In response to socialists who proposed that central planning required only that the planners solve the appropriate set of Walrasian equations, Hayek described the proposal as “humanly impracticable and impossible” and characterized its proponents as having failed to perceive the real nature of the problem. Socialist economists erroneously assumed various forms of knowledge to be “given” when in reality such knowledge is only discovered by people engaged in the competitive process. Moreover, much knowledge is dispersed and specific to time and place, and much knowledge is not transmissible but tacit, pertaining not so much to “what is” as to “how to.” Socialist economists displayed an “excessive preoccupation with the conditions of a hypothetical state of stationary equilibrium,” but actual economies are dynamic, undergoing constant change. Aiming to abolish profits, the socialists overlooked the essential role of profits as an equilibrating force. “To assume that it is possible to create conditions of full competition without making those who are responsible for the decisions pay for their mistakes seems to be pure illusion.”
—Robert Higgs, review of The Collected Works of F. A. Hayek, vol. 10, Socialism and War: Essays, Documents, Reviews, by F. A. Hayek, Quarterly Journal of Austrian Economics 1, no. 1 (Spring 1998): 82.
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