Monetary Policy and the Knowledge Problem

GERALD P. O’DRISCOLL JR.
CATO JOURNAL 36.2 (2016): 337-352

Abstract: The knowledge problem in economics is most closely associated with Friedrich Hayek, who articulated it in analyzing the role of prices in markets, the socialist calculation debate, and monetary policy. In this article, O’Driscoll summarizes and applies Hayek’s analysis to contemporary monetary policy debates. He also connects Hayek’s work with that of Milton Friedman, who articulated his own version of the knowledge problem in his monetary work. Friedman’s views in this area are underappreciated.