Looking for a source

[Catalan]

I’m looking to cite the following sentence which is in an article I’m writing,

Hayek understood that in order to know how markets can fail it is first necessary to know how markets work.

I remember reading something to this effect in Garrison’s Time and Money, but I can’t seem to find the reference. Anybody remember something like this from any book? Or, maybe I just mistakenly remember reading that, and it actually said something else.

[DanielMuffinburg]

Is that a direct quote of a paraphrase? Have you tried Googleing it?

[Catalan]

That’s my own sentence. I recall the source I’m looking for saying something almost exactly the same, though.

[Truth_and_Liberty]

The “quote” you might be looking for is:

“Before we can meaningfully ask what might go wrong, we should first understand how things could ever go right.”

However, after a little research, it seems this isn’t a direct quote of Hayek, but “a paraphrase from Economics and Knowledge (1937)” according to Roger Garrison’s slideshow here: http://www.slidefinder.net/l/lselect/6732577

But I’ve just read through Economics and Knowledge and I can’t see Hayek saying anything remotely like this. I don’t know who came up with the “original paraphrase”, but this exact wording has been reproduced elsewhere (google), including by Robert Murphy.

It’s a mystery.

[cobracarg]

Its from “economics and knowledge” but that quote that Garrison has is greatly summarized from the original content.

Clearly there is here a problem of the Division of Knowledge which is quite analogous to, and at least as important as, the problem of the division of labour. But while the latter has been one of the main subjects of investigation ever since the beginning of our science, the former has been as completely neglected, although it seems to me to be the really central problem of economics as a social science.16 The problem which we pretend solve is how the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affaris in which prices correspond to costs, etc., and which could be brought about by deliberate direction only by somebody who possessed the combined knowledge of all those individuals. And experience shows us that something of this sort does happen, since the empirical observation that prices do tend to correspond to costs was the beginning of our science. But in our analysis, instead of showing what bits of information the different persons must possess in order to bring about that result, we fall in effect back on the assumption that everybody knows everything and so evade any real solution of the problem.

Before, however, we can proceed further, to consider this division of knowledge among different persons, it is necessary to become more specific about the sort of knowledge which is relevant in this connection. It has become customary among economists to stress only the need of knowledge of prices, apparently because – as a consequence of the confusions between objective and subjective data – the complete knowledge of the objective facts was taken for granted. In recent times even the knowledge of current prices has been taken so much for granted that the only connection in which the question of knowledge has been regarded as problematic has been the anticipation of future prices. But, as I have already indicated at the beginning, price expectations and even the knowledge of current prices are only a very small section of the problem of knowledge as I see it. The wider aspect of the problem of knowledge with which I am concerned is the knowledge of the basic fact of how the different commodities can be obtained and used,17 and under what conditions they are actually obtained and used, that is, the general question of why the subjective data to the different persons correspond to the objective facts. Our problem of knowledge here is just the existence of this correspondence which in much of current equilibrium analysis is simply assumed to exist, but which we have to explain if we want to show why the propositions, which are necessarily true about the attitude of a person towards things which he believes to have certain properties, should come to be true of the actions of society with regard to things which either do posses these properties, or which, for some reason we shall have to explain, are commonly believed by the members of society to possess these properties.18

[Catalan]

I found a citation from Time and Money, but yea it’s from “Economics and Knowledge”.

[Truth_and_Liberty]

It’s a great quote, but I’m inclined to attribute it as an original quote by Garrison because I don’t see how it relates to Hayek at all. What Garrison means by it is that if you don’t understand how markets function, you cannot possibly hope to identify how markets fail. For example, you can’t identify the problem that causes business cycles if you don’t understand how markets coordinate the time-structure of production. Hayek is talking about the how entrepreneurs/policymakers can know how to use resources efficiently, not how economists fail to understand the market process.

[cobracarg]

I can see the relationship. Garison just interprets his Hayek summarized quote as a way to explain the markets. but the his intiial quote does not mention markets at all, it just makes a general statement when applies to other things as well: “Before we can ever ask how things might go wrong, we must first explain how they ever go right.”

Now I agree that Garrison’s quote is not really a direct Hayek quote, it is really just a summarization of Hayek’s quote.