His Introduction
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Michael Polanyi (1891-1976) was one of the few polymaths in modern society, often compared to "the Newton of our time." He is regarded alongside Hayek and Popper as one of the "three most important thinkers of the 20th century." In fact, in terms of the foresight, originality, and depth of thought, he may even surpass Hayek and Popper. He is Michael Polanyi, a hidden prophet quoted by countless thinkers but known by very few ordinary people.
Polanyi's greatness lies not only in his extraordinary natural scientific talents across physics, chemistry, and complex sciences. His son and two students won the Nobel Prize; it also lies in his resolute shift to social science research during the rise of Nazism and the Soviet Union, co-founding the Mont Pelerin Society with Hayek and Popper to issue the most powerful critiques of totalitarianism and defend the free system. More importantly, he reflected on knowledge, information, and civilization, providing insights into the underlying human thought and the essence of civilized society.
Since the collapse of the Soviet system, "planned economy is unfeasible" has become a social consensus. However, even today, many still hope to realize the ideals of a planned economy with the assistance of modern high technologies such as artificial intelligence, big data, and cloud computing.
Contribution One
The most important knowledge for humanity is "tacit knowledge."
For a long time, there has been a significant misunderstanding of "knowledge." Many believe that only knowledge that can be articulated, taught, and verified is true knowledge, such as mathematical formulas, historical anecdotes, and academic papers.
As a result, people have invested a lot of energy into the educational arms race of "explicit knowledge"; it is also from this that people believe that by comprehensively collecting tangible information, a planned economy utopia can be established.
However, Polanyi pointed out as early as the 1930s in his work "Society, Economy, and Philosophy" that the fundamental problem of a planned economy is its inability to effectively utilize human "tacit knowledge." (Polanyi, "Society, Economy, and Philosophy") In his book "Personal Knowledge," Polanyi proposed that human knowledge is divided into "explicit knowledge" and "tacit knowledge." Explicit knowledge can be clearly taught and verified, such as mathematical formulas and academic theories; while tacit knowledge consists of everyday skills and intuitions that cannot be articulated or fully transmitted, such as driving, communication skills, and the intuition behind business decisions. This tacit knowledge is dispersed among countless individuals, making it difficult to manage and regulate centrally. (Polanyi, "Personal Knowledge: Towards a Post-Critical Philosophy") The planned economy attempts to achieve rational resource allocation by comprehensively collecting and managing explicit knowledge but overlooks the critical role of tacit knowledge.
However, Michael Polanyi completely overturned this view of knowledge in his book "Personal Knowledge."
He argued that human knowledge actually comes in two forms: one is "explicit knowledge," which can be summarized, verified, and taught, such as the clear knowledge found in textbooks; the other is "tacit knowledge," which cannot be summarized, verified, or even taught, yet is essential for survival and development. Examples include driving, swimming, inspiration, communication skills, and so on.
Tacit knowledge is often implicit, even irrational, accidental, and relative. Almost no one can clearly explain how a moment of inspiration occurs.
However, compared to explicit knowledge, tacit knowledge is the most important form of knowledge. For instance, an entrepreneur's intuition, imagination, and persuasiveness are all forms of tacit knowledge. The written knowledge acquired through business school and degrees often does little to aid in business decision-making and can even be harmful.
Moreover, scientific discoveries may superficially stem from arduous experiments and precise calculations, but the spontaneous inspiration of scientific geniuses is often more crucial, which is also tacit knowledge.
Polanyi's discovery has overturned the traditional knowledge system, leading to a qualitative leap in humanity's understanding of knowledge. Today, the theory of "tacit knowledge" has become essential common knowledge in complex sciences, education, economics, and sociology when considering uncertainty.
Contribution Two
A planned economy is unfeasible even for a second.
Since the collapse of the Soviet system worldwide, "planned economy is unfeasible" has become common knowledge. However, even today, many still reminisce about the various "glorious achievements" of planned economies, believing that with the assistance of modern high technologies such as artificial intelligence, big data, and cloud computing, a planned economy can be realized.
