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Not a Zero-Sum Game - Ludwig von Mises Institute

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Because 'imperfections in the world impose limitations on<br />

knowledge, the allocation of tasks can never be perfect. One<br />

frequently overlooked impediment to the quest for perfection is<br />

the cost of acquiring information, which F. A. Hayek pointed out.<br />

This is due to the fact that usable knowledge is dispersed in time<br />

and ci~mstance, and both time armd ci~mstmces are changing<br />

continually and unpredictably. Only those in the right place at the<br />

right time can make the most of it. 11<br />

Admittedly, no one can possibly be aware of every existing<br />

opportunity to which every person might apply his talent and<br />

effort at any given moment, But as we gain more knowledge<br />

we continually endeavor to seek and adapt to more profitable<br />

opportunities to divide labor over time. The ever present incen-<br />

tives of higher rewads tend to steer the community toward max-<br />

imizing each person" particular howledge, experience, and<br />

ability to manage and economize. This continuous process of<br />

reallocation is coordinated by the principle of comparative costs.<br />

As specialization increases, the individual productivity of eaeh<br />

participant in his own field in turn increases the differences in abil-<br />

ities, lowering the opportunity costs for each. As opportunity costs<br />

decrease, everyone can offer more in exchange, increasing the ben-<br />

efits and wealth for all. When InferJoe increases his own produe-<br />

tivity by specializing in BREAD, the BREAD he uses as payment<br />

casts him less, With this savings, he can pay SuperJaek more<br />

BREAD for the GARMENTS, or he can increase his bid in the<br />

market for other things. Everybody shares the gains sf everyone<br />

else's increased productivity.<br />

1 1. Friedrich <strong>von</strong> Hayek, "The Use of Knowledge in Society," American Economic Wevkw<br />

35, no. 4 (September 1945): pp. 519=539. Also available online at<br />

ht$://www.econlib.org/1ibrary/E~~ays/hyk~w1 ,htm (acee~8ed October 2, 2667).

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