I just like to sum up some points from what I learned
from a reread of Hayek's book "Individualism and Economic Order".
I actually first read Hayek's "Individualism and Economic Order"
when i was 14 years old.
So, it was interesting to pick up the book again
and go through it systematically.
One thing I learned or relearned
was just how well the key essays have held up.
So, if we look at pieces such as economics and knowledge,
the use of knowledge in society,
the meaning of competition,
and those three key essays on the socialist calculation debate.
They still read as being really quite deep,
and quite important, and very well thought out.
They've turned out to influence a lot of subsequent economic thinking
and, of course, that's a big reason why Hayek won a Nobel Prize in Economics.
Of course, this book is a collection of otherwise published essays
or given lectures,
and it should not be thought of as having been composed as a book per se.
Nonetheless, we can ask what is the central theme in this collection,
and I think, overall, there clearly is one.
And that gets back to this idea of knowledge,
which I've stressed in some of the other videos,
that Hayek sees questions of knowledge
as being of paramount importance for economics.
And Hayek sees there being limitations to the individual human mind,
Hayek sees limitations to rationalism.
And there are limitations upon
how much we can know and how well we can plan for the future.
For Hayek, it's our beliefs about knowledge which determine
what kind of economic order is possible,
and assumptions about knowledge also shape how we do economics.
So, this idea of decentralized knowledge being so important
means that for Hayek the key question is,
how does competition or some other kind of discovery process
get this knowledge to be known and out there,
and, in some manner, taken advantage of?
At the time Hayek wrote,
a lot of economists simply ignored questions of knowledge,
and Hayek's insights were extremely important.
There's now a kind of meme floating around.
I think it's wrong, but it goes something like the following.
While Hayek introduced questions of knowledge,
starting in the 1970s and 1980s,
other economists took him up on this challenge,
and now mainstream economics has completely incorporated
aspects of knowledge in the way which Hayek had been demanding.
I think that's missing something fundamental about Hayek's insight.
For Hayek, knowledge isn't just an assumption we stick on
to an economic model.
So, it's not that you have a model and then, to complete it,
you decide what assumption will I make about knowledge.
Knowledge is more fundamental than that.
The fact that mobilizing scattered knowledge,
taking advantage of decentralized knowledge is so important,
it should shape what our reasoning looks like in the first place.
It should shape virtually all of the questions we ask
at a very fundamental level.
And when it comes to economic models,
we do need to rethink what the entire enterprise of modeling is all about.
Because again knowledge is not an assumption we stick into a model.
The more fundamental economic question is,
how do the parameters of the model get to be known in the first place?
So, Hayek is suggesting that economic reasoning
still needs a fairly radical reorientation
from the way even a lot of the economics of information
or game theory have evolved.
I also would note, when it comes to this volume,
the less famous essays I found extremely interesting and refreshing.
And I saw a lot of new material in them which I hadn't thought about before.
Maybe the one i enjoyed reading the most this time around
was the one called "The Economic Conditions of Interstate Federalism",
which you can think of as implicitly being a series of predictions
as to what the European community, later the European union,
was going to look like.
Hayek's ideas on that were really quite fresh.
In any case,
"Individualism and Economic Order" is one of the great books of economics,
and I hope that you enjoy reading it or maybe just hearing about it
as much as I have.