"The Use of Knowledge in Society"

Hayek, Friedrich A.
(1899-1992)
CEE
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First Pub. Date
1945-09
Publisher
American Economic Review. XXXV, No. 4. pp. 519-30. American Economic Association
Pub. Date
1945
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Copyright
The text of this edition is copyright ©: 1945, American Economic Review, XXXV, No. 4; September, 1945, pp. 519-30. Reprinted with permission.
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What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses. [From "The Use of Knowledge in Society"]