Friedrich Hayek and the Collective Brain
&gt; Hayek’s point in his famous essay of 1945, “The Uses of Knowledge in Society”, is that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localised but connected knowledge, much of which is tacit.<p>Yet centralized control is the hammer that everyone turns to whenever there is a problem. Instead of figuring out the root-cause and actually solving problems the default instinct of all modern state-heavy economies is always to add more layers on control. And I don&#x27;t mean the &#x27;state&#x27; but people... I see it all the time on HN and Reddit too.<p>A perfect example of this recently is all of the calls for price controls in pharma - prices are a great example of distributed knowledge systems. Despite the fact research points to gov-backed monopolies being the primary cause for drug price fluctuations [1], sometimes increasing prices 2000% at a time. In any other market if a company increased prices even 25-50% they would put themselves out of business because a competitor would step in to offer a better price.<p>This was demonstrated recently with the Epipen controversy [2]. They would never have been able to jack their prices so high if they had any competitors, and there are companies dying to compete with them, but they have been stuck in the FDA &#x27;backlog&#x27; for years.<p>Plenty of other research shows that price controls results in shortages. Just like the massive food shortages that have been happening since Venezuela enacted price controls on food.<p>Yet the argument is being characterized as the evil selfish individualism which permeates American &#x27;capitalism&#x27; making these pharma CEOs jack prices up.<p>Of course not all regulation is bad. There are many externalities that can&#x27;t be controlled in the market (pollution is the perfect example). But this immediate instinct to always turn to more centralized control with blind trust, while villianizing markets, is an unhealthy obsession IMO. People act like capitalism is the shining star of American culture but as far as I can see it is continually villianized in movies and pop culture to the detriment of society. While government is held to such low standards that we only expect mediocrity from them.<p>For example, in response to pharma prices, how about cleaning up the existing regulatory system so the FDA doesn&#x27;t have companies in the backlogs for years? Or investing more capital so they have enough people to handle the load? Or are we just so used to inefficient government that we just expect them to not do their jobs well? But no, clearly the solution is to give them even more work to set prices for thousands of drugs.<p>I&#x27;m all for Hayek being taught in schools, maybe people would hold both markets to higher esteem and governments to higher standards. So we get better policy and new policy only when centralized control actually makes the most sense.<p>&#x2F;rant<p>[1] <a href="http:&#x2F;&#x2F;khn.org&#x2F;news&#x2F;government-protected-monopolies-drive-drug-prices-higher-study-says&#x2F;" rel="nofollow">http:&#x2F;&#x2F;khn.org&#x2F;news&#x2F;government-protected-monopolies-drive-dr...</a><p>[2] <a href="http:&#x2F;&#x2F;slatestarcodex.com&#x2F;2016&#x2F;08&#x2F;29&#x2F;reverse-voxsplaining-drugs-vs-chairs&#x2F;" rel="nofollow">http:&#x2F;&#x2F;slatestarcodex.com&#x2F;2016&#x2F;08&#x2F;29&#x2F;reverse-voxsplaining-dr...</a>