113CONTENTS

VLL

ANALYTICAL TABLE OF CONTENTS xiii PREFACE

XV

THE STORY OF THIS WORK 3 1 Introduction

PART ONE: TYPES OF KNOWLEDGE 27 2 The Known and the Knowing 3 Mundane, Scientific, Humanistic, Artistic,

59 and Other Classes of Knowledge 101 4 Alternative Classifications of Knowledge

PART Two: QUALITIES OF KNOWLEDGE 113 5 Truth, Beauty, and Goodness 125 6 Other Standards of Quality 144 7 Notions of Negative Knowledge

PART THREE: KNOWLEDGE AS A PRODUCT 8 Choosers and Users of Knowledge 155 9 Stocks and Flows of Knowledge 161 10 The Economic Cost of Knowledge 178 11 Transmission and Reception 186 12 Consumption, Investment, Intermediate Product

193 13 Uses, Value, and Benefits of Knowledge

202 14 Knowledge Industries and Knowledge Occupations

225

LIST OF PAGES WITH LINES OF TEXT RETAINED

FROM THE 1962 VOLUME 242 245 INDEX ANALYTICAL TABLE

11OF CONTENTS

3 1 INTRODUCTION 3 THE ECONOMIST AS A STUDENT OF KNOWLEDGE PRODUCTION Knowledge as a Datum in Economic Analysis

3 Knowledge as a Product, a Function of Resource Allocation 5 TERMINOLOGICAL PROPOSALS 7 "Production and Distribution" 7 "Knowledge and Information" 8 9 THE PROGRAM FOR THIS WORK Some of the Reasons for Our Curiosity 9 In Quest of Light or Fruit? 11 A Preview of the Eight Volumes 13 A Preview of Volume ι 17 Scope of the Expanding Work 20 20 TWO CHARGES AND APOLOGIES Going Too Far Afield 21 Valuing the Invaluable 23

PART ONE: TYPES OF KNOWLEDGE 2 THE KNOWN AND THE KNOWING 27 THE DOUBLE MEANING OF KNOWLEDGE 27

MEANINGS OF KNOWING

29 Knowledge-Of and Knowledge-About 29 ToKnowThatversustoKnowHow 30 To Know What, to Know That, and to Know How

33 The Special Status of Knowing That 36 An Assortment of Knowns and Knowings 38 Arrangement by Interrogative Pronoun 41 Further Comments on Knowing That and Knowing How

44 46

ELEMENTS AND MODES OF KNOWING

The Examples Surveyed for Different Modes of Knowing

46 The Elements of Knowing 47 Modes as Combinations of Elements 52 ANALYTICAL TABLE OF CONTENTS

64viii

DEGREES OF KNOWING 52 Elements, Modes, and Degrees 53 More Details, More Accuracy, More Confidence

55 INFORMATION AND KNOWLEDGE 56 ToKnowandtoInform 56 Enduring Knowledge and Timely Information

57

3

MUNDANE, SCIENTIFIC, HUMANISTIC, ARTISTIC,

AND OTHER CLASSES OF KNOWLEDGE 59 MUNDANE KNOWLEDGE 59 Persuasive Definitions 59 Mundane Knowledge, Intentional Learning, and Erudition

60 The Proportions among Types of Knowledge 61 SCIENTIFIC KNOWLEDGE 62 Science Excluding Empirical Knowledge 62 Admitting Empirical Sciences 64 Expelling All but the Natural Sciences 65 Science in Other Languages 67 A Definition Reflecting a Polyglot Consensus

68 HUMANISTIC KNOWLEDGE 70 Traditional Meanings 71 The Humanists' Identity Crisis 73 Legal and Institutional Definitions 74 The Antiscientistic Humanist 75 The Two Cultures 79 The Characteristics of the Humanities 81 SOCIAL-SCIENCE KNOWLEDGE 84 Historical Development 85 Methodological Controversies 85 An Academic Subject Group 87 The Sense of It All 89 ARTISTIC KNOWLEDGE 90 Liberal, Professional, Mechanical, and Fine Arts

90 Performance versus Precepts for Performance

91 Creation and Communication 92 KNOWLEDGE WITHOUT WORDS 92 Verbal and Nonverbal Arts 93 Visual Arts 94

108ANALYTICAL TABLE OF CONTENTS

ix

Performing Arts 94 Mundane Experiences 96 Knowing a Tune and Knowing a Feeling 98 Knowledge as a Mere Euphemism 100

4

ALTERNATIVE CLASSIFICATIONS OF KNOWLEDGE

ΙΟΊ

VARIOUS ASPECTS AND DISTINCTIONS

101 Basic and Applied Knowledge 101 Theoretical and Historical; General-Abstract and

Particular-Concrete; Analytical and Empirical

102 Knowledge of Enduring and of Transitory Interest

103 Knowledge for Many and Knowledge for Only a Few

105 Instrumental, Intellectual, and Spiritual Knowledge

106 THE CHOSEN CLASSES 107 Five Classes of Knowledge 108 Subjective Sorting and Operational Criteria

108

PART Two: QUALITIES OF KNOWLEDGE 5 TRUTH, BEAUTY, AND GOODNESS 113 KNOWLEDGE VERSUS BELIEF 113

KNOWLEDGE AND TRUTH

114 Facts and Propositions 115 Verifiability, Confirmability, Falsifiability

115 Relevance for the Purposes of this Study 117 The Wrong Fifty Per Cent 118 Pastime and Artistic Knowledge 118 Practical Knowledge Had Better Be True 119