In fact, as early as the 1930s, when the Soviet Union announced data from its "First Five-Year Plan," Michael Polanyi candidly pointed out in "Society, Economy, and Philosophy" that the Soviet system eliminated crucial tacit knowledge, rendering the economy fundamentally unmanageable; and that the so-called statistical data was entirely false.
Beneath the glossy numbers, the Soviet Union was actually relying on capitalist funds, technology, and means to sustain its planned economy. They referenced international prices, utilized underground black markets, and issued privileges, attempting various commercial and technological projects; even so, they still could not achieve resource allocation, resulting only in massive waste, famine, and corruption.
They were well aware that a planned economy could not function for even a second, nor could it exist for a day. Thus, they adjusted statistical methods, creating so-called "economic miracles" to deceive the world...
Contribution Three
The essence of modern civilization is "multi-centered order."
Traditional societies in both the East and West are structured as vertical management power pyramids implemented by top authorities. The most typical example is ancient China: the court formulates plans, issues directives layer by layer, and the lower levels execute mechanically. Even the late Qing reformists' understanding of "parliament" was merely "top-down communication." This "single-centered order" structure is simple, with the primary goal of maintaining stability, so everyone must adhere to their roles and become tools of the collective.
However, in modern society, human needs and cooperation have become increasingly complex, and the information required for production is dispersed among countless individuals. Therefore, every field or group must form its own decision-making center, and no center can dominate the others. In this "multi-centered order" of modern society, everyone freely participates in competition and innovation; the various centers are connected through division of labor, trade, and free association, completing vast exchanges, divisions of labor, and transactions to achieve survival and development.
Viewing human society from the perspective of "how many centers" truly reveals the essence of civilization.
Michael Polanyi even further pointed out that the essence of a market economy is "multi-centered complex order." Thus, the Soviet system is not a scientific, modern order but a "single-centered order" that stifles division of labor and cooperation, representing a regression of civilization.
Polanyi noted that in its "First Five-Year Plan," the Soviet Union attempted to manage the economy through statistical data and central directives, but in reality, it eliminated crucial tacit knowledge, leading to economic failure. Although the Soviet government maintained the operation of the planned economy by referencing international prices, utilizing underground black markets, and issuing privileges, these measures were merely stopgap solutions that could not fundamentally resolve the issue of resource allocation, ultimately resulting in massive waste, famine, and corruption.
Polanyi was the first prophet to expose the Soviet planned economy's deception. He pointed out that behind the glossy statistical data, the Soviet Union actually relied on capitalist funds, technology, and means to sustain the operation of the planned economy. This "single-centered order" not only fails to allocate resources effectively but also stifles individual innovation and competitive ability. The core problem of a planned economy is its inability to adapt to the complex and ever-changing demands of modern society, as information in modern society is dispersed among countless individuals, and each field or group needs to form its own decision-making center, which cannot be controlled by a single central authority. Polanyi further pointed out that the essence of modern civilization is "multi-centered order." In this order, information and decision-making are dispersed among multiple independent centers, each center achieving cooperation and innovation through division of labor, trade, and free association. This complex network structure enables the modern economy to flexibly respond to changes, driving continuous development and progress. In contrast, the Soviet "single-centered order" attempted to manage the entire economic system through centralization, ignoring the dispersed tacit knowledge and individual innovation capabilities, leading to systemic failure.
The modern market economy is based on the concept of "multi-centered order," achieving efficient resource allocation and social prosperity through decentralized decision-making and free competition. Michael Polanyi's theory profoundly reveals the fundamental reasons why planned economies are unfeasible. By distinguishing between explicit knowledge and tacit knowledge, he pointed out that planned economies cannot effectively utilize the tacit knowledge dispersed among individuals, leading to failures in economic management. The success of modern society relies on "multi-centered order," where decentralized decision-making and free market mechanisms can better adapt to complex and changing demands, achieving efficient resource allocation and sustained development. Therefore, planned economies are not only theoretically difficult to realize but have also been proven unfeasible in historical practice.