Knowledge And Decisions

A two-day conference in 1978 at the Center for Law and Economics at the University of Miami was organized around a paper of mine on legal issues, and provided an invaluable experience in confronting leading scholars in law, economics, and political science with the ideas that form the foundation of this book. The generous support of the Liberty Fund in Indianapolis, Indiana, made possible this gathering of distinguished scholars from all parts of the country, and the generous permission of Professor Henry G. Manne, Director of the Center for Law and Economics, has made possible the incorporation of that paper into this book. Other discussions of the book’s evolving themes were held at the University of California at Berkeley, Wesleyan University in Connecticut, the University of Maryland, and San Jose State University in California. I learned something from all of them.

The support, enthusiasm, tact, helpfulness, and wisdom of my editor, Midge Decter, have been of inestimable value during what seemed like interminable years of writing, and in smoothing what can be a rocky road between the manuscript and the finished book. All the good things I had heard about her proved to be true, and I am pleased to hereby amend my longstanding belief that the only good editor is a dead editor. (A couple of other possible exceptions also come to mind.)

These contributors are only the tip of the iceberg. Many librarians, colleagues, secretaries — and especially the marvelous staff at the Center for Advanced Study — have helped me along the way.

In the end, however, after all the influences, aiders and abettors, responsibility for all conclusions and errors is mine.

Thomas Sowell

University of California, Los Angeles May 9, 1979

Part I SOCIAL INSTITUTIONS

Chapter I The Role of Knowledge

Ideas are everywhere, but knowledge is rare. Even a so-called “knowledgeable” person usually has solid knowledge only within some special area, representing a tiny fraction of the whole spectrum of human concerns. Humorist Will Rogers said, “Everybody is ignorant, only on different subjects.”

How does an ignorant world perform intricate functions requiring enormous knowledge? These intricate functions include not only such scientific feats as air travel and space exploration, but also the complex economic processes which bring a slice of bread and a piece of butter to your plate at breakfast. Anyone who has studied the actual process by which everyday food items are planned, produced, and distributed knows that the complexity staggers the mind. Many highly intelligent and highly trained people spend a lifetime studying it, and learning more all the time. Among those who speculate financially in such commodities, economic disaster is commonplace, even after they have spent years studying the market. In short, individually we know so pathetically little, and yet socially we use a range and complexity of knowledge that would confound a computer. The question is not only how given institutions (including whole societies) manage to do this, but how various institutions (and societies) differ in the manner and effectiveness with which they do it — and what do the historic and continuing changes in the way they function portend for the future?

We shall begin with the production of knowledge — with the process by which ideas are filtered and transformed into recognized knowledge, having the force to guide decisions. Then we shall consider the application of knowledge in economic, legal, social, and political institutions. And finally, we shall consider the evolution of institutions, attitudes, and beliefs, and the way all these affect our ability to produce and apply knowledge in the future.

IDEAS

Physicists have determined that even the most solid and heavy mass of matter we see is mostly empty space. But at the submicroscopic level, specks of matter scattered through a vast emptiness have such incredible density and weight, and are linked to one another by such powerful forces, that together they produce all the properties of concrete, cast iron and solid rock. In much the same way, specks of knowledge are scattered through a vast emptiness of ignorance, and everything depends upon how solid the individual specks of knowledge are, and on how powerfully linked and coordinated they are with one another. The vast spaces of ignorance do not prevent the specks of knowledge from forming a solid structure, though sufficient misunderstanding can disintegrate it in much the same way that radioactive atomic structures can disintegrate (uranium into lead) or even explode.