KNOWLEDGE AND BEAUTY

120 TheObjectandtheForm 120 Performing Arts 121 Beautiful Theories, Beautiful Exposition 121 KNOWLEDGE AND GOODNESS 122 Ethics 122 Normative and Empirical Statements 123 Moral Education 123 A Special Class of Knowledge? 124

7ANALYTICAL TABLE OF CONTENTS

X

6 OTHER STANDARDS OF QUALITY 125 125

HIGH-GRADE AND LOW-GRADE KNOWLEDGE

Serious versus Lightweight Knowledge 125 Workmanlike versus Shoddy Knowledge 128 129

UNWANTED KNOWLEDGE

Wanted by Some, Unwanted by Others 130 Nuisance Commercials as the Price of Desired Gifts

131

NONCOMPREHENDED KNOWLEDGE

132 133

RESTRICTED OR FORBIDDEN KNOWLEDGE

The Victims of Dangerous Knowledge 133 U nwho lesome Kno wledge 134 Obscene Knowledge and Pornography 136 Erotic Knowledge and Intellectual Freedom

138 Inflammatory or Explosive Knowledge 141

7 NOTIONS OF NEGATIVE KNOWLEDGE 144 Accepted Knowledge Negated by New Knowledge

144 Disproved and Suspended Knowledge 145 Knowledge Losing Relevance 145 Alternative Knowledge: Acceptance Pending

146 Demoted Sciences 146 Controversial Knowledge Claims 147 Questionable Knowledge 148 Vague Knowledge 148 Superstitions 149 Illusive Knowledge 150 Confusing Knowledge 150 Excluded Possibilities and Negative Predictions

151 Conclusion 152

PART THREE: KNOWLEDGE AS A PRODUCT

8

CHOOSERS AND USERS OF KNOWLEDGE

155 Consumers' Choice, Entrepreneurial Initiative,

PoliticalDecision 155 Subjectively New and Socially New Knowledge

158 Knowledge as an Intermediate or a Final Product

159

186ANALYTICAL TABLE OF CONTENTS

xi

9 STOCKS AND FLOWS OF KNOWLEDGE 161 The Stock of Recorded Knowledge 162 A Collection of Scientific Journals 163 The Role of Books 165 The Stock of Knowledge in Human Minds 167 The Flow of Knowledge 170 Generation, Dissemination, and Use of Information

173 Accumulation, Replacement, Current Input,

Consumption, and Waste 176

10 THE ECONOMIC COST OF KNOWLEDGE 178 The Private and Social Cost of Acquiring Knowledge

178 Knowledge at No Cost 178 The Scarcity Value of Alertness 180 The Intentions of the Recipient of Knowledge

181 The Initiative to Produce Knowledge 183

11 TRANSMISSION AND RECEPTION 186 Techniques and Intents of Knowledge Production

186 Types of Individual Knowledge Transmitters: Eight Levels 187 Knowledge Receiving as Knowledge Production

190

12 CONSUMPTION, INVESTMENT, INTERMEDIATE PRODUCT

193 Production: The Use of Valuable Input for

ValuableOutput 193 Investment in Knowledge and Investment for Knowledge

195 Knowledge as Intermediate Product 196 Knowledge-Producing Personnel in Business Firms

198 Instruments for the Production of Knowledge

198 Who Pays for It and How? 199 Chatting and Other Knowledge Production by Amateurs

200

13 USES, VALUE, AND BENEFITS OF KNOWLEDGE

202

USES OF KNOWLEDGE 202 Information Service and Knowledge Acquired

203 Pastime Knowledge and Practical Knowledge

204 Process versus Contents of Information 205 Some More Examples of Use 205

225ANALYTICAL TABLE OF CONTENTS

Xii

THE VALUE OF KNOWLEDGE Value of Information 208 Value of Knowledge to Individual Would-Be Knowers

208 Practical and Intellectual Knowledge 209 The Private and Social Value of Education

211 Higher Earnings for Longer Schooling

212

An Alternative Notion of the Value of Schooling

213 The Private and Social Value of Scientific Journals

215

BENEFITS FROM KNOWLEDGE

217

Benefit-and-Cost Analysis 218 Five Types of Benefit-and-Cost Comparisons

219

Eager Ophelimetricians 220 Who Pays? Who Benefits? 222

14 KNOWLEDGE INDUSTRIES AND KNOWLEDGE OCCUPATIONS

225 KNOWLEDGE INDUSTRIES 225 What We Don't Know about Some Knowledge Industries

225 The Type of Product or the Type of Labor 226

INDUSTRIES AND OCCUPATIONS

227

Knowledge Industry

227

Knowledge Occupation 228 Degrees of Arbitrariness 229 A Heuristic Fiction: "Complete" Division of Labor

230 Production for Interindustry Trade and Intraindustry Use

231 The Major Knowledge Industries and Branches

232

FIRMS, INDUSTRIES, AND THE WHOLE ECONOMY

235

The Occupational Structure of Single Firms

235

A Different Model of the "Information Economy"

237

Strategies and Tactics in Quantitative Analysis

241

14PREFACE

BIBLIOMETRICIANS have presented impressive evidence of the knowledge explosion that has occurred in our time. The publication of the work of which this volume is the first installment may be seen as a flagrant instance of the knowledge explosion: a single book of mine—The Production and Distribution of Knowledge in the United States, published by the Princeton University Press in 1962—has octupled within eighteen years, expanded into a series of eight vol­ umes. The reasons for this expansion are discussed in "The Story of This Work," which follows this preface and tells about the origin and development of my research. One point, however, should be clarified right now: my concepts of knowing and knowledge are un­ usually wide. I do not confine myself to scientific or technological or verified or practical or intellectual knowledge. Anything that people think they know I include in the universe of knowledge.

