The Role of Practical Knowledge in Market Processes:An Assessment of the Austrian Contribution

Abstract. This paper considers the works by Austrians concerned with knowledge, especially "practical knowledge " or "inarticulate or tacit knowledge. " Mainly studied are the writings of Friedrich A. Hayek who was especially influential. The paper examines the Austrian understanding of knowledge before Hayek, the contributions made by Hayek, and then the work that was done by Austrians after Hayek. Hayek's writings indicate that practical or inarticulate knowledge enables people to do things in a skillful way despite their having no conscious awareness of this knowledge unlike their awareness of scientific and propositional knowledge. Due to this realm of the knowledge, experts use the right kind of information in their work and entrepreneurs make intuitive business decisions. The Austrians point out that market processes can take advantage of this type of knowledge while central planning cannot. The author concludes by suggesting that we know little about practical knowledge and how to develop it