Hayek, ‘Knowledge’, And Radical Ignorance

This is the second in a series of posts I’m writing for the blog Rooted In Prosperity, which studies the way we apply the principles of free and prosperous societies to organizations, in the effort to make our workplaces more industrious, innovative, and create everyday value. Thanks to Ann for inviting me to contribute.

In the last post, we talked about the persistence of failure, and the need to distinguish success from random success. I don’t mean to disparage planning or success completely. Instead, I just acknowledge different values of the two kinds of success. I’d rather be good than be lucky. Truthfully, I’d like to be both, but if I have to choose, I’ll pick good.

However, when considering the relationship between success and failure, the question becomes what distinguishes between them? The obvious answer is ‘results’, but results are notoriously difficult to determine, let alone to measure. Frequently, results are only clear in retrospect. It’s also unclear what one means by saying “knowledge”. Hayek makes this point broadly in The Use of Knowledge in Society:

It will at once be evident that on this point the position will be different with respect to different kinds of knowledge; and the answer to our question will therefore largely turn on the relative importance of the different kinds of knowledge; those more likely to be at the disposal of particular individuals and those which we should with greater confidence expect to find in the possession of an authority made up of suitably chosen experts.

Knowledge is an inherently backward-looking enterprise. If we apply the theory of constraints (one of the most underrated mental models), and identify the limits of knowledge, then don’t we arrive at the point where we have to say that ignorance is the controlling condition of human intellect? The wealth of ignorance is unending in every direction. Isn’t that the philosophical claim at the heart of the economic calculation problem, our fetish for local knowledge?

If we apply this view of knowledge to the distinction between success and failure, isn’t the logical conclusion that failure, or at least non-success, is the controlling condition on human action? There’s no end to the things we have not succeeded in doing. Failure is easier than success; simply do nothing.

Failure is all around us. And yet, liberty has proven an effective and efficient tool for transmuting our general failure into very specific, and very tangible, successes. Moreover, these successes have proven to be remarkably repeatable, and build upon each other. The principles of liberty haven’t just randomly succeeded.

For my next post, I plan to address what this concept of radical ignorance has for the firm, in the context of decision rights. That’s right, it’s time to talk rights. Get pumped. And tell me how ignorant I am in the comments.

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