The objective of the article is to encourage the use of economic theory or information to discern the distribution of resources to maximize overall preferences. Hayek opposes the idea of Oskar Lange of promoting the planned economy (Hayek 517). He argues that an economy operates like a human brain. Indeed, most of the necessary information to make decisions is distributed in various sectors of the economy and not centralized at one location. He advocates for the price mechanism, arguing that the method can access the relevant information at individual levels in the economy.
The article has both strengths and weaknesses. The main strength of this article lies in the author’s ability to refute the previous assumption that it is possible to collect all information about resources and preferences in a single location for decision-making. He notes that only scientific knowledge could be centralized since circumstantial knowledge is evenly distributed in the economy (Hayek 517). However, the critical weakness of the article emanates from Hayek’s assumption that the ratio of circumstantial knowledge to scientific knowledge is high. This supposition may not be correct given the advancement in science and technology, which allows experts to gather a broad range of information in the economy.
The division of labor by Adam smith
Although Smith does not mention the aim of his writing in this work, it is evident that the publication aims to show the success of the British Empire after utilizing the concepts of division of labor and capitalism (Smith 2). He contends that the division of labor led to increased efficiency as people continued to specialize in different fields of production. In the industrial sector, the division of labor gave rise to the development of superior skills and innovation. Thus, it increased the human propensity to trade.
The article has both pros and cons. The major advantage of this article is the use of the theory of labor division to explain the concepts of urbanization and industrialization. The theory of division of labor clearly explains the reason for increased urbanization and industrialization in the economy. Smith makes it clear that increased urbanization was caused by the availability of opportunities to trade and access to opulence (Smith 2). However, Smith is optimistic that the theory could address other social problems, such as inequality and injustices. He thinks that the model could reduce disparities in areas of expertise and income, but capitalism has been said to have increased inequality in society.
The Institution of Property by David Schmidtz
The key argument of Schmidtz is that it is vital to appropriate resources as properties to avoid the tragedy of the commons to allow the mobilization of resources in an economy to create opportunities and wealth (Schmidtz 42). Per the author, it is not possible to achieve human progress without property. Schmidtz differentiates between externalities and internalities that exist in any economy. Moreover, he argues that the appropriation of property depends on the prevailing conditions in an economy, including excess, small scarcity, medium scarcity, and large scarcity.
The article has merits and demerits. The strength of this article lies in its advocacy for the transition of resources to private properties for the first time in the economy. Schmidtz clearly illustrates why it is essential to allow people to own properties in any growing economy. The Schmidtz‘s model motivates people to work hard to own their properties (Barnes 144). However, Smith does not demonstrate the way resources can be appropriated without promoting inequality in society, yet the emergence of private property is the primary cause of social and economic injustices in the economy.
Barnes, Gordon. “Property and Progress.” Reason Papers 34.2(2012): 144-150.
Hayek, Friedrich. “The Use of Knowledge in Society.” The American Economic Review 35.4(1945):519–530.
Schmidtz, David. “The Institution of Property.” Social Philosophy and Policy 11, no. 2 (1994): 42-62.
Smith, Adam. “The Division of Labor (1776).” The Wealth of Nations. Baltimore: Penguin Books, 1970.