The breadth of my concept of knowledge can be judged from the fact that a rendition in German would require three words: wissen, kennen, and konnen. The questions "Do you know France and do you know French?" would call for answers in German: "ja, ich Jcenne Frankreich und ich kann Franzosisch." A Frenchman, asked for his knowledge of England and English, has to distinguish be­ tween two verbs when he admits to connaitre 1 'Angieterre and savoir I'Anglais. To know what, to know about, and to know how— all are encompassed in the wide concept of knowledge employed in the present work. The extent to which the first volume of this serial work draws on what was contained in my 1962 book can be seen from the List of Pages with Lines of Text Retained from the 1962 Volume (below, p. 242). Only slightly more than forty pages of the earlier book, or 15 per cent of the present volume, have been retained.

Three chapters of this volume were prepublished, partly or in full: Chapter 9 appeared with some cuts in Kyklos, vol. 32, nos. 1-2; Chapter 10 in Wandlungen in Wirtscha/t und Gesellschaft— Festschrift fur Walter Adolf Johr, ed. by Emil Kiing (Tiibingen: Mohr-Siebeck, 1980); and Chapter 13 in Knowledge: Creation, Diffu­ sion, Utilization, vol. 1, no. 1. I appreciate the publishers' permis­ sion to reprint. Several grants in aid of my research have been received over the years, but in listing some of the sponsors it is necessary to stress that PREFACE

15xiv

different sources of funds supported different stages and phases of the project. Much of the research for the 1962 volume will be used in Volumes III to VIII of the new work; most of the grants received since 1971 have been for research to be used for Volumes III to VI. Only a minute fraction of the financial support received for the entire proj­ ect was used for preparing the material for the present volume. It is for this reason that I should begin my list of sponsors with the two who financed most of the reference work and typing of Volume I: The Ford Foundation and the Earhart Foundation. Yet, since I have done the writing of this volume simultaneously with the research on later volumes, I should not defer naming the chief supporters of the project as a whole: The National Science Foundation, The National Endowment for the Humanities, the National Institute of Education, the Alfred P. Sloan Foundation, and the John and Mary Markle Foundation. Over the years, 1971 to 1980, my research team has varied in size, from between six to twenty-four persons, mainly graduate students working part-time as research assistants. Most of them were econo­ mists, but anthropologists, psychologists, historians, educationists, engineers, literature majors, information scientists, computer scien­ tists, and other specialists were among them. The total number up to now exceeds sixty. I shall name them in the prefaces of the volumes in which I report on their research. For this volume I have to thank only two of them: Mary Taylor Huber, who supplied materials and documentation for Chapter 3, and Jessica Kennedy, who helped me with the Index. Two friends of mine have influenced my thinking in essential ways: Professor Donna Kerr, philosopher and educationist, had much to do with Chapter 2, "The Known and the Knowing," and Professor Kenneth Boulding, economist and social philosopher, made many helpful suggestions for almost all chapters. Finally, I want to thank three good spirits of the Princeton University Press: Herbert Bailey, director, for his encouragement, counsel, and confi­ dence in me and my longevity; Sanford Thatcher, assistant director, for his skill in steering my ambitious projects through the dangerous waters of editorial policy; and Peggy Riccardi, the editor in charge of my manuscripts, for her understanding, literary taste, and exquisite feeling for language.

Princeton University and FRITZ MACHLUP New York University THE STORY OF THIS WORK

16THE STORY of this work is, I think, worth telling. This should imply that it is also worth reading. I have tried it out on a few patient vic­ tims, and they said it had made no demands on their patience and they felt in no way victimized. Boldly generalizing from their flatter­ ing reactions, I offer my story to any reader who is not averse to browsing through authors' self-advertisements.

My first thought was to include this story in the Introduction. Sanford Thatcher, of the Princeton University Press, wisely advised against it: such intimate matters about the author and his work were, he said, more suitable for the Preface. However, I do not like long prefaces. So I decided to stick this story between preface and intro­ duction; it would no longer be prefatory, but still proemial or preludial, still a part of the preliminary material of the book.

How One Thing Led to Another How did I ever come to think of inquiring into the production of knowledge as an economic activity of the nation and to estimate size and growth of this sector of the economy? It was not a sudden flash, a brainstorm out of the blue; nor was it an idea suggested by conver­ sation or by reading a particular book or article. Instead, it was a case of intellectual chain reactions, taking place gradually over a period of twenty-five years. It was a case of "how one thing led to another." Each linkage is plausible, but the beginning and the end are so un­ like each other that no one could have foreseen this evolution.

