices in the economy, and to demonstrating that interventionism makes the efficient functioning of markets impossible. His seminal articles “Economics and Knowledge,” and especially “The Use of Knowledge in Society,” are among the most important contributions to the field of economic science in the whole of the twentieth century. Hayek devoted his analysis to explaining the coordination of human action in a world in which knowledge is inevitably dispersed and he was able to prove that the solution is in the price system, not in central planning."

"Alchian: Two things you [Hayek] wrote that had a personal influence on me, after your Prices and Production, were 'Individualism and Economic Order' [sic — Alchian certainly has in mind Hayek's 'Economics and Knowledge'] and 'The Use of Knowledge in Society.' These I would regard as your two best articles, best in terms of their influence on me. Hayek: 'Economics and Knowledge' — the '37 one — which is reprinted in the volume, is the one which marks the new look at things in my way. Alchian: It was new to you, too, then? Was it a change in your own thinking? Hayek: Yes, it was really the beginning of my looking at things in a new light. … I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it [i.e. 'Economics and Knowledge'] in print. Alchian: Well, I'm delighted to hear you say that, because I had that copy typed up to mimeograph for my students in the first course I gave here [i.e. UCLA]. And Allan Wallace … came through town one day, and I said, 'Allan, I've got a great article!" He looked at it, started to laugh, and said, "I've seen it too; it's just phenomenal!' I'm just delighted to hear you say that it was exciting, because it was to me, too … that was a very influential article, I must say."

"We can either have a free Parliament or a free people. Personal freedom requires that all authority is restrained by long-run principles which the opinion of the people approves."

"The Neoclassical school has been the dominant school of economics for the last two generations, so I have also been schooled in it throughout my career. It can provide us with some very useful tools to analyse problems within a given structure, but it is not very good at understanding how the institutions, technologies, politics, and ideas that define that structure evolve over time. In this respect, Hayek is very different from the Neoclassical school, even though many Neoclassical economists mention him in the same breath as Milton Friedman, on the basis that he was one of the most influential advocates of the free market. Unlike Neoclassical economists, however, Hayek does not take the socio-political order underlying the market relationship as given and emphasizes the ultimately political nature of our economic life. This is a big contrast to the Neoclassical view, which thinks that economics and politics can be, and should be, separated. Indeed, if you read Hayek’s book, Individualism and Economic Order, you will see that he is very critical –sometimes even abusive – of Neoclassical economics."

"Hayek's adversaries — Oskar Lange and company — argued that a market system had to be inferior to a centrally-planned system: at the very least, a centrally-planned economy could set up internal decision-making procedures that would mimic the market, and the central planners could also adjust things to increase social welfare and account for external effects in a way that a market system could never do. Hayek, in response, argued that the functionaries of a central-planning board could never succeed, because they could never create both the incentives and the flexibility for the people-on-the-spot to exercise what Scott calls metis. Today all economists — even those who are very hostile to Hayek's other arguments … agree that Hayek and company hit this particular nail squarely on the head. Looking back at the seventy-year trajectory of Communism, it seems very clear that Hayek (and Scott) are right: that its principal flaw is its attempt to concentrate knowledge, authority, and decision-making power at the center rather than pushing the power to act, the freedom to do so, and the incentive to act productively out to the periphery where the people-on-the-spot have the local knowledge to act effectively."

"It would clearly not be an improvement to build all houses exactly alike in order to create a perfect market for houses, and the same is true of most other fields where differences between the individual products prevent competition from ever being perfect."

"Professor Mises' denial of the possibility of economic calculation in a socialist system must be rejected. However, Professor Mises' argument has been taken up recently in a more refined form by Professor Hayek and Professor Robbins. They do not deny the theoretical possibility of a rational allocation of resources in a socialist economy, they only doubt the possibility of a satisfactory practical solution of the problem. […] The position taken by Professor Hayek and by Professor Robbins is a significant step forward in the discussion of the problem. It promises a much more fruitful approach than Professor Mises' wholesale denial of the possibility of economic accounting under socialism."

"This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals."

"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 form 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 these "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 these 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. This character of the fundamental problem has, I am afraid, been rather obscured than illuminated by many of the recent refinements of economic theory, particularly by many of the uses made of mathematics."

"The shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices—are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others. It is a curious fact that this sort of knowledge should today be generally regarded with a kind of contempt and that anyone who by such knowledge gains an advantage over somebody better equipped with theoretical or technical knowledge is thought to have acted almost disreputably. To gain an advantage from better knowledge of facilities of communication or transport is sometimes regarded as almost dishonest, although it is quite as important that society make use of the best opportunities in this respect as in using the latest scientific discoveries. This prejudice has in a considerable measure affected the attitude toward commerce in general compared with that toward production. Even economists who regard themselves as definitely immune to the crude materialist fallacies of the past constantly commit the same mistake where activities directed toward the acquisition of such practical knowledge are concerned—apparently because in their scheme of things all such knowledge is supposed to be “given.” The common idea now seems to be that all such knowledge should as a matter of course be readily at the command of everybody, and the reproach of irrationality leveled against the existing economic order is frequently based on the fact that it is not so available. This view disregards the fact that the method by which such knowledge can be made as widely available as possible is precisely the problem to which we have to find an answer."

"The part of our social order which can or ought to be made a conscious product of human reason is only a small part of all the forces of society."

"I am certain that there are many who regard with impatience and distrust the whole tendency, which is inherent in all modern equilibrium analysis, to turn economics into a branch of pure logic, … are subject to no other test but internal consistency. But it seems that, if only this process is carried far enough, it carries its own remedy with it. In distilling from our reasoning about the facts of economic life those parts which are truly a priori, we not only isolate one element of our reasoning as a sort of Pure Logic of Choice in all its purity but we also isolate, and emphasize the importance of, another element which has been too much neglected. My criticism of the recent tendencies to make economic theory more and more formal is not that they have gone too far but that they have not yet been carried far enough to complete the isolation of this branch of logic and to restore to its rightful place the investigation of causal processes, using formal economic theory as a tool in the same way as mathematics."

"Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to co-ordinate the separate actions of different people in the same way as subjective values help the individual to co-ordinate the parts of his plan."

"There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means as De Tocqueville describes it, 'a new form of servitude.'"