What can economists and lawyers contribute to the stock of useful knowledge for designing institutions? How do their contributions differ? I argue that law and economics generate two complementary but distinct types of knowledge. At its core, legal knowledge is participatory and internal to law’s practice, while economic knowledge is observational and external. Drawing on Michael Polanyi’s concept of ‘intellectual orders’, I propose that economics as a social science and law as a primarily practical profession each rely on complex institutions to generate their respective types of knowledge. The comparative analysis clarifies the potential and limits of using economics for institutional design, the role of law as a knowledge-generating profession, and principles for intellectual collaboration.

In this paper, we revisit the Knowledge Problem addressed by Hayek eight decades ago and emphasised more recently by Rizzo and Whitman in their critique of the new paternalist approach of mainstream behavioural economics promoted by Sunstein and Thaler. We do this in light of the work of Michael Polanyi. Polanyi developed a theory of knowledge which has some commonalities with Hayek’s but also departs from it by emphasising the tacit, personal and perceptual dimensions of any process of knowing, thus radically renouncing any attempt of a knowledge typology separating different types of tacit knowledge (TK) and even denying that general knowledge could exist independently of TK.

Tacit knowing as a concept and legitimate topic of scholarship came up in philosophical research in the second half of the 20th century in the form of some influential works by Michael Polanyi (although similar concepts had been discussed before). Systematic epistemological studies on the topic are still scarce, however. In this article, I support the thesis that tacit knowing pervades all our common major divisions of knowledge and that it therefore must not be neglected in epistemological research. By this approach I am simultaneously giving a systematic back-up for Polanyi's claim that the tacit component is found in all knowledge.

Standard accounts of analogy in law picture it as reasoning from the past case (source) to a solution in the case at hand (target). This article argues that the normatively constraining invocations of similarity or likeness presupposed by standard accounts do not obtain. It then sketches an alternative account based on Michael Polanyi's idea of polycentricity (not Lon Fuller's) on which the orientation of analogical reasoning is reversed. A past case (here “target”) is picked and framed in certain ways to persuade the interlocutor about the decision independently reached in the present case (here “source”) through the guidance of tacit knowledge (involving anticipation of what is likely to pass muster with the legal community) which normatively constrains the process.

After an esteemed academic career as a chemist, Michael Polanyi switched to the social sciences and made significant contributions to our understanding of the nature and role of knowledge in society. Polanyi's argument concerning knowledge led him to emphasise the vital importance of decentralised mechanisms of adjustment and coordination, including markets. His article ‘Collectivist Planning’ (1940) enters into debates about the possibility (or otherwise) of centrally planning scientific and economic activity. This early article also foreshadows post-war debates within the Mont Pèlerin Socierty (formed in 1947) concerning the economic role of the state and the future of liberalism.