It began with an interest in monopolistic or imperfect competi­ tion, aroused in 1933 by reading the well-known books on this sub­ ject and by discussions at Harvard with a group of fine economists. I was soon writing on monopoly and competition, first only on pure theory. Later I turned my attention to the institutions promoting re­ strictions on competition, among them the system of patents of in­ vention. I spent a few years studying the economics of patent protec­ tion and intended to do a book on this subject. Such a book has to be focused on the analysis of benefits and costs. If the patent system succeeds in diverting material and human resources into research, development, patenting, litigation, and whatever is connected with inventing, the cost of these resources has to be estimated. Was it pos­ sible to divide R and D activities into those that were and those that were not induced by the patent incentive? Even if such a sep-

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aration were feasible, would it not be essential to compare the patent-induced investments in {or expenditures for) R and D with the total? Having recognized that R and D was an essential part of my theoretical and empirical research, it became clear to me that these activities were closely linked with education. R and D was com­ plementary with higher education in some aspects and competitive in others. Quality education was surely a precondition of quality re­ search. I became interested in the total effort the nation had been making, at conspicuously increasing costs and decreasing benefits, to create and disseminate scientific and technological knowledge. It was apparent that trained personnel was required for R and D and that education, especially higher education, had to prepare it. Thus, to be systematic in my work, I had to inquire into the educational system at all levels. If I wanted to find out how the nation produced knowledge, I could not confine such an inquiry to what the R and D people liked to call "S and T information"—scientific and technologi­ cal information. All schooling, all college work, all graduate educa­ tion had to be included in a comprehensive study of the production of knowledge in the United States. From the inclusion of education, it was only a small step to the inclusion of books and journals, magazines and newspapers. Read­ ing, as a matter of fact, is a significant part of education, but the ques­ tion arose whether there is a way to separate intellectual from pastime reading, absorption of knowledge of enduring relevance from "getting informed" about current news items, and receiving messages useful for immediate action, but of strictly transitory rele­ vance. There may indeed be a way to make such separations, to estimate the proportions between quasi-permanent and merely ephemeral knowledge, but it would be of even greater interest to in­ clude both in the total to be captured in any quantitative research. The next annexation, after that of information through the printed word, was information through the electronic media of communica­ tion, radio and television broadcasting. And there are also several other channels over which information and knowledge of all sorts is transmitted. I regarded it as imperative to include artistic creation and communication and, on a more mundane level, the roles of tele­ graph, telephone, and the postal services.

Two final steps remained, and they proved to be of strategic im­ portance: the inclusion of information services and information ma­ chines. The information-machine industry, especially, had a wellnigh spectacular growth in the 1950s, led by the development of the

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computer and electronic data processing. The growth rates observed in this and other "knowledge industries" and "knowledge occupa­ tions" seemed to me so extraordinary that I became convinced of the need for a quantitative study that would show the share of each knowledge industry in the gross national product of the United States. I had never in my past work engaged in statistical investiga­ tions. Now it seemed imperative that I should.

Returning to the theme "How One Thing Led to Another," I may say that the chain from the theory of competition and monopoly to a statistical investigation of knowledge production in the United States is long and tangled. From link to link, however, the connec­ tion is relatively easy to see.

Public Lectures and Sponsored Research Apart from the chain of ideas, there is a chain of events from an idea for a research project to its execution, and eventually its completion. The execution required financial support, and I shall presently speak about the sponsors of my research. But it also required encourage­ ment and moral incentives. The research climates at the Johns Hop­ kins University and at Princeton University and some invitations to endowed lectures elsewhere provided both.

Endowed lectures have often been responsible for publications of pamphlets or slim books. This time a heavy tome grew out of five lectures. The first of these was the John L. Senior Lecture in Ameri­ can Studies which I gave in March 1959 at Cornell University; the other four were the Moorhouse I. X. Millar Lectures which I gave in October 1960 at Fordham University. Had it not been for the persua­ sive powers of Father William T. Hogan, S.J., of Fordham University, I doubt that I would have been enterprising enough to embark on the research for this ambitious project. I grossly underestimated the im­ mense amount of work when I gave in to Father Hogan's persuasion. Of course, after I had seriously started the research, I never thought of turning back. The task I had set for myself was not a one-man job; I needed re­ search assistance. Fortunately, I had a group of able graduate stu­ dents at Hopkins, and in 1959 I secured grants from three sources: the National Science Foundation, the Ford Foundation, and a large corporation. These grants were chiefly in support of research on some of the earlier links in the chain of ideas, namely, "The Eco­ nomic Aspects of Patent Protection, Technological Inventions, and Their Development." As a matter of fact, most of the work financed by these grants was on projects fully consistent with the title of the

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sponsored research. Still, I was able to get some portion of the assist­ ants' time for the statistical research needed for the comprehensive investigation of knowledge production. The three grants continued when I moved to Princeton; some of my research assistants came with me. During my first year at Princeton University, I had a group of seven collaborators, two post­ doctoral and five working towards their Ph.D. degrees. That I was freed from teaching duties during my first term at Princeton was of great help in completing my book.

