Posted tagged ‘The Use Of Knowledge In Society’

Here Is Some Econ. Homework

March 22, 2016

When knowledge is allowed to flow unhampered through the market, mainly through the price system, it works to coordinate all activities as optimally as possible. But when Government interventions don’t allow this knowledge to flow freely, malinvestments and dislocations are the result. The only way to cure these problems is for the interventions to stop. This allows the market to purge itself of these wasteful activities via a recession. Unfortunately no politician, bureaucrat, or Fed policy maker wants to have this correction happen on his watch.

Even tough hampered markets have an appearance of sustainability, they ultimately succumb to economic forces.

Here are two articles that talk about hampered markets. The first article is titled, Mises Was Right: The Hampered Market Is Unsustainable, by Sandy Ikeda, at mises,ca. Here are some excerpts from the article:

“Regulatory Dynamics Are Worse Than Transfer Dynamics. This is all because of the central role that prices play in coordinating market processes. That means that the government’s attempt to execute macroeconomic policy by manipulating the quantity of money and credit is perhaps the worst aspect of regulatory capitalism. Monetary manipulation eventually impacts all market prices directly and severely. Other things equal, it is the most distortionary form of intervention.”

“We can rank the major categories of intervention in order of their distortionary effects and thus in order of their unsustainability: 1) Large-scale monetary manipulation, 2) Large-scale price control, 3) Large-scale income redistribution.”

“So, other things equal, a country that pursues a pure form of welfare state capitalism might last longer than a country that pursues a pure form of regulatory state capitalism……”

“……Every country that has attempted interventionism in the past 100 years or so has experienced repeated economic crises. In Russia, crisis led to the Bolshevik Revolution and later the collapse of the Soviet Union. In Germany, the failure of the Weimar Republic conditioned the rise of National Socialism and then later the “economic miracle” under Ludwig Erhard. And in the United States, regulation and monetary manipulation produced the Great Depression and, decades later, the so-called Great Recession of 2007–09, with the “Reagan Revolution” in between.”

Ludwig Erhard And The German Economic Miracle.


Here is the second article titled, We Live In A Time Of Piecemeal-Planning & Incremental Interventionism, by Richard Ebeling, at Here are some excerpts from the article:

“Wherever we turn we are confronted with politicians, political pundits, television talking heads, and editorial page commentators, all of whom offer an array of plans, programs, and projects that will solve the problems of the world – if only government is given the power and authority to remake society in the design proposed.”

“Even many of those who claim to be suspicious of “big government” and the Washington beltway powers-that-be, invariably offer their own versions of plans, programs, and projects they assert are compatible with or complementary to a free society.”

“The differences too often boil down simply to matters of how the proposer wants to use government to remake or modify people and society. The idea that people should or could be left alnoe to design, undertake and manage their own plans and interactions with others is sometimes given lip service, but never entirely advocated or proposed in practice.”

“In this sense, all those participating in contemporary politics are advocates of social engineering, that is, the modifying or remaking of part or all of society according to an imposed plan or set of plans.”

“The idea that such an approach to social matters is inconsistent with both individual liberty and any proper functioning of a free society is beyond the pale of political and policy discourse. We live in a time of piecemeal planning and incremental interventionism.

“Society is a spontaneous order not a planned one.”

“Hayek argued that the true individualism starts from the premise that “society” is not some ethereal entity having an existence of its own, nor the designed creation of one or a handful of minds imposing a “plan” on people that produces the social order.”

“Instead, society is the cumulative and interactive outcome and result of multitudes of individual human beings making their separate individual plans that interact and generate connections and associations with other individual plans to produce the overall social order and its coordinated patterns.


If you really want to do some home work, read The Use Of Knowledge In Society, by F. A. Hayek at

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Are People Smarter Today Compared To People 100 Years Ago?

December 3, 2014

The Thinker Statue by the French Sculptor Rodin - stock photo

I asked myself this question, “are people smarter today compared to people 100 years ago”, after reading an article titled, Dumb And  Dumber – Scientific Proof  That People Are Getting ‘Stupider’, at In the article, the writer makes the assertion that people are getting ‘stupider’ {then humorously asks, is ‘stupider’ even a word}. The article states that there is now scientific evidence that this is so. SAT reading and verbal scores have been going down for decades, are examples cited as evidence to support the theory. The article also posts a 1912 eighth grade exam from  Bullitt County Schools in Kentucky. Try to answer some of these questions, you will be humbled.


The question: are people getting stupider, needs to a few qualifying questions asked before we can answer it. 1) What are the standards used for comparing the intelligence of people who lived 100 years ago to people alive today? 2) Who decides what constitutes being smart and being stupid? 3) Does reciting  facts from memory, like a contestant on Jeopardy, show higher intelligence than being able to take facts and logically reason your way from point A, to a conclusion at point Z? 4) Does being smart in your chosen field magically make you smart in other fields? These are just a few questions we need to think about before we make a pronouncement about intelligence or lack of intelligence.


