Rethinking the Knowledge Problem in an Era of Corporate Gigantism

A preeminent theorist of laissez-faire, Friedrich von Hayek called the “knowledge problem” an insuperable barrier to central planning. Knowledge about the price of supplies and labor, and consumers’ ability and willingness to pay, is so scattered and protean that even the most knowledgeable authorities cannot access all of it. No person knows everything about how goods and services in an economy should be priced. No central decision maker can grasp the idiosyncratic preferences, values, and purchasing power of millions of individuals. That kind of knowledge, Hayek said, is distributed. However, in an era of artificial intelligence and mass surveillance, the allure of central planning has reemerged—this time, in the form of massive firms. Having logged and analyzed billions of transactions, Amazon knows intimate details about all its customers and suppliers. It can carefully calibrate screen displays to herd buyers toward certain products or shopping practices, or to copy sellers with its own, cheaper, in-house offerings. Mark Zuckerberg aspires to omniscience of consumer desires, profiling nearly everyone in Facebook, Instagram, and Whatsapp, and then leveraging that data trove to track users across the web and into the real world (via mobile usage and device fingerprinting). Indeed, you don’t have to use any of those apps to end up in Facebook/Instagram/Whatsapp files—profiles can be assigned to you. Google’s “database of intentions” is legendary, and antitrust authorities around the world have looked with increasing alarm at its ability to squeeze out rivals from search results once it gains an interest in their lines of business. Google knows not merely what consumers are searching for, but also what other businesses are searching, buying, emailing, planning—a truly unparalleled match of data processing capacity to raw communication f lows. Nor is this logic limited to the online context. Concentration is paying dividends for the largest banks (widely assumed to be too big to fail), and major