ABSTRACT
In view of the limited and fragmented nature of knowledge, a social order – in the economic as well as the extra-economic domain – can arise and continue to exist only if and when there is a coordinating procedure, i.e. a procedure that coordinates the plans and actions of individuals. In principle, such coordination can take place in one of two ways: either centralized from above, or decentralized through interaction between and among individuals. In either case the result will be a certain social order, an ‘order of actions’.1
An order of actions is characterized by the fact that in a specific situation, individuals form expectations about the actions of other individuals and that these expectations will prove to be correct with a sufficiently significant degree of probability. Depending on the underlying method of coordination, two types of order of actions can be distinguished: (1) organizations (which Hayek also called taxis) and (2) spontaneous or polycentric orders (which Hayek also called cosmos).2 By analogy with the above, we can differentiate in the economic realm between the centrally planned economy and the market order.3
