European Central Bank President Mario Draghi told The Wall Street Journal last month that the "European social model has already gone." If his fellow Europeans have read Friedrich Hayek, they would also understand why.

Friedrich August Hayek, who passed away 20 years ago this week, was one of the foremost social scientists of the last century. A Nobel laureate in economics, Hayek is often associated with his critique of socialist systems. There is, in society, a "knowledge problem": Economic life requires...