
Friedrich Hayek and the Collective Brain - miraj
https://capx.co/friedrich-hayek-and-the-collective-brain/
======
chrismealy
Having read a ton of Hayek I thought I'd share what the real Hayek is like,
not the libertarian poster child. Actually existing Hayek would probably
disappoint most libertarians. He’s against corporate personhood, skeptical
about patents and copyright, and for urban planning, unemployment benefits,
public health, socialized medicine, and inheritance taxes. It seems like what
gets him really riled up is setting prices for cucumbers or state-owned hat
factories.

His contribution to social science is his focus on distributed information in
economic production. Think about how decision-making is distributed in
capitalist economies: bankers, investors, asset managers, producers,
distributors, retailers, brokers, executives, corporate planning departments,
middle managers, marketing departments, advertising, etc. Just imagine trying
to replicate all that effort with a few office buildings' worth of planners in
Moscow (Compare that to just Wall Street!). You can't run an economy without
enough planners.

Hayek never tells jokes. I think if he had any sense of humor at all it might
have occurred to him that designing the perfect society without planners (or
much democracy) was certainly a kind of planning. He's like the whiteboard in
"Office Space" that says "Planning to Plan" except it says "Planning to not
Plan" and it's three books and 700 pages long ("Law, Legislation and
Liberty").

~~~
TheOtherHobbes
Indeed. I'm not really sure I see the difference between capitalist planning
and communist planning.

Don't corporations have growth targets and multi-year plans? Don't they
(mostly) have a top-down management structure, where freedom of action and
collective intelligence are constrained the further you get from the Central
Committee (also known as the C-suite)?

Don't corporations regularly do incredibly stupid, naive, uninformed, and
self-destructive things that would be impossible if the kind of distributed
intelligence claimed in this article was a reality?

Are corporations any better at constraining the effects of toxic self-
promoting and self-aggrandising individuals who talk a good game but are
either incompetent or actively destructive?

And so on. It doesn't really matter that Hayek is misunderstood and (mis)used
for free market propaganda in the same way that Adam Smith is.

What matters is that the existence of true freedom of thought and action is
debatable in any culture which considers that kind of propaganda a necessity
at all.

~~~
TeMPOraL
The primary difference, and the reason why capitalist economy beats
centralized planning[0] is that it scales _much_ better, by making it so that
a lot of details solve "themselves". I.e. capitalism depends on most of the
minutiae decisions to be made by market feedback loops - instead of e.g.
explicitly setting it so that factory A produces X components, so that
factories B and C could use them to make Y goods, capitalism lets the
factories just run on a free market, and in time, an equilibrium of supply and
demand will form.

That said, planning on top-level is still needed and still done. The point of
setting up feedback loops isn't to let them run unchecked, but to make it
easier to control the whole system (including keeping it stabilized). Just
like it would be stupid to build a thermostat without input, having the
temperature be determined by the point at which the materials it's made of
start to "sweat", you don't want to leave market totally unchecked, doing
whatever the hell it wants. Governments still get to influence the market, the
same way a temperature dial influences the thermostat.

\--

[0] - as performed by humans with pen and paper; I don't see a reason why a
centralized planning scheme could not work better than capitalism if performed
by optimization algorithms in a hyper-connected world.

~~~
msgilligan
> I don't see a reason why a centralized planning scheme could not work better
> than capitalism if performed by optimization algorithms in a hyper-connected
> world.

One very Hayekian (Austrian) reason is that you won't have [very useful] data
on consumer preferences. The price system will aggregate this effectively. You
can't really poll for this, but purchase decisions will reveal it.

~~~
ue_
Why can't usage data be recorded rather than what people purchase? If you want
a Fuji apple, you request one, and that would be recorded in the system. How
does the price system determine what people want? Many products which people
don't want are made, and in fact capitalism has manufactured products that
they have to convince people to use.

~~~
msgilligan
Because you can't measure what people don't want, or what their relative
preferences are between comparable items. You really can't do this right
without a price system.

UPDATE: And this applies not just at the consumer level, but in the decisions
firms make regarding their supply chains.

