1. “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 (H.3)”
a. What does Hayek mean by a “rational economic order”?
Hayek “rational economic order” refers to the use of knowledge in a rational form. According to Hayek “data”, from which the economic calculus starts, are not “given” for the whole society. Knowledge is limited when given to us, therefore the …show more content…
This according to Hayek is one of the main problems of economic policy specifically: how information is utilized.
b. What is the minimum information needed by economic planners and individuals?
For economics planners the minimum information must be theoretical or technical, so they can use it efficiently. For individuals the minimum information needed must the one that is beneficial to them.
c. Does the minimum differ for planners and for individuals? How? Why?
Yes. Information is different for individuals and planners. Economic planners would have scientific and organized knowledge while individuals will possess an unorganized knowledge namely, “knowledge of particular circumstances of time and place”. This is because planners must design economic programs for all of society. Whereas individuals are interest on what is best for them and how their information is best used when need it.
d. What happens when some individuals possess more information than other individuals?
There is a disruption in the economy since those who possess more information can make use of their knowledge cautiously and benefit or gain advantage from it. According to Hayek, disruptors were regarded as dishonest, however, at disruptions there will be an economic benefit for all of society. This is because society will use the best available opportunities in the economy.
e. What does Hayek mean when he