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In Nature, all information is in a decentralized format

Discussion in 'The Kruse Longevity Center' started by Jack Kruse, Feb 14, 2021.

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  1. Jack Kruse

    Jack Kruse Administrator

    Information is Decentralized in Nature and in economies:

    A centrally planned economy could never match the efficiency of the open market because what is known by a single agent is only a small fraction of the sum total of knowledge held by all members of society (Hayek’s “Local Knowledge Problem”). A decentralized economy thus complements the dispersed nature of information spread throughout society. Each company is an attempt to take the local knowledge that it has and create a good or service that ultimately is the correct capital allocation (aka profit).

    To highlight how decentralized this information is, I’m going to give an example by Milton Friedman who made the statement: “There’s not a single person in the world who knows how to make a pencil:

    • The wood comes from a tree

    • To cut down that tree, it took a saw

    • To make the saw, it took steel. To make steel, it took iron ore

    • Graphite comes from some mines in South America

    • The eraser, which is rubber, probably comes from the tropics

    • Or the yellow paint

    • Or the glue that holds it together
    There was no central planning office. It was the "magic of the price system.”
     
  2. Jack Kruse

    Jack Kruse Administrator

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