Hayek's Price Fan Simile : The Seeds of the Economy of Knowledge

Friedrich Hayek's research focus shifted from a formal analysis of the capital structure in the early 1930s to the study of the economy of knowledge in 1945. He never, as it is too often said, abandoned economics. The abandonment narrative impedes understanding of Austrian economics generally and Hayek's works more specifically. Toward correcting the false narrative, we explore connections between his 1945 thesis and the price fan simile he set out in 1931 to facilitate understanding of the role played by emerging input prices as more capitalistic methods of production are adopted. Expanding on the price fan simile, we also seek to deepen the understanding of the allocative marvel that prices achieve in the free market system, and, consequently, the utter impracticality of using socialist calculation in place of the free market