Hayek on Knowledge, Economics and Society1

Abstract

This essay examines Hayek’s theory of knowledge, and the role which it plays in his writings on economics and society. It treats the knowledge which members of modern societies possess as imperfect and incomplete, because knowledge is fragmented and dispersed among millions of individuals, because the limits of human reason make many things unknown and unknowable, and because modern societies are as a result complex evolving organisms which cannot be understood or controlled by the normal methods of science. Acting on the assumption that human beings do have the knowledge to control society leads to serious harm. Hayek was critical of all social theories that pretended to such knowledge, including much of mainstream economics. His political pessimism derived from his epistemological pessimism, but he remained trapped in the rationalism he was so keen to reject.