Decentralization as ability to adapt

Abstract

The issues of centralization and decentralization are not new in the history of economic and social theory, but lessons from the past tend to be forgotten. I will here discuss some insights of one of the greatest economic and social theorists of this century, F.A. Hayek. Until not so long ago, Hayek's work was almost completely unknown, and the few who knew it were only acquainted with his later writings on social and political philosophy. Hayek's economics remained in the shadow that was cast over it when his one-time opponent Keynes carried the quarter century after the publication of the General Theory in 1936. In this contribution I will show that Hayek's work contains the resources for coming to grips with the problems of centralization and decentralization that are now facing the formerly socialist societies in Eastern Europe. Hayek's technical economics of the 1920s, '30s and '40s will be discussed first. Then I will summarize Hayek's arguments in the debate on a socialist economy, and show how they were generalized into a theory of society. In his later work on the emergence and evolution of social institutions and their relations within society as a whole, decentralized decision making occupies a central position. Hayek's ideas in this domain were shaped by his cognitive psychology, his earliest contribution to the sciences of man. Various Hayekian ideas will be linked to those in other domains with the purpose of examining how we may shed more light on some pressing problems of social organization.