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The price system solves a profound coordination problem by communicating dispersed knowledge that no central planner could ever fully access or comprehend. We explore Hayek's insight about how prices serve as both information and incentives, allowing self-interested actions to inadvertently benefit society.

• The "knowledge problem" – why information needed for economic decisions is dispersed among millions of individuals
• Tale of two farmers – how profit-seeking Mo unknowingly serves society better than altruistic Al
• Markets generate information through commercial processes that otherwise wouldn't exist
• Goodhart's Law – when measures become targets, they cease to be good measures
• Soviet planning failures – absurd outcomes like factories producing single giant nails to meet weight quotas
• Recycling pennies – potential approaches as the US phases out penny production

Mentioned in the podcast:

FA Hayek, "Use of Knowledge in Society" (AER, 1945)
Michael Munger, Socialist Generation Debate
"Goodhart's Law"
"What Do Prices Know That You Don't?"

Ross Kaminsky, of KOA:

My Duke colleague Bruce Caldwell, on the intellectual history of Hayek's 1945 AER paper

Book'o'da'week! Three suggestions (but mostly Red Plenty!)

Paul Craig Roberts' "Alienation and the Soviet Economy"
Alec Nove's "The Economics of Feasible Socialism"
Francis Spufford's "Red Plenty"

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

You can follow Mike Munger on Twitter at @mungowitz

Melanie Giles

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