Ala F.A. Hayek, the value of de-centralized knowledge is everywhere. The military was offering $40,000 in a contest for the first team to find 10 red weather balloons scattered around the country.
The contest is open to anybody and everybody and the rules are very simple: be the first to submit the coordinates for all 10 balloons and you win. How can one person possibly find all 10 balloons, scattered around the country? The answer is they can't.
No one person will be able to acquire all the knowledge necessary in order to solve the problem. Each person will be forced rely on other people's knowledge, the internet, cell phones, GPS, etc. In other words, all the information is out there, but is scattered amoung thousands or millions of people and the technology they have built.
This is fun game that illustrates the power and the necessity of dispersed knowledge. This is an invaluable economic lesson. No one person can be expected to have all the knowledge necessary to run an economy. No government could possibly know everything possible to "plan" an economy.
Our market works because I do what is in my interest and you do what is in yours, and our neighbors do what are in theirs. All of us working in our own best interest magically comes together to promote the interest of us all. As Adam Smith famously said,
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."For a short, excellent illustration of this idea, I highly encourage reading, I Pencil by Leonard E. Read. I also highly encourage reading Hayek's seminal work, The Use of Knowledge in Society.
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