~~~
ue_
>Because you can't measure what people don't want, or what their relative
preferences are between comparable items.

In what way do prices help with that? If more Fuji apples are requested, you
know people like that over the other varieties. If you want one brand of
apples over the other, one brand's products_distributed variable increases by
one. Sorry if it appears as though I'm being obtuse.

>And this applies not just at the consumer level, but in the decisions firms
make regarding their supply chains.

Howso?

~~~
Lazare
Different varieties of apple have different production costs, and those costs
change over time, sometimes rapidly an unexpectedly.

Maybe I prefer Fuji apples, but only slightly; I'd be perfectly okay with a
Nashi pear too, or if there's a shortage of Fuji apples, a Royal Gala.

Maybe a frost has reduced Fuji apple production; it would make sense for Fuji
apples to be allocated first to the people who _really_ prefer them, and then
if any are left over they could come to people like me.

> If you want one brand of apples over the other, one brand's
> products_distributed variable increases by one.

Right, so how do you capture my "sure, a Fuji apple, but only if there's
plenty"?

In a price system, it's easy: The price of Fuji apples fluctuates based on
supply and demand, and I'll purchase the fruit based both on my internal,
ever-changing preferences _and_ the price. Regardless of the changing relative
scarcity of Fuji apples, I will, apparently magically, end up with the fruit
that more efficiently matches my wants and needs with the global fruit supply.

And this works even if you scale it up to 7 billion people and millions of
products. That's a very difficult trick to match!

(And keep in mind, we also need to make decisions about distribution, stock
levels, what apple types to grow, how much land to allocate to orchards, how
much fertilizer to use, where to locate orchards to maximise growing season
but minimise fuel usage for transportation. Every resource we have is limited
in some fashion, often sharply so, yet our wants and needs are effectively
boundless.)

------
RobertoG
"[..] Exchange, as practised by people for about the last 100,000 years [..]"

We know that exchange is just one more activity that humans do, but,
historically, in the thousand of years context, it was not fundamental.

We could argue that in the palaeolithic the social organization had little to
do with markets. We could argue that in the neolithic, the social organization
was, in most cases, hierarchical and top-down.

So, the implicit assumption of markets as the 'natural state' of human
organization has not real basis. Even money is an invention of the state.

The idea that markets are powerful tools don't need to be defended. It's the
idea that markets know what is better for us what many reject.

It's like saying that we should just start the lawnmower and leave it to
decide what to cut. Then, when we don't like the garden, we have to accept
it's for the best, because if a better garden was possible is what we would
have.

~~~
jasode
_> Even money is an invention of the state._

The existence of money precedes sovereign governments. The only prerequisite
for "money" is consumption decoupled from the instantaneous moment of the
trade (aka not direct barter) and human memories to keep track of them. That
form of "money" has been happening for thousands of years. The prerequisite
for "currency" is any item (coins, cigarettes, hotel loyalty points, scrips,
etc) that's frequently used as an intermediate store of value to obtain other
items.

However, a _fiat_ currency requires a modern state to convince citizens to put
faith into authorized pieces of paper instead of
cattle/tobacco/yams/gold/diamonds/etc. If the citizens lose faith in
government-printed money (e.g. Zimbabwe, Germany Weimar Republic), people will
fall back on underground "organic money".

~~~
RobertoG
It's probably a question of definition, but if you exchange cattle, tobacco or
gold you are not using "money".

I would argue that money is an IOU, a promise of something that can be used
generally, not only between the two initial parties (that would be a
contract).

What would be the point of calling 'money' to cattle?

"That form of "money" has been happening for thousands of years. "

Can you give me some examples? because I have read about it and it seems that
it's not the case. At least, not in very relevant contexts.

'[..] people will fall back on underground "organic money".'

Actually they start using currency of other states.

And it's not a "faith" thing, it's related to a real loss of value of the
currency caused, in the cases that you mention, for supply shocks in the
country (see
[http://bilbo.economicoutlook.net/blog/?p=3773](http://bilbo.economicoutlook.net/blog/?p=3773)
).

