Some quotes from Knowledge and Decisions

I read economist Thomas Sowell’s Knowledge and Decisions a number of years ago. It is basically a book-length elaboration on Friedrich Hayek’s essay “The Use of Knowledge in Society”, applied well beyond economics. Hayek’s essay is an argument against central planning: because economically relevant knowledge is dispersed among individuals (much of it local, tacit, and hard to transmit), decentralized markets—and specifically prices—can coordinate economic activity without centralizing knowledge. Sowell runs with this insight and applies it to institutions more broadly, examining how information is acquired and acted upon, and how incentives shape the decisions that are made. He also brings along some familiar hobbyhorses, particularly his suspicion of intellectuals and institutions insulated from the consequences of their actions.

I wanted to record here a few passages from the book that have stuck with me over the years. Knowledge and Decisions was originally published in 1980 (though I quote from the 1996 edition). The language used in the first passage is dated, and I have left the wording unchanged. Paragraph breaks have been removed for readability.

On the quantity of knowledge:

It is widely believed that modern society has a larger quantity of knowledge than more primitive societies […] [The intellectual advantage of civilization] is not necessarily that each civilized man has more knowledge but that he requires far less. A primitive savage must be able to produce a wide variety of goods and services for himself, and a primitive community must repeatedly duplicate his knowledge and experience in innumerable contemporaries. By contrast, the civilized accountant or electronics expert, etc., need know little beyond his accounting or electronics. […] Civilization is an enormous device for economizing on knowledge.

On the meaning of knowledge:

To say that a farm boy knows how to milk a cow is to say that we can send him out to the barn with an empty pail and expect him to return with milk. To say that a criminologist understands crime is not to say that we can send him out with a grant or a law and expect him to return with a lower crime rate. […] In short, the degree of authentication of knowledge may be lower in the “higher” intellectual levels and much higher in those areas which intellectuals choose to regard as “lower.”

On the cost of exercising legal rights:

A legal right worth X (in money or otherwise) is not in fact a right if it costs 2X to exercise it. […] For example, a woman’s right to prosecute a rapist can be drastically reduced—for some women, obliterated—by allowing the defense attorney to put her through an additional trauma on the witness stand with wide-ranging questions and observations, publicly humiliating her but having little or nothing to do with the guilt or innocence of his client.

On democracy:

A lynch mob may be a more accurate expression of the majority will than a court of law—especially an appellate court of appointed judges—and yet lynch mobs are condemned and “law and order” upheld because certain freedoms are deemed more important than democracy.

On timely decision making:

A certain amount of foolish decision making and thoughtless inefficiency may be tolerated—must be tolerated—in any large organization […] Some improvements may be possible in specific instances by having subordinates correct superiors’ mistakes, but this is not costless in terms of organizational discipline or in terms of the time spent by subordinates and superiors discussing what is and is not a mistake. In some cases—an extreme example being a combat unit under enemy fire—the time spent discussing alternatives may be more costly than either alternative itself.