Dispersed knowledge
This article is part of the Basic Course on Libertarianism and the Austrian School of Economics-> Module 5: Austrian Economics and Free Market
Last updated: 2026-06-26
Note: The following 3 concepts are inseparable; speaking of one directly implies speaking of the other.
- Dispersed knowledge
- Spontaneous order
- Economic calculation
Dispersed Knowledge
Dispersed knowledge is one of the most important and revolutionary concepts of the Austrian School, developed by Friedrich Hayek in 1945.
Precise and Austro-economic definition:
Dispersed knowledge is the fact that the knowledge relevant to “economic” and “social” action is dispersed, fragmented, and localized among millions of individuals, in the form of practical, circumstantial, and often tacit information (not easily verbalizable).
Another main point is that it is changing: what is needed this week is no longer needed next week; what is needed today is already useless tomorrow.
No one —neither a committee of experts, nor a minister, nor a central algorithm— can possess even a significant fraction of that knowledge in a single place.
Thus dispersed knowledge is the fact that the knowledge relevant to economic and social action is:
- dispersed: Among each of the millions of individuals, each with different needs and tastes.
- fragmented: Those millions of individuals can also be grouped by specific needs and tastes.
- localized: To add further complexity, this dispersion and fragmentation may be needed in different zones, provinces, localities or neighborhoods, blocks, houses, or a specific person in a country.
- changing: To close the point about the great complexity of what we are discussing, it changes constantly; what is needed at this very moment is already useless if it is obtained in a few hours.
Types of knowledge that Hayek distinguishes:
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General scientific knowledge
What is in books, universities, and laboratories (what planners believe is the most important). -
Knowledge of the particular circumstances of time and place (the truly decisive one)
Everyday examples:- A merchant in a town knows that today there is a surplus of ripe tomatoes and can buy them cheaply before they spoil.
- A mechanic in charge of the ambulance service in a city discovers that a certain spare part fails in ambulances of a certain brand because of the quality of local fuel. He therefore recommends filling up fuel in another locality so as not to interrupt the service until the issue is resolved.
- A farmer in some rural area knows that this week his wheat is optimal for harvest because of last week’s rains. If he harvests in 2 weeks the quality of the food will not be good.
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The owner of a pharmacy knows that, given the climate characteristics of his region, he was going to need more of a certain medicine in 2 weeks; however right now the climate conditions have changed and he will need them tomorrow.
This knowledge is local, temporal, subjective, and changing. It changes minute by minute.
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Tacit knowledge (Michael Polanyi + Hayek)
What we “know more than we can tell”: skills, intuitions, a “nose” for business, ways of dealing with difficult clients, etc.
Conclusions
- No individual nor central authority can possess all the information relevant to society (local, subjective, changing, often tacit knowledge).
- Only an Omniscient God could have that knowledge—that is, know what each person needs in every place at any moment.
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All historical attempts to centralize this knowledge ended in catastrophes, which will be seen in [Module 6: Collectivist Catastrophes](../cursos/curso-basico-liberalismo.md#module-6-collectivist-catastrophes
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According to Hayek, “The curious problem of economics is how to use resources that no one possesses in their entirety for ends of which no one has complete knowledge.”
This article is part of the Basic Course on Libertarianism and the Austrian School of Economics-> Module 5: Austrian Economics and Free Market
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