~~~
nickik
A gold coin can be money, a bank circulating a IOU that allows withdrawal from
bank of one gold coin is called fiduciary media. The underlying money is still
gold not the note.

~~~
digi_owl
The gold coin would be gold first, coin later.

What makes it a coin is that someone measured its purity, and stamped it with
their mark to underwrite said purity.

The IOU, if not attached to a specific name, is just as good and exchange
medium as that coin. Even better perhaps because the value is not in the
material itself, but in what it can be exchanged for.

Frankly gold is nothing magical, it is just a material that is very corrosion
resistant. Thus making weights out of gold would allow them to stay accurate
longer while being transported around.

~~~
nickik
Of course gold is not magical, I don't clam it is.

The coin form is just for exchange, gold itself is the base money.

> The IOU, if not attached to a specific name, is just as good and exchange
> medium as that coin.

This is where you are wrong. Exchanging a IOU of a third party increases the
trust relationship to a third party. That is useful to do, and that's why
banking exists, but it is not inherent or required.

> Even better perhaps because the value is not in the material itself, but in
> what it can be exchanged for.

Yes. But again. It is still bound to the base money. Look into how historical
note issuing banking system work, there are great resources on this. The banks
exchange the gold when they get other notes. Then they further abstract and
establish clearing houses that do multiparty exchange.

Note here that the relationship always grow complex and more trust is
involved, but it is all based on the soundness of the underlying base system.

The IOUs, banking and all are simple not required for something to be money.

------
aerodeck
Funny to see this on HN. I am currently reading a book that details the recent
history of economic theory and how it has been in bed with neoliberalism. It
has much to say about Hayek and the Mont Pelerin Society, a think-tank that he
founded to develop his ideas.

What surprises me about Hayek was that he had a radical conception of
decentralization, managing to talk about human society as though on-par with
an ant-colony. IMO, this sort of anti-humanism is a necessary ingredient for
overcoming anthropocentrism in our current thinking and pivoting towards
ecological thinking, rather than purely rational thinking.

However, I think Hayek makes some tremendous mistakes in his thinking.
Firstly, by reducing the Collective Brain to merely the market/price-
discovery, he ignores the possibility that price-controls and/or social-
demonization could themselves be components of that brain (perhaps fulfilling
the function of an OS's kernel). Hayek talks much about there being no one
person who can understand everything, but fails to critique himself. Secondly,
he fails to see how the setup of a market has an influence on the kind of
information that gets processed. In order for some thing to be exchanged on
the market, it needs to be commodified in some way. This transformation of
/thing/ into /commodity/ is where the social slight-of-hand happens,
necessarily discounting some aspect of it's worth. An example is having two
identical mugs, but one of those mugs being /mine/ and therefore special to
me. That specialness doesn't exist if the mugs are a commodity, and perhaps
that specialness fulfills an informational/computational function. In the end,
the price is a result of a collective brain, but the market itself is a human
construct. Facebook, Wikipedia, Reddit and 4Chan all structure their 'markets'
differently, with incredibly different results.

