Friedrich Hayek
A)believed that central planning would break down mainly due to problems associated with information gathering.
B)argued that central planning could be informationally efficient.
C)believed that only a democratic government, where individuals can make their preferences known by voting, could be informationally efficient.
D)criticized the market system as informationally inefficient.
E)argued that informational inefficiency would be the market's undoing.

Question

Quizplus · Accepted Answer

Hayek believed that central planning would break down due to problems associated with information gathering, which he described in his famous article "The Use of Knowledge in Society." He argued that the dispersed knowledge and information necessary for economic planning cannot be centrally controlled and that only the price system of the market can efficiently allocate resources based on the dispersed knowledge of individuals.