The Publication of the 1962 Volume The book, under the title The Production and Distribution of Knowl­ edge in the United States, had been promised to the Fordham Uni­ versity Press as an issue of the Millar Lecture series. When I deliv­ ered the manuscript of 600 typed pages and 84 statistical tables, I found that this was far more than Father Quain, the director of the Press, had expected. Arranging the complicated multicolumn tables in a form suitable for printing in a format of normal octavo size ap­ peared to raise serious problems. I turned to Herbert Bailey of the Princeton University Press for advice. He saw no forbidding prob­ lems in the composition of my tables and asked me to let him read the manuscript. He liked what he saw and undertook to talk to Father Quain. The results of the discussions between the directors of the two university presses were that the Fordham University Press kindly released me from my commitment, and the Princeton Univer­ sity Press put my manuscript through the customary refereeing process. The referees reported that this was a "pioneering" work. Instead of the customary request or condition that the author cut or prune the manuscript to "acceptable size," I was praised for my inclusion of some rather controversial comments and digressions and encour­ aged to extend critique and recommendations of this kind to several chapters of the book. I appreciated the wisdom of the editorial board in allowing me additional space to add more of my personal value judgments to the factual statistical estimates. The book, no doubt, became far more readable: after all, it is not easy to present masses of statistical series in a good prose style with occasional humor to lighten the serious disquisition.

The Outline of the 1962 Book The book was published in December 1962. In the first chapter, "In­ troduction," the outline of the book was described as follows:

"Our first task . . . will be to develop the conceptual framework for xix

20THE STORY OF THIS WORK

an analysis of 'knowledge production.' This will involve discussions of the meanings of the term 'knowledge' and of the various ways in which scholars—philosophers, sociologists, and others—have clas­ sified knowledge. It will further require an analysis of the various methods of producing knowledge, with appropriate distinctions be­ tween technical and economic points of view. Finally, it will call for the formulation of criteria for deciding under what conditions knowledge is a 'final' product, or only an 'intermediate' one, and, if it is a final product, whether it is investment or a service to consum­ ers. All this is on the program for Chapter n.

"Chapter hi is a brief essay on the significant difference between an 'industry approach' and an 'occupation approach' to the study of knowledge production. The industry approach will be followed in the subsequent six chapters, and only the last chapter of the book will return to the problem of the secular increase in the share of 'knowledge-producing occupations' in the total labor force.

"Chapter iv, the longest in the volume, is devoted to Education, the largest of the knowledge industries. After brief discussions of education outside the schools—in the home, on the job, in the church, in the armed services—historical statistics and expenditure analyses are presented, first, for elementary and secondary schools and, then, for institutions of higher education. The problems of the productivity—social rate of return—and of the efficiency of educa­ tion are examined, and, finally, a proposal for school reform is sub­ mitted. Earnest consideration of this proposal is requested.

"Another long chapter, v, deals with Research and Development and the enormously rapid growth rate in this activity, largely financed with government funds. The various subdivisions—basic research, applied research, and development—are treated separately as well as jointly; the inventive process and the role of the patent system in the promotion of inventive effort are analyzed. After an examination of the competitiveness between industrial research and secondary and higher education and the essential complementarity between basic research and education, a warning is sounded against the widely favored expansion of industrial research and develop­ ment, because it may lead to a fatal curtailment in the training of re­ search scientists. Too rapid growth of applied research and de­ velopment work may conceivably dry up the supply of research per­ sonnel and, thus, force cutbacks of research in the future.

"The Media of Communication are to be treated in Chapter vi, which will include historical and statistical surveys of printing and publishing—books, periodicals, newspapers—of the stage and the cinema, of radio and television, telephone and telegraph, the postal

21THE STORY OF THIS WORK

XX

service, and of a few other media. Though each of these discussions is relatively brief, they add up to a considerable compendium. "Chapter vn is devoted to a survey of Information Machines. Here the replacement of men by machines in the processing of informa­ tion and the prompt availability of information needed for more ra­ tional decision-making are discussed. Some basic facts about elec­ tronic computers and automatic control systems are presented, and the spectacular growth of this industry is shown by means of statis­ tical data furnished by some of the larger firms.

"Information Services will be discussed in Chapter vm, in a somewhat groping fashion because of the awkward conceptual and statistical problems involved. Several information services are ren­ dered jointly with other services at joint costs and, in view of the ar­ bitrariness of statistical separation, no satisfactory treatment seems possible. "A summary statement of the expenditures for the products of the various knowledge industries is to be presented in Chapter ix. Al­ though the growth rate of knowledge production as a whole is natu­ rally less sensational than the growth rates in some of its parts, it still is impressive. An ever-increasing part of the actual and potential gross national product has been taken by the production of knowl­ edge. The causal connections are complex and undoubtedly go in both directions: an increase in the production of certain kinds of knowledge, in the nature of investment, leading to increased pro­ ductivity in the use of resources and to higher national incomes; the increase in total income, in turn, leading to greater consumption of other kinds of knowledge and also providing ampler funds for in­ vestment in more knowledge of the productive types.

"The last chapter, x, will treat of the gradual, but distinct, change in the occupational composition of the labor force that has been going on at least since 1900 and has become even more conspicuous in recent years. This change involves a continuous increase in 'knowledge-producing' workers and a relative decline in what used to be called 'productive labor.' The changing employment pattern now shows such a rapid trend towards the use of more brainpower relative to the use of physical strength or physical skills that a seri­ ous problem of employability of less-educated members of the labor force arises. "The plan of this book shows, I submit, a unity of conception which sharply distinguishes it from a collection of essays. Yet the author's effort to make each chapter as self-contained as possible will be apparent. This is attempted for the sake of specialists who may be interested in some chapters but not in others. It is quite likely

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that many 'educators' will want to read only Chapter iv, and many 'research scientists' only Chapter v. Although I cannot say that they would not miss anything if they chose to neglect the rest of the book, at least they would never know that they have."