Hayek had some good ideas, but he was too much of an apologist for the
existing economic order for those ideas to really be useful. As technologists
resurrect his ideas to apologize for the existing technological order, the
same will likely be the case.

~~~
nickik
> Firstly, by reducing the Collective Brain to merely the market/price-
> discovery

He does not.

> he ignores the possibility that price-controls and/or social-demonization
> could themselves be components of that brain

Again. He does not. He actually talks about this question in actual interviews
that you can listen to.

> Hayek talks much about there being no one person who can understand
> everything, but fails to critique himself.

Again, there are literal interviews where he talks about this exact question.

And making a argument myself, his point is that you can not understand
everything and that's why you can not centrally control it, not that he
actually knows how everything works.

Plus, he has spent a lot of time on actually trying to figure out how this
processes happens, and again, there are audio recordings of him talking about
it.

> In order for some thing to be exchanged on the market, it needs to be
> commodified in some way.

False. Prices work for uniques as well.

> This transformation of /thing/ into /commodity/ is where the social slight-
> of-hand happens, necessarily discounting some aspect of it's worth. An
> example is having two identical mugs, but one of those mugs being /mine/ and
> therefore special to me. That specialness doesn't exist if the mugs are a
> commodity, and perhaps that specialness fulfills an
> informational/computational function.

That is exactly what the price mechanism is for. If the mug has special value
to you then you can not sell it or sell it at a higher price. You are
signaling to the 'collective brain' that this is a special mug. That's the
exact point.

> In the end, the price is a result of a collective brain, but the market
> itself is a human construct.

Nobody argued against that.

~~~
aerodeck
I see a couple of interviews here:

[http://hayek.ufm.edu/index.php/Main_Page](http://hayek.ufm.edu/index.php/Main_Page)

Do you have a suggestion of which one is good to start? I really want to dive
deep into this guy.

Also, to be fair, theory travels. A lot of time it's more interesting to see
how a concept is misused than applied correctly.

EDIT:

lol. it seems that yea, he thinks price-signals are the only thing.

[https://www.youtube.com/watch?v=dV7-2Aua4_4&feature=youtu.be...](https://www.youtube.com/watch?v=dV7-2Aua4_4&feature=youtu.be&t=2m25s)

~~~
nickik
Yes, the place you linked to is the best for interviews.

A couple of things to note.

These interviews with some leading schooners came about because Hayek was old
and he had not given many interviews on video. So what you are seeing there is
a very old Hayek who does not always get everything correct about the past (as
always happens in these situations).

Second, Hayek changed his position on some topics quite a bit. Please don't
watch the interviews directly assume his book that he wrote earlier are the
same.

Hayek's arguments by nature are hard to write and talk about. Him not being a
good speaker (or writer) makes this very hard. He himself multiple times tried
to invent new words for concepts because he felt the words that existed did
not capture the meaning. Mostly he was not successful beyond his own works.

If you are open to reading, I would suggest "Hayek's Challenge: An
Intellectual Biography of F.A. Hayek". The auther is leading authority on
Hayek and is the editor of Hayek Collected works.

Depending on what aspect you are interested in there are different more
specialized books. For Hayeks own works, I think "Road to Serfdom" is a easy
first read but its written for a very specific people in a specific context,
that has to be understood. Some people recommend "Fatal Conceit" as a nice
'summary' for lots of stuff, but there are also some issues with it. I think
also that the essay collection "Individualism and Economic Order" is required
reading.

There are a couple podcasts that I can recommend, specially for beginners. One
is with the author of the book above. They address different aspects of Hayek.

\- Boudreaux on Reading Hayek
[http://files.libertyfund.org/econtalk/y2012/Boudreauxreading...](http://files.libertyfund.org/econtalk/y2012/Boudreauxreading.mp3)
(this gives a good overview about his books)

\- Caldwell on Hayek
[http://www.econtalk.org/archives/2011/01/caldwell_on_hay.htm...](http://www.econtalk.org/archives/2011/01/caldwell_on_hay.html)

\- Caplan on Hayek, Richter, and Socialism
[http://www.econtalk.org/archives/2010/06/caplan_on_hayek.htm...](http://www.econtalk.org/archives/2010/06/caplan_on_hayek.html)

\- Larry White on Hayek and Money
[http://www.econtalk.org/archives/2010/02/larry_white_on.html](http://www.econtalk.org/archives/2010/02/larry_white_on.html)

------
brbrodude
Libertarians take vague/basic stuff, rephrase them and act as if they just
uncovered Gods truth itself. Yes, commerce/market has good stuff, but
capitalism isn't the sole owner of commerce and markets, not the inventor, nor
anything of it. The Ottomans(islamic golden age etc) had them, but they also
redistributed resources to the needy and condemned usury, and so, most past
societies also had markets and commerce, and also, no one has ever rallied
against "freedom", those 'argument' mean little. The text reads like it could
have been written by any teenager who uncritically took all propaganda from
facebook and is enamored with an ideology. Plus, he makes it sound like these
sort of liberalism and theory is just injustly shunned for no reason(or maybe
no other than "all academics are secretly communists"?)

The point where left vs right were == USA pre-90s model vs soviet model should
be considered anachronic by now, as most leftists, and even china, are not for
central planning as a rule, and neither is USA capitalism as defensible now.
This is a perfect example of false dichotomy(probably one of the most abused
nowadays, because its necessary to do so to sustain a certain narrative).

Libertarians(which are called liberals everywhere else on the world, with
libertarian meaning non-authoritarian leftist) defend private property and so
they are completely for states, police and prisons by consequence. And if you
take the theories as nature's truth and apply it leaving out politics you end
up with dictatorships like Pinochet's Chile, where only the kernell of state
violence remains because it is necessary to keep a system which is not able to
satisfy humans needs of survivorship and self-determination(aka freedom).

I do plan to take a closer look at Hayek as this one seems like one who was
actually interested in science, philosophy, and truth and seems to be an
honest free thinker and not as much an ideologue, Nassim Taleb praises him, it
seems the reason he's not taken so seriously in Academy is actually because
his ideas refused to 'solidify' and provide hard models which would be seem as
"more sciency"(I could be wrong, but seems it's one of the points Nassim
makes, that a Science with uncertainty at it's core is better than one that
tries to cargo-cult its way through).... But damn the undead arguments and
mythologizing of 'market is god and good and pure freedom for all all in
itself' must die already, lets live in the real world, shall we?

Edit: some spelling

------
RodericDay
The way I see it, democracy and markets are opposed to each other.

Democracy: One person one vote.

Markets: Each person has tiny micro-votes, and they can get more votes by
supporting initiatives that pan out. One individual with millions of micro-
votes can easily out-vote a million individuals with less votes.

It's interesting to see just how "cargo cult"-like the practice of voting has
become in many places.

