Question

In ‘The Use of Knowledge in Society’ (1945), F.A. Hayek identifies a ‘knowledge problem’ that central planners (or managers of any organization) confront. Explain What are some implications for how the knowledge problem impacts business management?

Answer 1

Friedrich Hayek also known as F.A.Hayek was an economist as well as philosopher. According to his theory of economics, private spending will bring more development to the economy more than government spending. He was a Nobel price recipient in the year 1974 for his findings in fluctuation of money and economics.

One of his writings was "The Use of Knowledge in Society". It was a famous article. In 2011, it was selected in the list of top 20 articles in the last 100 years. In this book, he represent the central bank or any management as " central planners". According to his view in the article, central bank is a monopolistic agency of the government. They do not have enough knowledge to lead and take decisions regarding money supply and to make the correct use of money. The money should be distributed among different sections of institutions who have knowledge in various phases. That will be more beneficial to the economy.

Business management also don't have enough knowledge. They should delegate money and corresponding duties to the other employees who have knowledge in their own. Then only, the business can be run to success. Otherwise, it cannot make use of the knowledge of other personnel to the business. Business management should not think that they knows everything or other people does not have knowledge.