How the Book Was Received The book was reviewed in professional journals, general-interest magazines, and several daily papers. The most widely used attribute reviewers bestowed on my work was "pioneering." Featured in most notices was my discovery of the unexpectedly high total dollar value of production by knowledge industries (for 1958), its large share in the national product, and its rapid growth (in the previous decade). Learned and professional journals emphasized, as one should ex­ pect, issues of particular interest to their special fields.

The most perceptive and commendatory of the reviews in eco­ nomic journals was by Kenneth Boulding. He offered several useful suggestions, and also a few criticisms which were intended to "underline the great importance and the pioneering nature of this study, .... That it could easily be mistaken for a simple exercise in national-income arithmetic should not blind the reader to its revolu­ tionary potential. The very concept of a knowledge industry con­ tains enough dynamite to blast traditional economics into orbit."1

One of Boulding's criticisms was leveled against my recommenda­ tions for school reform; he quite rightly held that my plan for shortening primary and secondary schooling from twelve to nine or ten years was based on arguments for which I had merely casual evi­ dence, if any. The same criticism was made by Mary Jean Bowman.2 Yet, she substituted for the "Machlup Plan" a "Bowman Plan," which included, among other desirable features, an abolition of junior high school, with a reduction of primary plus secondary edu­ cation to eleven years. Her major criticism of my approach towards measuring the total annual value of knowledge production related to my technique of using opportunity costs—the value of alternative outputs, that is, of outputs not produced but foregone for the sake of the actually chosen use of resources. She questioned my combining these opportunity costs, to the extent that they were mere estimates, with statistical data from the national-income-and-product ac­ counts. Robert Lekachman was most complimentary of what he consid­ ered "perhaps the finest portion of this volume .. . the long virtuosic

1 Kenneth E. Boulding, "The Knowledge Industry," Challenge, May 1963, p. 38.

2 Mary Jean Bowman, "Professor Machlup on Knowledge and Reform," The School

Review, vol. 71, no. 2 (1963), pp. 235-245.

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chapter on education, which displays the talents of interpretation and advocacy for which the author is equally famous among his fel­ lows." Of the work as a whole he found that "seldom has a pioneer investigation of so complex a topic as a freshly defined industry re­ ceived so elegant and so fascinating an initial treatment. The book deserves attention for the incisiveness of the argument, the novelty of the definitions, and the freshness of the information which is gathered, sorted, and interpreted."3 Especially gratifying was the review by Theodore Schultz. He commented favorably on my inclusion of opportunity costs in my estimates of the value of knowledge produced by education: "[Machlup] is every inch an economist in facing up to the analytical issues implicit in earnings foregone and other opportunity costs of schooling, and the vexing issues underlying the benefits from schooling whether they are 'consumption' or 'investment' and whether they accrue to students or to others. . . . Machlup's treat­ ment of earnings foregone and of other neglected opportunity costs is not only formally correct but refreshingly clear and remarkably all-inclusive."4 Schultz mentioned "the special merit of the . . . chapter on 'Re­ search and Development.' " He found that "the concise section on inventive effort and patent protection is a classic, and so is the treatment of the complementarity between basic research and higher education." Several of Schultz's comments on various parts of my work were challenging and will cause me to give careful attention to the issues in question in the respective chapters of this new work. It may be worth noting where Schultz saw the chief strength of my book: "Without any fanfare or claim that this book is about economic growth, Professor Machlup has made a major contribution to this branch of economics."5 This may or may not agree with the judgment expressed by Shane Hunt, who wrote that "basically this is a book on economic struc­ ture. In place of the conventional division of an economy into pri­ mary, secondary, and tertiary industries, Professor Machlup pro­ poses an entirely different division into those economic activities which have as their product some form of knowledge, and those which do not."6

3 Robert Lekachman, Review, PoiiticaJ Science Quarterly, vol. 78 (September 1963),

pp. 468-469.

4 Theodore W. Schultz, Book review, The American Economic Review, vol. 53 (Sep­

tember 1963), p. 837.

5 Ibid., p. 836.

6 Shane Hunt, Review, Journal of Political Economy, vol. 73 (June 1965), p. 311.

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If secular changes in the structure of the economy—in the compo­ sition of output and labor force, and in the functional distribution of income—are important criteria of development and growth, Hunt's and Schultz's descriptions of the implications of my findings are consistent.

The Multiversity and the Knowledge Industry In his Godkin Lectures at Harvard University in April 1963, Clark Kerr, then President of the University of California, discussed "The Uses of the University." He sketched the historical development of the university from its medieval beginnings to the present and showed how ideals and reality had changed; how Cardinal New­ man's "Idea of a University," favoring liberal over useful knowl­ edge, and Abraham Flexner's "Idea of a Modern University," favor­ ing elitist research over service stations for the general public, had both given place to the "Idea of a Multiversity," trying to be every­ thing to everybody. This evolution was part of a major transforma­ tion that had taken place in the United States: "Basic to this trans­ formation is the growth of the 'knowledge industry,' which is coming to permeate government and business and to draw into it more and more people raised to higher and higher levels of skill."7

Quoting my findings concerning the relative share of "knowledge production" in the United States and its rate of growth, he remarked that "knowledge has certainly never in history been so central to the conduct of an entire society," that the "knowledge industry" may well "serve as the focal point for national growth" in the second half of this century, and that "the university is at the center of the knowl­ edge process."8 The acceptance of my findings, but especially of my terms, made Clark Kerr the butt of vehement attacks by revolting students, dis­ contented professors, and well-meaning philosophers. The leader of the students charged Kerr with having called the large university a "knowledge factory." Two professors, without checking, repeated that "knowledge factory" was one of Kerr's phrases.9 The philoso­ pher, having learned from Kerr's reply to the professors10 that Kerr had not spoken of a "knowledge factory" but rather of the growth of

7 Clark Kerr, The Uses of the University (Cambridge, Mass.: Harvard University

Press, 1963), p. 88.