~~~
nickik
You are not seeing the full picture.

> One individual with millions of micro-votes can easily out-vote a million
> individuals with less votes

No. In a market there exist property rights that are designed to not work like
that. If I own a simple pen, somebody with a billion 'votes' can come along
and if I refuse to sell my pen that just that.

In a pure democracy, this is simple not the case. The rule of the majority is
a real thing, if I have a pen and there are a majority of votes for me to be
forced to give away that pen, I can do nothing.

This is of course in theory, in practice their is no pure form of either.
However it es a extremely important thing to point out. It is the exact reason
why you can run a economy with markets but not with democracy.

~~~
RodericDay
"A simple pen" is a nice example, but the real interesting question is what to
do about common goods like natural resources and land.

The more we shift to an economy where people "own" things via debt and rent,
it really becomes a matter of best bids.

\--

edit: It's also interesting to keep in mind that the original distribution of
land wasn't equal. So much of libertarianism is predicated on ideals like
"homesteading", but in practice most parcels of land were unequally
distributed from the very beginning. This was never corrected, and continues
to reverberate.

~~~
nickik
> "A simple pen" is a nice example, but the real interesting question is what
> to do about common goods like natural resources and land.

A pen is made out of natural resources.

> The more we shift to an economy where people "own" things via debt and rent,
> it really becomes a matter of best bids.

No, a rent is just a transfer of right of use but not right of ownership. Once
you have stable property rights you can actually make renting practical, and
that opens many more options. It does not fundamentally change the system.

> edit: It's also interesting to keep in mind that the original distribution
> of land wasn't equal. So much of libertarianism is predicated on ideals like
> "homesteading", but in practice most parcels of land were unequally
> distributed from the very beginning. This was never corrected, and continues
> to reverberate.

