We Are All Hayekians Now: The Internet Generation and Knowledge Problems - 1 views
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Primarily in his The Use of Knowledge in Society but also in his other contributions to the socialist calculation debate, Hayek crafted a brilliant statement of a perennial problem.
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Technological problems involve effectively allocating given resources to accomplish a single valuable goal.
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The choice to build the bridge is a choice between this bridge or that skyscraper as well as any other alternative use of those resources. Each alternative use would have different benefits (and unseen costs).
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This is not a mere question of engineering the strongest or even the most cost-effective structure to get across the Hudson, this is a question of what is the strongest or most cost-effective possible future version of New York City.
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“We are building the world’s 20th search engine at a time when most of the others have been abandoned as being commoditized money losers. We’ll strip out all of the ad-supported news and portal features so you won’t be distracted from using the free search stuff.”
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But, of course, Google survived, prospered, and continues towards its apparent goal of eating the entire internet (while also making cars drive themselves, putting cameras on everyone’s heads, and generally making Steve Ballmer very very angry). So, why did Google win? The answer is, perhaps surprisingly, in Hayek’s theory.
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“Our goal always has been to index all the world’s data.” Talk about anemic goals, come on Google, show some ambition!
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Sure, all this data is now hanging out in one place for free, but to make a useful index you need to determine how much people value different data. We need data about the data.
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In Soviet Russia, failed attempts at arranging resources destroyed the information about the resources. The free market is the best way to figure out how individual people value individual resources. When left to trade voluntarily, people reveal their preferences with their willingness to pay. By arranging resources through coercion you’ve blinded yourself to the emergent value of the resources because you’ve forbidden voluntary arrangement in the economy.
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Search used to be really bad. Why? Because search companies were using either (a) content-producer willingness to pay for indexing, (b) mere keyword search or (c) some combination of editorial centralized decision-making to organize lists of sites.
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These methods only work if you think that the best site about ducks is either (a) the site that has the most money to pay Altavista for prime “duck” listing, (b) the site that has the most “ducks” in its text, or (c) the site that was most appealing to your employees tasked with finding duck sites.
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If 999 other websites linked to one website about ducks, you can bet that most people think that this site is better at explaining ducks than a site with only one link to it (even if that link was horse-sized).
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So Google uses the decentralized Hayekian knowledge of the masses to function. Why does this mean we’re all Hayekians?
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All of the questions of organizing activity on the internet are solved (when they are, in fact, solved successfully) using Hayekian decentralized knowledge.
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Amazon customer reviews are how we find good products. Ebay feedback is how we find good individual sellers. And, moreover, whole brick and mortar services are moving to a crowd-sourced model, with sites like AirBnB for lodging and RelayRides for car rental.
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the giant firms of tomorrow will be those that empower people to freely share their knowledge and resources in a vibrant marketplace.
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Today, the central challenge for a firm is not to develop careful internal management but rather the non-trivial task of building marketplaces and forums to encourage decentralized knowledge production and cooperation.
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Our generation already understands this on a gut level. We Google everything. We defend freedom on the internet as if it was our own personal real-world liberty at stake. We mock the antiquated central planners of the early web, looking at you AOL, Prodigy, for their ineffectual obviousness and denial of crowd-sourced knowledge.
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"We are all Hayekians now. Specifically, the "we all" is not quite everyone. The "all" to which I'm referring is people of the internet-people who've grown up with the net and use it for a majority of their day-to-day activities. And, the "Hayekian" to which I'm referring is not his theories on capital, or the rule of law, but, specifically his vision of knowledge."