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The forefathers of libertarian thought, Ludwig von Mises and Friedrich Hayek, wrote illuminating defenses of markets in their war of words against socialism and state planning in the early 20th century. At the center of their analysis was the spontaneous economic order created by the separate actions of individuals as they make choices in the marketplace. They argued that the ordinary knowledge of regular citizens could be pooled in the market and lead to a better result than any central decrees based on expert knowledge. von Mises and Hayek were not the first to articulate this idea, but they certainly surpassed their predecessors in both clarity and depth.

Orthodox libertarianism has fought a losing battle in most developed countries for a long time now, for good reasons. Even though markets are accepted as necessary mechanisms in modern society, few people consider them sufficient in themselves. The state must intervene to keep preserve equality and to keep the market from “failing”. Most discussions of market failure and state intervention seem to be based on a shallow understanding  of the dichotomy between ordinary knowledge and expert knowledge. Market failure results when ordinary knowledge is misinformed. State intervention is justified if its experts are better informed.

However, the importance and value of ordinary knowledge does not nowadays seem to get much attention beyond questions of market regulation. In this essay I will discuss ordinary knowledge from a few different perspectives and try to sort out a few preliminary ideas about its applicability in political decision-making.

The market

To set a point of comparison I will very briefly present Hayek’s theory of the market. The most concise presentation is probably his article The use of knowledge in society (Hayek 1945) which I will be quoting. Hayek introduces ordinary knowledge like this:

“Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of particular circumstances of time and place.” (Hayek 1945 p.521)

These particular circumstances are the daily preferences and constraints which particular persons can know intimately from their daily experience (or the preferences and constraints of a particular company managers if we are thinking of company-to-company markets), but which cannot be aggregated and centralized without losing critical details. This ordinary knowledge is dispersed. One person cannot apprehend even a small fraction of it. But it can nevertheless be communicated through price information on an open and competitive marketplace and it can thus spontaneously (i.e. without centralized control) guide economic production for general benefit.

“[The man on the spot] need not know of such events [that happen beyond the horizon of his immediate knowledge] as such, nor of all their effects. It does not matter for him why at the particular moment more screws of one size than of another are wanted, why paper bags are more readily available than canvas bags, or why skilled labor, or particular machine tools, have for the moment become more difficult to acquire. All that is significant to him is how much more or less difficult to procure they have become compared with other things with which he is also concerned, (…)” (Hayek 1945 p.525, emphasis in original)

Hayek emphasizes that the market is above all an effective mechanism for coping with change (p.523). A central planner dealing with statistical aggregates can observe them periodically but can only make the crudest of adjustments based on what he sees. Prices, on the other hand, can on short notice reflect a multitude of interconnected changes even without an overseer.

“[T]he sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. (…) [C]entral planning based on statistical information by its nature cannot take direct account of circumstances of time and place…” (Hayek 1945 p.524)

“I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.” (Hayek 1945 p. 527)

This is no doubt correct. We are so used to participating in markets and benefiting from them that it takes some effort to understand them more deeply, to see that they are social structures which link together the ordinary knowledge of millions of individuals for their mutual advantage.

But Hayek’s ideal view of markets should not be pushed too far. Markets have their faults as far as informed decision-making is concerned. The ordinary knowledge of particular circumstances has insufficient perspective on the wider consequences of market actions, such as harmful effects on the environment and many social problems. Ordinary knowledge is often ignorant and vulnerable to being misled by fraud and false advertising. The unregulated market may lead to monopolies which vitiate the benefits of market competition. And of course the market does not promote equality. For all these reasons (and many others) the state must regulate the market. But Hayek’s account nevertheless remains one of the best theoretical expositions of the value of ordinary knowledge. Following his cue, I will now discuss ordinary knowledge in democratic politics.

The ordinary and the political

It’s easy to see that market coordination is insufficient as a basis for political organization. It is  impervious to questions of justice and inapplicable to services that cannot be priced. But leaving aside the market itself, we may ask whether the ordinary knowledge that Hayek so eloquently defended can inform political decision-making.

This requires that we extend the concept of ordinary knowledge beyond Hayek’s bounds. But we can still call it knowledge of particular circumstances. Just like economic knowledge it will be particularly crucial for coping with change. It’s easy to think of areas of life (beyond the economic sphere) where ordinary knowledge is the best expertise. When some parts of the local infrastructure deteriorate or when the neighbourhood suddenly become unsafe at night, local people will know about it first. If local government officials are corrupted or if common funds are wasted on projects that are of no use to anyone, the locals will probably be better aware of it, too, than central administrators.

So there’s an almost unlimited number of basic political matters on which the best source of knowledge is ordinary knowledge. And we may note a similarity to the ordinary economic knowledge that Hayek describes: ordinary political knowledge is very much tied to the immediate surrounding environment which citizens experience at first hand. It is indeed knowledge of very particular circumstances. As soon as we extend our political realm to states or municipalities, or even big cities, the particular vantage point of a single perspective suffers from severe myopia and is most likely misinformed.

The crucial difference with regard to an economic market is that ordinary political knowledge cannot be harnessed like ordinary economic knowledge can. The actions of an economic individual on the market influence prices, but no directly comparable mechanism exists for political action. In the following I will nevertheless look at two partial options for harnessing ordinary knowledge for public benefit.

Voting or deliberating

There are two political mechanisms by which we could envision ordinary knowledge coming into play in political decision-making. The first one is voting. We can presume that people apply ordinary knowledge when they assess candidates who are competing for the right to represent them. Candidates should ideally present a detailed plan of action that they intend to implement if elected. Voters could then compare their own preferences and select the candidate whose program comes closest to the one they would like to see implemented. The elected representatives would then at least approximately be implementing policies informed by the ordinary knowledge of voters.

