HAYEK AND CENTRALIZED BANKS.
HAYEK AND CENTRALIZED BANKS.Kids, the problem that large national banks have with local housing markets is related to a problem that Hayek identified for large scale central planning. As this article summarizes, “The reason socialist economists thought central planning could work, argued Hayek, was that they thought planners could take the given economic data and allocate resources accordingly. But Hayek pointed out that the data are not “given.” The data do not exist, and cannot exist, in any one mind or small number of minds. Rather, each individual has knowledge about particular resources and potential opportunities for using these resources that a central planner can never have.” In the runup to the financial crisis, the biggest national banks were attempting to deal with local mortgage markets on the basis of averages and highly aggregated information. It turned out to be more difficult than they thought.