Knowledge and Coordination A Liberal Interpretation

Adam Smith and Friedrich Hayek saw the liberty principle as focal and accorded it strong presumption. But their wisdom invokes how little we can know. InKnowledge and Coordination, Daniel Klein re-examines the elements of economic liberalism. He interprets Hayek's notion of spontaneous order from the aestheticized perspective of a Smithian spectator, real or imagined. Klein addresses issues economists have had surrounding the notion of coordination by distinguishing the concatenate coordination of Hayek, Ronald Coase, and Michael Polanyi from the mutual coordination of Thomas Schelling and game theory. Clarifying the meaning ofcooperation, he resolves debates over whether entrepreneurial innovation enhances or upsets coordination, and thus interprets entrepreneurship in terms of discovery, or new knowledge. Beyond information, knowledge entails interpretation and judgment, emergent from tacit reaches of the "society of mind," itself embedded in actual society. Rejectinghomo economicusin favor of the "deepself," Klein offers a distinctive formulation of knowledge economics, entailing asymmetricinterpretation, judgment, entrepreneurship, error, and correction-and kinds of discovery-which all serve the cause of liberty. This richness of knowledge joins agent and analyst, and meaningful theory depends on tacit affinities between the two.Knowledge and Coordinationhighlights the recurring connections to underlying purposes and sensibilities, of analysts as well as agents. Behind economic talk of market communication andsocialerror and correction lies Klein's Smithian allegory, with the allegorical spectator representing a conception of the social.Knowledge and Coordinationinstructs us to declare such allegory. Knowledge and Coordinationis an authoritative take on how, by confessing the looseness of its judgments and the by-and-large status of its claims, laissez-faire liberalism makes its economic doctrines more robust and its presumption of liberty more viable.

Daniel B. Klein is Professor of Economics at George Mason University, and Associate Fellow at the Ratio Institute in Stockholm. He is the creator and chief-editor of the scholarly journal Econ Journal Watch.