Tuesday, March 31, 2009

The problem of knowledge

The leaders of the G20 (actually the G19 plus the EU) are due to meet in London this week. The agenda of the summit centres on the global financial crisis.

A global economy is an enormously complex real-time, self-adaptive communications and control system which works with a variety of signals: data, information, knowledge, wisdom. Or at least, it's supposed to be.

What happens when you try to substitute one type of signal for another in such a system? For example, if you substitute data with knowledge, or the reverse?

Consider, first of all, that the quartet of signal types (data, information, knowledge and wisdom) form a hierarchy: from simplest to most complex; from the most common to the most rare; from the immediate to the ultimate; from the most accessible to the least accessible; from the possessive to the characteristic; from present-focused to future-focused; from the impersonal to the personal; from the material to the spiritual; from input to output; from having to being; from news to views; from the dispersed to the concentrated.

Signal substitution will hinder the operation of the system.

Can the G20 leaders solve the economic crisis?

Based on the stated aims of the summit, the answer must be no because the aims appear to be a classic case of signal substitution.

The reason is what we might call the problem of knowledge. Will the G20 leaders have sufficient and timely knowledge about the financial crisis to solve it? No, on both counts. The knowledge they, or any one person or group of persons, possesses about all the relevant issues is limited. And even the knowledge they have may out of date. The well-known lag effects in economics will only be exacerbated with increased government intervention.

The biggest danger is that the G20 summit will introduce rules and regulations that will harm and hinder the operation of the global economy.

Note: See also Friedrich von Hayek's essay on The Use of Knowledge in Society (1945).

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