Thomas Sowell

Knowledge and Decisions

Man is no Aristotelian god contemplating all existence at one glance

.

— Walter Lippmann

PREFACE TO THE 1996 EDITION

As of the time when it was first published in 1980, Knowledge and Decisions

was by far my most important and most comprehensive book. None of my subsequent writings has surpassed it, though it has been joined by work of comparable scope in A Conflict of Visions in 1987 and Race and Culture in 1994. The re-publication of Knowledge and Decisions

now, sixteen years after its initial debut, reflects the continuing importance of the issues raised in it, and offers an opportunity to update some conclusions while re-affirming others.

The social vision underlying the analysis in Knowledge and Decisions is the opposite of what I have elsewhere called The Vision of the Anointed.¹

There the focus was on a set of people and their perception of their role in a world whose problems they saw as caused by the inadequacies of others. Here the focus is not on particular people or their beliefs, but on social processes and the constraints within which those processes operate. The analysis begins with one of the most severe constraints facing human beings in all societies and throughout history — inadequate knowledge for making all the decisions that each individual and every organization nevertheless has to make, in order to perform the tasks that go with living and achieve the goals that go with being human.

How a variety of social institutions and processes coordinate innumerable scattered fragments of knowledge, enabling a complex society to function, is the central theme of the first half of Knowledge and Decisions. This approach focuses on the advantages and disadvantages of particular institutions and processes in mobilizing the knowledge needed for making particular kinds of decisions. Families, markets, armies, churches, corporations, and sports teams are just some of the wide spectrum of formal and informal social mechanisms for mobilizing and coordinating the knowledge and experience of many to guide or influence individual decisions by others.

Perhaps the most important feature of the first half of Knowledge and Decisions is simply its analysis of decision-making processes and institutions in terms of the characteristics and consequences of those processes themselves — irrespective of their goals. As noted in Chapter 6, this approach rejects the common practice of “characterizing processes by their hoped-for results rather than their actual mechanics.” “Profit-making” businesses, “public interest” law firms, and “drug prevention” programs are just some of the many things commonly defined by their hoped-for results, rather than by the characteristics of the decision-making processes involved and the incentives created by those processes. So-called “profit-making” businesses, for example, often fail to make a profit and most of them become extinct within a decade after being founded. In Knowledge and Decisions the owners of such businesses are defined not as profit-makers but as residual claimants to the firm's income — that is, to what is left over after employees, suppliers, and others have been paid. Put this way, it is clear from the outset that what is left over may be positive, negative, or zero. There is no more reason to expect “drug prevention” programs to prevent drug usage or “public interest” law firms to serve the public interest than to expect that most “profit-making” enterprises will in fact make profits. Whether any of these organizations do or do not live up to their expectations or claims is a question of empirical evidence. Pending the presentation of such evidence, such organizations can be analyzed in terms of what they actually do, not what they hope or claim to achieve. In Germany a 1933 “Law for Removing the Distress of People and Reich” gave the chancellor dictatorial powers², which in turn allowed Adolf Hitler to start wars that brought unprecedented distress — indeed, devastation — to the German people and nation.