8 Ibid.

9 Sheldon S. Wolin and John H. Schaar, "Berkeley and the Fate of the Multiversity,"

New YorkReview, vol. 4, no. 3 (March 11, 1965), p. 15.

10 Clark Kerr, "An Exchange on Berkeley," New York Review, vol. 4, no. 5, Special

Spring Issue (April 8,1965), p. 35.

25xxiv

THE STORY OF THIS WORK

the "knowledge industry," and that this term was not Kerr's but quoted from my book, was still distressed by the thought of a univer­ sity as "an 'industry' whose business . . . is knowledge."11 That an institution of higher learning should be regarded as a part of an "in­ dustry" offended the high-minded lover of wisdom. He believed that Kerr's acceptance of that term reflected some dehumanizing at­ titudes of the new managers of our educational enterprises.12 The difference between Kerr and his antimaterialistic critics was not the absence of idealism in Kerr's lectures but his critics' failure to look into my book to see that neither industry nor occupation—the words I used in designating my two approaches—were in any sense de­ meaning intellectual and humanistic knowledge.

I have included this little comedy of errors regarding my innocent word coinage partly because of its entertainment value, but chiefly because of its implied lesson that we check our references not only superficially but by reading enough to understand from the context what the author meant by his words. "Knowledge industry" has cer­ tainly become an accepted term in discussions of economic and so­ cial change and involves no slur on whatever type of knowledge is created or communicated—cognitive or affective, practical or esoteric.

Interdisciplinary and Iniernaiionai Reactions The interdisciplinary character of my book was reflected in the vari­ ety of special professional groups that published reviews or com-

II Henry David Aiken, Predicament of the University (Bloomington: University of

Indiana Press, 1971), p. 114.

12 ". . . if one treats the production of knowledge as an industry and the university

as its center, one has defined the university's institutional function in industrial

terms." Ibid., p. 388.—One may forgive a philosopher his unawareness of economic

terms in the official language of the United States Government, the "Standard Indus­

trial Classification," which includes agriculture, amusement, recreation, professional

services, and government itself among the "major industry groups." The U.S. Census

of 1890 distinguishes "mechanical and manufacturing industries" from other indus­

tries. The dictionary definitions of industry include, besides "diligence in any task"

and "systematic work," "a particular branch of productive labor," stated as going

back to 1566, long before the industrial revolution.—The sociologist Everett Hughes,

in an article first published in 1952, commented on the supposedly current "exten­

sion of the term 'industry' to include so much more than manufacturing" and consid­

ered it "an interesting datum," probably reflecting the higher prestige of that efficient

form of organization. After mentioning the "advertising industry" and the "amuse­

ment industry" as examples, he added: "No one has yet, so far as I know, talked of the

medical, educational, and labor-union industries, but I suppose someone will."

Everett C. Hughes, "The Sociological Study of Work: An Editorial Foreword," The

American Journal of Sociology, vol. 57 {March 1952), reprinted in his The Sociologi­

cal Eye (Chicago: Aldine-Atherton, 1971), p. 298.

26THE STORY OF THIS WORK

XXV

ments in their periodicals. Apart from journals on education and re­ search, the magazines and newsletters of publishers, librarians, journalists, radio and television broadcasters, accountants, advertis­ ing professionals, and public-relations specialists were among those that took notice of the book. Among the learned societies— besides those of economists—that considered the volume as relevant to the research interests of their members were the sociologists, the anthropologists, the political scientists, and the information scien­ tists. International interest in the book showed itself first through lengthy reviews in foreign-language journals, and later through fre­ quent citations and comments in journal articles and books. But only two translations into foreign languages have been published: Rus­ sian and Japanese. The Russian edition appeared in 1966 under the title Proizvodstvo i rasprostranenie zanii ν SShA.13 A preface, twenty-six pages long, was written by G. V. Poluninoi. It raised the question why a work by a "bourgeois" apologist from an "imperialist country" should merit a translation into Russian. He'gave several reasons for it, chief among which were the novelty of the conception and the mass of valuable data that resulted from an attempt to compute magnitudes "hitherto not computed by anyone." He regarded the material as of "unquestioned interest to Marxist investigators of the economics of capitalist countries," particularly to investigators of the rapidly ex­ panding "nonproductive sphere." He concluded that it is "necessary to insist on a genuinely scientific Marxist investigation of this sphere." The Japanese edition appeared in 1969 under the title Chishiki Sangyd.14 The translation was made by a team of researchers under the supervision of Tatsuo Takahashi and Hiroshi Kida. The title means literally "Knowledge Industry"; this term, evidently, has caught on in Japanese discussion. The book had surprisingly large sales and became the topic of private and public discussion groups. In Japan the interest in the growth of knowledge production has re­ mained intense. One research institute undertook to replicate my statistical investigation with Japanese data and published its find­ ings in a separate book. Another organization invited me several times for lecture series on further developments in this area and pub­ lished three small books of my papers in Japanese translation.