Nobody ever said that life was fair, certainty not the classical liberals. No
system can go back in time and fix all the morally wrong thing to establish a
perfect system and then role history forward. This is not Kafka DB.

The argument is that the best societies establish a property rights system and
based on that develop further. That's the best we can do. If there are
identifiable rights violation that we can 'fix' then this should of course be
done. The issue of course explode in complexity with time.

~~~
RodericDay
I think you're missing the forest for the trees.

Once upon a time, society was really really really unfair. Aristocrats ruled
everything autocratically and justified it via divine right, etc.

Then stuff happened, people fought, and democracy came along. Many hailed it
as a much more egalitarian form of decision making. We still pay a ton of lip
service to the idea that democracy is amazing.

However, then more stuff happened, and now democracy is very very weak. We
barely use it to make serious decisions, we collectively prefer to delegate to
experts or markets, and decision-making power more and more blatantly now
falls upon those who have cash.

This is varnished over by saying "the markets decided x". It's not even
necessarily a bad thing, some believe the wealth was accumulated
meritocratically and therefore it's better in the hands of those who know what
to do with it.

However, it doesn't erase the fact that markets and democracy are opposed to
each other. This doesn't mean one is good and one is bad, it just means that
when it comes to making a collective decision about what to do with a
resource, one cannot both do it democratically and according to market
principles. It's one or the other.

Life isn't fair but we get to decide if we make it a bit fairer. The notion
that the best societies limit themselves to a property right system, and not
further, into an education and health and entertainment systems, seems like
it's very much up for debate.

I see no reason why it's in society's collective interest to maintain a
security system to uphold private property rights, and not others for other
rights.

\---

People always like to talk about how "the invisible hand of the market" led to
this or that conclusion. Even if a greedy horrible butcher wants to gouge
people, the competitive nature of the market will stop him. So, pretty
clearly, the invisible hand stops evil-doers from doing so much evil.

However, what's also increasingly clear, is that the invisible hand also works
in the opposite direction. That is, if you want to do better things that what
the markets allow, if you're a particularly benevolent butcher, the same
invisible hand that stops the bad butcher, will stop the good butcher.

The market has a logic of its own, both for good and for bad, and we need to
collectively decide when and where we want to utilize it, and when we want to
use some other decision-making system.

------
iamcasen
It is a fascinating thought that human intelligence is collective, and that a
vast network of specialists is more efficient than a small network of self
sufficient producers. I think there is a lot more to study there.

That being said, I could have done without the left leaning politics ===
extreme, oppressive, authoritarian government bologna.

------
vyodaiken
I can't think of Hayek without being reminded of his claim that personal
freedom in Pinochet's torture state was greater than that under the previous
government where people were not getting their eyeballs pulled out and
genitals shocked for disagreeing with the State.

~~~
nickik
I really Hayek fan and I agree that he was wrong here.

Allende was not as socialistic and not as much in control as Hayek thought.
Since WW2 Hayek had a huge fear of democratic socialism turning into what we
would now call stalisim.

This fear never really came to pass because there is to much vested interest
in the markets, thus the change happens slowly. Most democratic countries
realize that they have gone to far, and then go back.

------
dmix
> 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.

Yet centralized control is the hammer that everyone turns to whenever there is
a problem. Instead of figuring out the root-cause and actually solving
problems the default instinct of all modern state-heavy economies is always to
add more layers on control. And I don't mean the 'state' but people... I see
it all the time on HN and Reddit too.

A perfect example of this recently is all of the calls for price controls in
pharma - prices are a great example of distributed knowledge systems. Despite
the fact research points to gov-backed monopolies being the primary cause for
drug price fluctuations [1], sometimes increasing prices 2000% at a time. In
any other market if a company increased prices even 25-50% they would put
themselves out of business because a competitor would step in to offer a
better price.

This was demonstrated recently with the Epipen controversy [2]. They would
never have been able to jack their prices so high if they had any competitors,
and there are companies dying to compete with them, but they have been stuck
in the FDA 'backlog' for years.

