“The Use of Knowledge in Society.” American Economic Review 35 (September 1945): 519–530.

Excerpt:

“What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough  if we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. The answer to the question of what is the best use of the available means is implicit in our assumptions. That is, the conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all of their different uses.

This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never so be given.”

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