We can rely on decentralized file storage infrastructure such as IPFS & Filecoin, or use p2p communication protocols to send files directly from sellers to buyers. We can use smart contracts to facilitate the payment in exchange for digital files trustlessly. Instead of regular file-sharing protocols, we can build a new protocol that allows people to attach a price tag (in cryptocurrency) to share any digital file. Thankfully, we can easily build digital markets using digital money. If we believe that every individual has local knowledge that is valuable to someone but not everyone, we need to invent a new model to match these buyers and sellers more effectively. Naturally, this leads to a convergence towards content that appeals to the many - blockbuster movies, top40 songs, and hit games. Secondly, torrents have no concept of "value" - there are no good ways for consumers to signal what they want, which leads to suppliers (seeders) essentially guessing. An example includes solutions to homework of a specific college course - majority of people will have no use for these files, while desperate students will pay good money to acquire the knowledge. Firstly, there are many types of knowledge that are not valuable to a large group of people, but extremely valuable to a small group of people.
However, the BitTorrent model will fail to achieve our goal of building a market for digital knowledge. Although it suffers from free-rider problems, there are sufficient altruistic seeders in the world who keep popular content spreading across the Internet. This leads to the obvious question - can we create markets for all types of digital knowledge? File-Sharing Protocols Suckįile-sharing protocols such as BitTorrent have created networks of anonymous users sharing all types of files it ranks 5th place for the amount of traffic generated on the web. This effectively lets us communicate knowledge to anyone in the world - it is trivial to send or receive digital files on the Internet. We can describe anything from insider secrets to scientific breakthroughs in text files, DNA sequences in .csv, and any real-world experience in video format. Thanks to computers, we can express almost all types of knowledge as 0s and 1s. Fundamentally, by simply existing and making decisions in your daily life, you are generating local knowledge (location, purchases, health, consumption, ideas) that is valuable to someone else in the world. Your cinema booking for Toy Story 4 could be valuable to $DIS shareholders or a crazy ex-girlfriend. A terminally ill patient has valuable health data that could strengthen a predictive model. A Google employee knows things about the business that a hedge fund would pay hundreds of thousands of dollars for. Local Knowledge = $Įvery single human on Earth possesses knowledge which is valuable to someone else.
HAYEK THE USE OF KNOWLEDGE IN SOCIETY MAIN POINTS HOW TO
However, while Hayek was obsessed with figuring out how to allocate resources efficiently in society, I am obsessed with figuring out how to unlock the full value of local knowledge for the individual. Hayek's fixation on the idea of decentralized knowledge was for its superiority over centralized planning of societies - he even won a Nobel Prize in 1974 for these ideas. The price system leads to a "self-organizing system of voluntary co-operation", dubbed a Catallaxy by Hayek and his predecessors. Hence, the price system becomes an effective tool for economic coordination as individuals are able to signal what they want and how much they want it. For example, it is an impossible task to constantly report our preferences for all the goods that we consume to a central planner, when we don't even know our preferences for tomorrow's lunch. If this is true, should we focus on making information more transparent and available to a central planner, like a government? Hayek argues that this is futile because knowledge is fundamentally decentralized - it consists of "dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess". In this world, the problem of allocating resources efficiently in society would simply be an optimization problem to the single mind/computer who possesses all the information. In this essay, Hayek invites us to consider a world where all information is known to a single mind. In 1945, Austrian economist Friedrich Hayek wrote a seminal essay titled The Use of Knowledge in Society. Menu The Use of Digital Knowledge in Society 04 July 2019
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