But this seems like a highly flawed mechanism for harnessing ordinary knowledge. One problem is that the knowledge of those voters whose chosen candidate failed to be elected is nullified. In a way this resembles the way that the market nullifies the knowledge of those who lack financial means. In fact the voting process is superior to the market in this regard since it is much easier for voters to find influence by voting ‘strategically’ than it is for dispossessed people to work around the merciless wealth & influence hierarchy of the marketplace. Non-representation of certain viewpoints is a necessary evil in democratic systems. But it still leaves ordinary knowledge with a great deal of influence.

But a second, much bigger problem is that the chosen representative’s political influence won’t be determined by the number of votes received and her agenda will not be hers alone. Both her influence and her agenda will be determined by the party that she represents. And parties are complex organizations with goals and visions that certainly don’t stem from their voters. Consequently, political issues get a life of their own in party politics and are quickly disconnected from the context of ordinary knowledge. The chosen representative will have to compromise and change her plan of action in a manner which was completely unforeseeable to voters. If on the other hand a voter only votes for a party program (instead of an individual candidate’s action plan) then this program will hardly be directly related to her first-hand experience. Either way, representative democratic government seems to provide a very weak mechanism for utilizing ordinary knowledge.

A more promising route may lie in democratic deliberation, a (more or less hypothetical) scheme for making political decisions after (a select group of) ordinary citizens have discussed it thoroughly amongst themselves. Setting aside all practical problems such a scheme would face, at least it seems likely that ordinary knowledge would be the primary source of information in deliberation.

But it would probably need supplementation. Indeed a basic supposition in democratic deliberation is that the participants are informed by knowledgeable persons or authorities before they deliberate. Perhaps this invalidates our quest for ordinary knowledge, perhaps not. Scale again seems to be the important variable. Citizens who deliberate questions relating to their city could take some time to understand the city budget prior to deliberation and still apply their first-hand ordinary knowledge of the city as they make decisions. But ordinary knowledge would soon disappear from the picture if the deliberation required weighing of complex social statistics and their implications.

However, even if we restrict the decisions of the deliberative council to items tied closely to daily life, we might still have some misgivings about its ability to truly benefit from distributed ordinary knowledge. Firstly, it seems unavoidable that much ordinary knowledge will be excluded from the deliberation simply due partial participation and time constraints. Secondly we might wonder if the result of deliberation can ever be a true compromise or consensus or if, instead, a loud minority will just force their own point of view on the rest. In any case Hayek’s basic idea of a different kind of knowledge really does not apply to a deliberative council, no matter how fairly it has been selected. Effective deliberation requires a small group and the ordinary knowledge of those who don’t participate will be nullified.

So both voting and deliberation fall very much short of the market as mechanisms for harnessing ordinary knowledge. Ordinary knowledge pretty much disappears from the decision-making process after it has been expressed in a vote. And deliberative decision-making is bound to exclude a number of persons entirely. The basic contradiction is that political decisions must always be centralized somehow to be effective and beneficial. Complete decentralization would mean anarchy and there’s no such thing as spontaneous order in politics.

Scale and expertise

A few concluding observations:

First, ordinary knowledge should be remembered even though it’s difficult to harness it politics. Hayek’s point about the fundamental incompatibility of statistical and ordinary knowledge is a general one. The larger and more comprehensive the statistic, the further removed it is from ordinary social life and the less accurately it portrays the ordinary reality of our daily lives. It’s good to retain a healthy scepticism toward simple numbers by keeping in mind that they fail to account for the subject matter of much ordinary knowledge.

Second, decisions in a small democratic unit, whether they are reached by voting or deliberation, will be more open to influences from ordinary knowledge than decisions in a large one. Local parties are likely to drive agendas that are much more in touch with the ordinary experience of citizens than those of national parties, provided that the local parties are allowed some independence. And a deliberation on local matters in a small group is likely to lead to a much more useful application of ordinary knowledge than a deliberation on national matters that always require special expertise.

Thirdly, the scope of political matters where ordinary knowledge would surpass expert knowledge (if it could be harnessed) is very narrow. Ordinary citizens are likely to be badly informed on practical constraints and completely ignorant on all matters which require statistical understanding. Ordinary knowledge is unavoidably short-sighted, vulnerable to deception and unable to recognize its limits. Clearly it would be an absurd wish to expect ordinary knowledge to be the primary source of political knowledge. Yet it must be a necessary source of information in all democratic nations. They would not be democracies without it.

Fourthly, it is interesting to speculate how much ordinary knowledge can be supplemented with expert knowledge before it ceases to be ordinary knowledge (in democratic deliberation, for instance). Does first-hand experience from your encounters with impoverished people still remain important after you’ve read a statistical study of income distribution? Which one of the two kinds is more important for making good political decisions? I also wonder if it makes sense to say that an expert can have ordinary knowledge of highly specialized matters.

In any event, these are some of the reasons why  I think there’s a need to assess the scale and scope of democratic decision-making. On the one hand there are small political questions that require small units where ordinary knowledge can contribute to resolving them. On the other hand there are big political questions that require large units if they are to be resolved at all.  Big units inevitably tend to control and disparage small units in a system of concentric units of government.  Ordinary knowledge should tell us that this is not always a good thing.

References

Hayek, F. The use of knowledge in society, The American Economic Review, Volume XXXV Number 4, p.519-530, September 1945.