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In Hayeks Road to Serfdom, he distinguishes between central planning & decentralised planning. And states that decentralised planning makes the most sense, since the available information is too large to collect for any central planning to be effective.

Given the current technological climate its easy to forsee that the collection of price sensitive information can be made, in principle.

How does this affect Hayeks theory?

  • Hayek's argument includes people having inexplicit knowledge and not knowing whether they want something until they are actually offered it. This information cannot be collected, even in principle. – alanf Apr 10 '14 at 14:50
  • Very true, but nor is it of any practical economic value until its translated objectively into purchases of some kind. One shouldn't confine information gathering on simply prices, but also all searches, social media, forums. Should one make a division here between the distribution of existing products which is what the price mechanism to a first approximation is about, and that of the invention of new products - which appears what your criteria is engaging with? – Mozibur Ullah Apr 10 '14 at 15:33
  • Really interesting question. I don't have a good answer, but the scope and scale of computation have certainly blown that premise of Hakek's argument out of the water. The danger of willful misuse is only increased, though (c.f. 1984). – Rex Kerr Apr 10 '14 at 16:12
  • @kerr: thxs - I'm suprised no-ones asked it already given the advent of Big Data - I'd be curious how this could be mathematically modelled. I'd also be curious of the effect of having the information transparently available to everyone. Again in principle that could be done. – Mozibur Ullah Apr 10 '14 at 17:14
  • @alanf: new product spotting is also concievable, its a part of whats called trend-spotting. Of course one has to knock out noise, some of which will be small spikes as they don't interest anyone much, but also large spikes which interests everyone but has no value. The art & theory will come in judging how. – Mozibur Ullah Apr 10 '14 at 17:21
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The theory you described is a part of the "Economic Calculation Problem" and would be affected by technology's ability to handle big data.

How?

By making the point irrelevant to the debate over central planning & decentralized planning. In theory a centralized group could make informed decision about production that would be backed by irrefutable (in theory) numbers and facts.

The important implication of technology is that it is a tool. It can come up with the perfect utilization of resources to meet peoples needs or it can come up with the perfect utilization of resources to increase profits for my company. Technology is just as biased as those who create it.

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