Econ 101.03

“… the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. The statistics which such a central authority would have to use would have to be arrived at precisely by abstracting from minor differences between the things, by lumping together, as resources of one kind, items which differ as regards location, quality, and other particulars, in a way which may be very significant for the specific decision” (IV).

In other words, Hayek claims that in economics there cannot be meaningful abstraction from particulars to universals.  You can go from looking at a thousand horses to saying something about what it is to be a horse, or from looking at a million lumps of coal to what it means to be a lump of coal, or a billion African violets to making legitimate scientific conclusions about the nature of the African violet.  But you can’t do that in economics.  Hayek thinks it is because economics is too complicated—because resources have all these other “tags,” if you will, affecting their value, besides their intrinsic qualities.  It would be as if you could change the nature of the violet by putting it in a different county, or separating it from other violets, or telling people it was a good substitute for an orchid in a girl’s corsage.  If you could change the nature of a violet—really change it—by doing any of those things, it would be devilishly hard to say what a violet really was (or was worth).

And that example shows what’s really at the bottom of Hayek’s claim that economic knowledge “by its nature cannot enter into statistics.”  The reason economic knowledge cannot by its nature enter into statistics is not because there’s too much information to handle right now for the people and systems we currently have—it’s because economic information is, at bottom, information about human choices—where we take the violet—how many other violets we put out on the shelf with it—how we market the violet—why we buy the violet—what we do with it afterwards—and those choices are not also good or rational choices, because human beings are … not … always … rational … actors.