What does tacit knowledge actually explain?

Abstract

The concept of tacit knowledge has come a long way from its origins in Michael Polanyi's work and its championing by Hayek and other Austrian economists. It is now widely, even routinely, cited not only in Austrian economics, but also in institutional economics work, industrial economics and economic geography. Further, rather than being viewed as a hypothesis requiring conceptual clarification and empirical testing, the concept of tacit knowledge is almost invariably treated as established, even incontrovertible, virtually as a fact. Conceptual disputes over tacit knowledge have instead focused on the boundaries between codifiable and tacit knowledge. Here we draw upon a critique of tacit knowledge and tacit rule following from the social philosophy literature that has not been considered in the economics literature hitherto. In brief, this critique argues that the concept of tacit knowledge is merely a term given to a phenomenon the observer does not understand; as such, it has no explanatory content. Through a philosophical examination of rule following, this critique further argues that the concept of agents tacitly following rules is highly problematic, not to say implausible.