Plenty of other research shows that price controls results in shortages. Just
like the massive food shortages that have been happening since Venezuela
enacted price controls on food.

Yet the argument is being characterized as the evil selfish individualism
which permeates American 'capitalism' making these pharma CEOs jack prices up.

Of course not all regulation is bad. There are many externalities that can't
be controlled in the market (pollution is the perfect example). But this
immediate instinct to always turn to more centralized control with blind
trust, while villianizing markets, is an unhealthy obsession IMO. People act
like capitalism is the shining star of American culture but as far as I can
see it is continually villianized in movies and pop culture to the detriment
of society. While government is held to such low standards that we only expect
mediocrity from them.

For example, in response to pharma prices, how about cleaning up the existing
regulatory system so the FDA doesn't have companies in the backlogs for years?
Or investing more capital so they have enough people to handle the load? Or
are we just so used to inefficient government that we just expect them to not
do their jobs well? But no, clearly the solution is to give them even more
work to set prices for thousands of drugs.

I'm all for Hayek being taught in schools, maybe people would hold both
markets to higher esteem and governments to higher standards. So we get better
policy and new policy only when centralized control actually makes the most
sense.

/rant

[1] [http://khn.org/news/government-protected-monopolies-drive-
dr...](http://khn.org/news/government-protected-monopolies-drive-drug-prices-
higher-study-says/)

[2] [http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-
dr...](http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-
chairs/)

~~~
vyodaiken
Hayek was an absolute fabulist and quite dishonest too. His arguments against
central planning rely on a sleight of hand where any government planning is
identified with something like GOSPLAN under Stalin. How people using the
internet, created by DARPA and NSF can fall for that is beyond me. Clearly,
governments can plan well or badly. For that matter private corporations can
plan well or badly - IBM and Intel have centralized planning on an immense
scale.

~~~
RobertoG
"IBM and Intel have centralized planning on an immense scale"

Right. In fact, is there any human group that don't have some kind of central
planning?

Ironically, the only kind I can think of is the anarchist meetings where,
somebody told me, nothing is never decided.

~~~
pjc50
This is where people should read Coase rather than Hayek, who actually
addresses the question of why companies exist and are centrally planned.

~~~
nickik
Yes. I have pointed to Law&Economics (invented by Coase for those who don't
know) multiple times in this thread.

I would however also say that Hayek has more to say on the topic and that the
parent comment mischaracterized Hayek's arguments.

Little triva, Coase was a student at LSE when Hayek was there in the 30s. They
are two of the best and most important economists of this century, both should
be studied in depth.

------
ranko
Interesting aside - the Matt Ridley who wrote was chairman of the Northern
Rock bank in the UK when it became the first British bank to suffer a run for
150 years. Perhaps when it was nationalised in 2008 he said something like "it
takes a government to rescue a failed bank".

~~~
justin66
Pretty sure you've got him mixed up with someone else, I went to a review of
his book and saw this: "Matt Ridley is a zoologist by training and a disciple
of Richard Dawkins."

~~~
CalChris
Not mixed up with someone else.

[https://en.wikipedia.org/wiki/Matt_Ridley](https://en.wikipedia.org/wiki/Matt_Ridley)

He was made a board member because his father had been a board member. And
then he was promoted to chairman of the board. His academic training was in
zoology but he wrote for the Economist.

~~~
pjc50
> He was made a board member because his father had been a board member

How amazing that the free market in employees would produce such a
coincidental result! That the most economically efficient person would be a
relative of another board member!

~~~
nickik
That the bank failed seems to be a indication that it was not economically
efficient and the market correctly removed it. That seems to be the exact
thing that we want.

For some (easy to understand) reason government have taking into their heads
to 'save' these institutions, but you can hardly blame that on the market as a
organisational principle.

~~~
CalChris
The government did not try to 'save' this bank. The government tried to stop
its contagion from spreading. Hoover had allowed that sort of contagion to
spread in 1930 to ill effect.

Also, you are ignoring the Major Major Major Major who ran this bank and now
lectures us about economics. If Hayek is the marginal figure he is, it is
partly because of the Ridleys championing him.