People today need to know less about some things and more about other things than the people who lived 100 years ago. If you look at the eight grade test in the article linked to above, you will find questions about spelling, arithmetic, grammar, geography, physiology, civil government, and history that not many of us could answer today. However the answers to these questions are just a click on the computer, or a swipe on a cell phone away from getting answered in today’s world. The knowledge that people had to memorize back then is now stored on a computer chip and is able to be called up at a moments notice. Think of the times you have been with people and someone asks a question that no one can answer until someone uses their cell phone to look it up. The ability to write these posts would be exponentially more time-consuming if it wasn’t for computers. The ability to use spelling and grammar checks makes writing so much easier (some times these tools can’t even save me from spelling and grammar mistakes). Think about a sports writer decades ago pounding out his story on a typewriter: talk about having to get it right on the first take. Calculators have made complex math problems easy for dummies like me. You don’t have to know how to read a map today because you have GPS on your phone with the hot British female voice telling you, “in 200 feet turn right”.

The advance in the standard of living since the industrial revolution brought about a situation where more and more people didn’t have to know how to produce food, clothing, shelter, etc in order to win their battle against the planet for their survival. People began to specialize in producing these things more efficiently which freed up time and labor to be used to produce new products and services that were created by entrepreneurs who speculated, but were not assured, that markets existed for these new products and services. Through this trial and error process of becoming more productive, we can safely say that the over all amount of knowledge in society is obviously expanding, while at the same time we can say that an individual needs less over all knowledge to survive. The process of production has become so specialized that an individual can be a welder at a John Deere plant and literally trade his labor for food, instead of knowing how to actually produce food.


Thomas Sowell writes about what we are talking about in his book, Knowledge And Decisions ( one the best books I have ever read),  was inspired by F.A Hayeks essay, The Use Of Knowledge In Society.

Dr. Sowell writes in Knowledge and Decisions (which was written in 1980), “The growing complexity of science, technology, and organization does not imply either a growing knowledge or a growing need for knowledge in the general population. On the contrary, the increasingly complex processes tend to lead to increasingly simple and easily understood products. The genius of mass production is precisely in its making more products more accessible, both economically and intellectually to more people.”

Think of how much more true this is thirty-four years after Dr. Sowell wrote this. Things we use in our everyday life weren’t around in 1980.

More from Dr. Sowell. “…Matthew Brady required far more knowledge of photographic processes to take pictures with his cumbersome equipment during the Civil War than a modern photographer requires to operate his automated cameras…..The printing press performs daily communications miracles beyond the ability of an army of the most highly trained and dedicated scribes of the Middle Ages….An ordinary individual can easily arrange travel across thousands of miles through cities he has never seen by tapping the knowledge of travel agents and/or the American Automobile Association.”

Photographic equipment? The printing press? Travel agents? Seriously. We take pictures with cell phones. We have the internet and inkjet printers. We don’t call Triple A to make travel arrangements, we call Triple A if we need a tow.


If you haven’t seen the eighth grade exam from 1912 in the Dumb and Dumber article above you should go look at it. The civil government and history part of the eighth grade exam is where we have become woefully ignorant. Unfortunately these two areas are the most important areas we as individuals need to be smart about if we want to have continued prosperity. Being smart in these areas would have kept us vigilant about the incremental taking of individual freedom by people in Government that has happened over the last 50 plus years. Two questions from the civil government part of the exam prove my assertion. How many adults, let alone eighth graders today, could get these two questions right. 1) Name three rights given Congress by the Constitution and two rights denied Congress,  and 2) Define the following forms of Government: Democracy, Limited Monarchy, Absolute Monarchy, Republic. Give examples of each.

These questions aren’t even asked today. The first question, “name three rights given congress by the constitution…and two rights denied congress”, speaks volumes about what was understood about the constitution in 1912 that isn’t even taught in schools today. The fact that congressional powers are limited is stated in the question. Today most people think congress has unlimited power to make any law individuals in congress wish to make. Most people today think the President has unlimited power to decree what he wishes. But I bet most eight graders in 1912 knew that the President had limited powers.


The amount of over all knowledge has expanded exponentially over the last 100 years, while at the same time the amount of knowledge an individual needs to survive is less, and also the kind of knowledge each individual needs to survive is different.

The real question is not; are we smarter today than 100 years ago,? The real question is; are we smart enough to understand that the process that produced today’s standard of living stretches far back in time? Free individuals cooperating in free markets produced the standard of living we enjoy today. Central planning by Governments didn’t produce it, in fact, it has hampered our advance. The passage of time has separated us from the founding principles of our country.  If we aren’t smart enough to understand this, we will continually allow democratically elected tyrants to incrementally crush our individual freedom under the heel of their central plans.

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