Explain How the Ideas of (1) Valuation, as Expressed by Alchian; (2) Tacit Knowledge, as Expressed by the Various Readings; and (3) “the Knowledge of the Particular Circumstances of Time and Place,” as Expressed by Hayek, Work Together to Help Define

All of the readings from this week’s module come together in one clear position to answer what is the economic problem of society. Hayek defines the economic problem of society as “the knowledge required to coordinate resources in a rational economic order is dispersed among separate individuals – and the knowledge is often tacit in nature”. Economic planning is important to Hayek’s position and states, “This planning, whoever does it, will in some measure have to be based on knowledge which, in the first instance, is not given to the planner but to somebody else, which somehow will have to be conveyed to the planner”. Hayek makes it obvious that economic planning is critical, but there are questions as to who should do the planning, one authority or many individuals. The question comes down to the efficiency of the existing knowledge. It can be more beneficial at times to disperse the information among many individuals as it becomes necessary to fit the plan of others. Hayek believe that a committee of selected experts would be the best choice to own scientific knowledge, also known as “knowledge of general rules”. On the other hand, the knowledge of time and place is “unorganized knowledge” that all people have a special ownership of all the different parts of this knowledge. According to Hayek, “scientific knowledge is not necessarily more economically important than knowledge of time and place”. If the knowledge is tacit knowledge, it is not easily transferrable to someone who is not familiar with the content.

According to Wikipedia, “Tacit knowledge is the kind of knowledge that is difficult to transfer to another person by means of writing it down or verbalizing it”. Since tacit knowledge is not easy to share with another person, this is important for valuation because two people in a similar situation, who have different amounts of knowledge on a subject, will not be able to make the same exact decision as they will weigh the good and bad aspects of a decision differently. Since one person will have more experience and knowledge on the good and bad points of a decision, the other person would not be able to teach that person the same information so he/she can make a similar decision. This same theory holds true for costing because one cannot translate the highest-valued forsaken opportunity to another since they have different levels of knowledge. According to Hayek, some knowledge is tacit and some is dispersible. In the article by Breen, he clearly shows he does not believe that emergency responders use valuation since weighing positive and negative options slows down the decision making process by sorting through data. Breen says, “[Emergency responders] rapidly evaluate each choice on its own merits, even if they cycle through several possibilities. They don’t need the best solution. They just need the one that works”. Breen believes that the emergency responders make decisions very quickly