~~~
nickik
This 'Hoover let it continue'-story is partly correct but it ignores the
larger and far more important story. The bank failed because there was a
liquidity crunch caused by a badly implemented gold standard and a even more
badly manged Fed that failed to do its job. Its not the banks fault that there
is a massive liquidity crunch. Its also not the banks fault that they have
been legally restricted from note issue. In Canada (with no central bank) no
banks failed in the same period, but the economy of Canada was hit almost as
hard.

By the way the hole argument that you are making goes back to a British guy
100 years ago (Walter Badget, often called "Lender of last resort"). You would
be to discover that this guy was actually against the idea of saving bad
banks, and even more he was against central banks in general. His argument was
that if banks can not expand liquidity themselfs as they did before central
banks, then the central bank must do it, BUT ONLY TO GOOD BANKS AGAINST HIGHLY
SECURE ASSETS AT HIGH RATES.

Sadly his arguments have been turned around into something different by people
who don't want to read his point for political reasons or simply don't
understand them. Now its, 'if you let any bank fail, a domino-effect will
destroy everything', this is simply false, most of the time, most banks are
good. The problem is liquidity, and the central bank is in control of that,
that its job. The domino effect only happens if the central banks fails, as
the Fed did in 1930 and 2008.

I'm not in detail informed about this particular case in England. I made a
general point about markets and governments.

------
hyporthogon
(1) 'Exchange between strangers is a unique feature of us modern hominids'
isn't really falsifiable without begging the question or establishing a hard
boundary between kin and non-kin, which afaik is currently a function of the
problem under consideration (i.e.'kin' might mean something different to
geneticist vs. anthropologist vs. linguist vs. classical economist and even
something different for a different problem in each of those disciplines). But
'this is what makes us human' is far from essential to Hayek..and probably
basically inimical to Hayek, as some other commenters have pointed out.

(2) The 'reduction of collective intelligence to the price mechanism'
objection (which is often a specific case of generic objections to dimensional
reduction, including e.g. perceptron thresholds) is addressed throughout
Minsky's Society of Mind[0], esp. the 'frames' concept.

(3) The article doesn't mention the benefits of localized knowledge (as
opposed to the 'practical reality' of localized knowledge, which may be
lamentable and/or fixable), which iirc Hayek does get into (or maybe some
other Hayekians? more modern systems-oriented folks? can't think of a source
at the moment). If some knowledge (for example, within a community of
practice) weren't pretty strongly localized, then every knowable would be in
one truly global variable space, and abstraction would be incredibly
computation-intensive, and knowledge growth would be horribly O(n!), and all
of thought would work like JavaScript (ZING). This is a stronger kind of
localization than technical specialization (which just maps onto SOLID class
design rather than variable space).[1]

[0] Beautiful html edition: [http://aurellem.org/society-of-
mind/](http://aurellem.org/society-of-mind/) [1] Broad philosophical musing on
this sort of thing:
[https://mitpress.mit.edu/books/bubbles](https://mitpress.mit.edu/books/bubbles)

------
joshuaheard
When the author talks about the Collective Brain, or the Cloud, it is really
referring to the Market, or the Marketplace of Ideas. Conservatives like the
market over government for the very reasons outlined in this article. I'm glad
these fundamental ideas are getting updated with today's nomenclature.

------
aidenn0
> If Hayek is mentioned at all in academia, it is usually as an alias for
> Voldemort.

I thought that economists in academia were largely Austrian, which would
certainly not position Hayek as Voldemort.

------
djschnei
"Hayek is my homeboy"

...

that must be a bumper sticker...

------
saintPirelli
There is one guy in a t-shirt in this classroom. Savage!

------
mcnaughtonrules
Wild to see Hayek on hacker news

