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date: 15 December 2018

Abstract and Keywords

F. A. Hayek’s elaboration of the difficulty of aggregating diffuse private knowledge is the best-known articulation of the knowledge problem and an example of the difficulty of coordinating individual plans and choices in the unavoidable presence of dispersed, private, subjective knowledge. Prices communicate some of this private knowledge and serve as knowledge surrogates. The knowledge problem has a deep provenance in economics and epistemology. It is a deep epistemological challenge, with which several scholars in the Austrian tradition have grappled. This chapter analyzes the development of the knowledge problem in two main categories: the complexity knowledge problem and the contextual knowledge problem. It also provides an overview of the development of the knowledge problem as a concept with both complexity and epistemic dimensions, its relation to and differences from modern game theory and mechanism design, and its implications for institutional design and robust political economy.

Keywords: Austrian tradition, F. A. Hayek, knowledge problem, political economy, prices, private knowledge

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