The Limits to Designed Orders: Authority under `Distributed Knowledge'

We examine the argument, put forward by modern management writers and,in a somewhat different guise by Austrian economists, that authority is not aviable mechanism of coordination in the presence of `distributed knowledge'(which corresponds to Hayek's treatment of the use of dispersed knowledgein society). We define authority and distributed knowledge and argue thatauthority is compatible with distributed knowledge. Moreover, it is not clearon theoretical grounds how distributed knowledge impacts on economicorganization. An implication is that the Austrian argument that designedorders are strongly constrained by the Hayekian knowledge problem (Hayek,Kirzner, Sautet) is shaky. The positive flipside of this argument is thatAustrians confront an exciting research agenda in theorizing how distributedknowledge impacts economic organization.