The Use of Knowledge in Society

The knowledge relevant for economic decisions is dispersed across society — never concentrated in a single mind. No central planner can aggregate it well. Markets work because they are a decentralised mechanism for processing information: prices transmit signals that no committee could ever replicate. Read next to Coase, the question becomes: when is it worth centralising a decision (the firm) and when should dispersed information rule (the market)? AI reopens this question because it lets every node process more information than ever before.