Information, Uncertainty and Choice

Abstract

The analysis demonstrates that the relevant focus of economics is on the middle ground between perfect knowledge and total ignorance. Individual action always involves uncertainty because, as Mises emphasizes, uncertainty about the future and human action are two aspects of the same thing. The implications of uncertainty for human action are explored in a number of different contexts. Under uncertainty, profit maximization loses meaning as a guide to action and 'market failure' loses meaning and relevance as a guide for public policy. The paradox of omniscience, considered as perfect knowledge or the absence of uncertainty, is explored for individual decision making, profits and public policy. The findings support Hayek's thesis that knowledge is likely to be used most effectively if information is controlled by those whose knowledge and success depend on it.