6 ideas
The core economic problem is not allocating given resources, because the data a planner would need is never 'given' to any single mind. It exists only as scattered, incomplete, and often contradictory bits of knowledge held by separate individuals. So the real problem is how to make use of knowledge that nobody possesses in its totality.
Besides scientific or general knowledge, there is an unorganized body of knowledge of time and place: the shipper who knows about empty return trips, the estate agent who knows temporary opportunities, the arbitrageur who knows local price gaps. This knowledge is practically never available to a central authority, because it is local, fleeting, and often tacit. Only the person on the spot can use it in time, which is why decisions must be left to that person.
If conditions never changed, a plan could be settled once and followed forever. Economic problems exist because of constant small adjustments to shifting circumstances, and statistical aggregates erase exactly those local differences. Since change is continuous, the capacity to adapt quickly on the spot matters more than any comprehensive blueprint.
The price system works as a mechanism for communicating information: one number condenses the effect of countless distant events and passes it to people who need to act on it. A person only needs to watch a few prices to adjust correctly, just as an engineer watches a few dials. The system saves knowledge by transmitting only what is relevant for action.
Suppose a new use for tin appears somewhere, or a tin source is eliminated. Users of tin do not need to know which happened or why. They only need to know that tin has become scarcer, and the rising price tells them to economize. The adjustment ripples outward through substitutes and substitutes of substitutes until the entire economy has adapted, though no participant knows more than a small part of the whole.
Following Whitehead, Hayek argues that civilization progresses by extending the number of important operations people can perform without thinking about them. The price system is such a mechanism: it was not designed by anyone, and people benefit from it without understanding it. That it evolved rather than being invented is no reason to replace it with conscious direction, which cannot match its information-handling capacity.