David R. Henderson  

Hayek in "Unbroken"

A Means A in the Chronicle of ... Deception, Detection, and Demo...

I just finished reading Lauren Hillenbrand's Unbroken: A World War II Story of Survival, Resilience, and Redemption, on my vacation. I highly recommend it. One excerpt:

He [Pete, Louie Zamperini's older brother] told the principal that Louie craved attention but had never won it in the form of praise, so he sought it in the form of punishment. If Louie were recognized for doing something right, Pete argued, he'd turn his life around. He asked the principal to allow Louie to join a sport. When the principal balked, Pete asked him if he could live with allowing Louie to fail. It was a cheeky thing for a sixteen-year-old to say to his principal, but Pete was the one kid in Torrance who could get away with such a remark, and make it persuasive. Louie was made eligible for athletics for 1932.

Louie went on to the Olympics in 1936 and was thought of as a favorite for the 1940 Olympics, which, of course, didn't occur.

Robert Solow once said of Milton Friedman, "Whatever the issue, Milton thinks about the money supply. Well, I think about sex all the time but I don't always talk about it." I tend to see Hayek's decentralized information everywhere. Pete knew enough about his brother--Pete had "local information'--to have a strong belief that his solution for Louie's trouble-making would work. A central planner on his own--the principal or, even worse, if schooling had been centralized then--some rule-maker in Sacramento--would have been highly unlikely to think of Pete's solution for Louie.

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COMMENTS (2 to date)
Justin R. writes:

Not to be nit picky (well, ok, sort of) but I think the Solow quote ends with "Everything reminds me of sex, but I try to keep it out of my papers."

Interesting that he added the word "try" - maybe I'll have to catch up on my Solow reading...

John Papola writes:

Great stuff, David.

I always think of corporate life when I think about the knowledge problem. The way you actually get your job done and make progress within your division of a large corporation is often totally unknown to the headquarters and the centralized bean-counters. So often, memos of company-wide policy changes reach the average employee's desk to both snickers and groans. "They have no idea how we make them money" is a routine thought.

The knowledge problem becomes a problem pretty quickly. The notion that a President or Congress could overcome it is ludicrous when corporate officers at a 15,000 person company can't.

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