We examine the argument, put forward by modern management writers and,
in a somewhat different guise by Austrian economists, that authority is not a
viable mechanism of coordination in the presence of "distributed knowledge"
(which corresponds to Hayek’s treatment of the use of dispersed knowledge
in society). We define authority and distributed knowledge and argue that
authority is compatible with distributed knowledge. Moreover, it is not clear
on theoretical grounds how distributed knowledge impacts on economic
organization. An implication is that the Austrian argument that designed
orders are strongly constrained by the Hayekian knowledge problem (Hayek,
Kirzner, Sautet) is shaky. The positive flipside of this argument is that
Austrians confront an exciting research agenda in theorizing how distributed
knowledge impacts economic organization.
