Posts tagged with: knowledge problem

During a season such as Christmas, where hyper-consumerism and hyper-generosity converge in strange and mysterious ways, it’s a question worth asking: How much of our gift-giving is inefficient and wasteful?

For some, it’s a buzz-kill question worthy of Ebenezer Scrooge. For an economist, however, it’s a prod that pushes us to create more value and better align our hearts and hands with human needs.

In a new video at Marginal Revolution, economists Tyler Cowen and Alex Tabarrock explore this at length, asking how we might maximize the value of gift-giving:

For Cowen and Tabarrock, gift-giving typically suffers from knowledge and incentive problems. “When people buy something for themselves, value is created, because the buyer values the good more than it costs the seller to produce,” Tabarrock explains. “But when people give gifts that aren’t wanted, the recipient values the gifts at less than the cost. Gift-giving: it can be kind of a negative trade.” (more…)

In his new book, Knowledge and Power, the imitable George Gilder aims at reframing our economic paradigm, focusing heavily on the tension between the power of the State and the knowledge of entrepreneurs — or, as William Easterly has put it, the planners and the searchers.

“Wealth is essentially knowledge,” Gilder writes, and “the war between the centrifuge of knowledge and the centripetal pull of power remains the prime conflict in all economies.”

In a recent interview with Peter Robinson, he fleshes out his thesis:

Quoting Albert Hirschman, Gilder notes that, “Creativity always comes as a surprise to us,” continuing (in his own words), “if it didn’t, we wouldn’t need it and planning would work….Entrepreneurial creativity is almost defined by its surprisal —  by its unexpected character.”

Making room for such surprise requires a dose of Hayekian humility, but as for the shapes, contours, and origins of the surprise itself, Christianity has plenty to say. (more…)

bored at workOver at The Gospel Coalition, Elise Amyx of IFWE offers encouragement to those who may feel their work is useless:

Though some work may seem useless, Christians understand that all work is God’s work. Our work only seems insignificant because we fail to grasp the big picture. This is what economists refer to as the “knowledge problem.” The knowledge problem means we can’t always see the big picture because knowledge is dispersed among many people; no one person knows everything. In the vocational sense, this means we may not understand how our work is part of a much larger economic dynamic. If we can’t easily see how our work contributes to the common good, we may understate the effect of what we do.

Some positions make it difficult for workers to see the end product, but that certainly does not mean that their work is insignificant. Just because a factory worker doesn’t receive the instant gratification of seeing the final product that he helped to create doesn’t change the reality that his effort contributed to that product…

… It’s important to remember that the value of our work may never be fully realized in our lifetime. In medieval times, it could take hundreds of years to build a single cathedral. The laborer laying the cornerstone might never live to see the top of the steeple. (more…)