AI's Use of Knowledge in Society

The title is a direct nod to Hayek (1945). Brynjolfsson and Hitzig argue that AI can shift the optimal locus of control in organisations through two channels: by codifying local knowledge that used to be tacit, and by expanding the processing capacity needed to aggregate and interpret dispersed information. This erodes the advantage of having people deciding on the spot, making centralised coordination more viable. But they recognise the limits: AI fails on rare scenarios (the "long tail"), on embodied knowledge, and at the same time it empowers the periphery by giving it access to knowledge that used to live only at the centre. The tension between centralising and decentralising is not resolved — it intensifies.