Using the recent findings from the modern empirical disciplines, mainly building on Hayek's thoughts, the paper gives a definition of knowledge in accord with the Austrian School's tradition. Based on the definition, it sums up three behavioral assumptions and offers a framework for explaining individual behavior and expounds ideas on hierarchical knowledge and its change in real situations. In this way, the paper shows that the Austrian School can be greatly advanced with the help of modern empirical findings.
The problem of knowledge occupies a central position in the Austrian School Economics. But the definition of `knowledge' given by the school, is neither clear nor direct, although its characteristics have been explicitly declared (Hayek, 1937; 1945; 1952; etc.). Boettke (2002, p. 266) generalized the `knowledge' from the School as a `flow', and as having `another dimension of the interpretation and skillful judgment embodied in the use of knowledge' (p. 267). Undoubtedly, in his paper, Boettke described the meanings of the term in the School's tradition, but his statement is still not clear and applicable to analysis, because at least, the word `flow' is ambiguious to some extent. Recently, Foss and Foss (2006) pointed out the lack of definition for the term `dispersed/distributed knowledge' in the Austrian literatures, and suggested that it is necessary to open the black box of knowledge in the School. How should we do it? More importantly, how can we analyze individual behavior and interaction between them based on the concept of `knowledge'?
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