13 Translated by 1.1. Diumulen, U. I. Kozlov, and M. Z. Shterngarts; edited by Ε. I.

Rosental (Moscow: Progress, 1966), xxx and 462 pp.

14 Chishiki Sangyo (Tokyo: Sangyo Nohritsu Tanki Daigaku, 1969), xxxv, 447, and

16 pp.

27xxvi

THE STORY OF THIS WORK

Demands for a New Edition with Updated Statistics The discovery of the relatively large size and enormous growth of knowledge production gave a jolt to many observers and interpreters of economic development. No one had expected the production of knowledge in the United States to be of the order of magnitude that I had calculated for 1958.1 myself had never suspected this result of my calculations. I had finished writing most of the chapters of the book before I came to the summary chapter in which I totaled the figures I had estimated for each of the various knowledge industries. I could not believe my eyes, and still less my arithmetic (done with pencil and paper), when I saw that aggregate knowledge production was 29 per cent of (adjusted) gross national product. And I was star­ tled when I saw the growth rates of the various knowledge industries and the growth rate of the aggregate. If that growth were proceeding at the rate I had found for the decade before 1958—2V2 times the av­ erage rate of growth of other components of total GNP—the share of knowledge production in total activity would soon reach 50 per cent. I had made similar calculations for the share of knowledge occu­ pations in total activities. I had found that the ratio of workers in the labor force who were engaged in knowledge-producing activities to the total civilian labor force was 31.6 per cent in 1959, and had grown by 30 per cent in nine years. When I added the number of full-time students of working age to both magnitudes, so that the persons engaged in knowledge work included those who produce knowledge in their own heads, and this number is then compared with the "potential labor force"—the full-time students of working age being added to both the numerator and the denominator—the share of knowledge workers in the potential labor force was 42.8 per cent. That these ratios would reach and surpass 50 per cent within a few years was a relatively safe guess. Was growth in knowledge production continuing at the rates I had calculated? When would the output of the knowledge industries reach the 50 per cent mark? These questions were on the minds of many of my readers. I received dozens of inquiries every year. Had I updated my statistical series? Had I made some projections? Had I heard of anyone else doing a project of this sort? For years my an­ swers to all these questions had to be negative. Fortune Magazine did not take my "no" for an acceptable answer. Mr. Gilbert Burck, a member of its board of editors, assigned a researcher to the task of updating, partly by means of rough pro­ jections, my aggregate and some of the larger subaggregates for the

28xxvii

THE STORY OF THIS WORK

year 1963. Burck's article was very interesting but did not reveal the methods of computation.15 Even the total dollar amount of knowl­ edge production was not clearly stated, though it could be read off a bar diagram or calculated from the statement that from 1958 to 1963 it had grown by 43 per cent. Although the article conveyed the im­ pression that this was an extraordinary rate of growth, it failed to ex­ plain that it was actually a declining rate. During the same five years, the gross national product had increased by 32.5 per cent and the portion constituted by non-knowledge production by 28 per cent. Thus the growth rate of knowledge production was only IV2 times that of the other components of GNP, much less than the 2V2 times I had calculated for an earlier period. Burck's article realized that knowledge production "could approach the 50 percent mark," but it wisely withheld a prediction of when this might happen.

In 1967 Jacob Marschak delivered a lecture on the "Economics of Inquiring, Communicating, and Deciding," which was published in May 1968. He began with a reference to the "informational revolu­ tion," and to the "rapid growth of the knowledge industry." On the basis of my estimates of the share of knowledge production in the gross national product of 1958 and on its growth rate of about ten per cent per year, he made a projection according to which the share of the knowledge output would by then (1967) "appear to straddle the 40 per cent mark."16 In 1968 Peter Drucker wrote a book titled The Age of Discon­ tinuity. Part iv of it was on "The Knowledge Society" and Chapter 12, on "The Knowledge Economy." Based evidently on my estimates and his own projections, Drucker stated that the "knowledge indus­ tries .. . accounted in 1955 for one-quarter of the U.S. gross national product" and that, "by 1965, . . . the knowledge sector was taking one-third of a much bigger national product." He gave no basis for this projection but he projected even further and stated that "in the late 1970s it [the knowledge sector] will account for one-half of the total national product."17 In 1977 Marc Uri Porat completed a doctoral dissertation at Stan­ ford University on "The Information Economy." An expanded ver­ sion was published by the Office of Telecommunications of the U.S.

15 Gilbert Burck, "Knowledge: The Biggest Growth Industry of Them All,"Fortune,

November 1964, pp. 128-131, 267-268, 270.

16Jacob Marschak, "Economics of Inquiring, Communicating, and Deciding,"

American Economic Review, Papers and Proceedings, vol. 58 {May 1968), p. 1.

17 Peter F. Drucker, The Age of Discontinuity (New York: Harper & Row, 1968), p.

263.

29xxviii

THE STORY OF THIS WORK

Department of Commerce in a set of nine volumes under the same title, with appropriate subtitles for each volume.18 It presented a de­ tailed analysis of the statistical data for 1967 of the nationalincome-and-product accounts, developed by the Bureau of Eco­ nomic Analysis. Using techniques different from those I had employed for my 1958 estimates, Porat's numerical findings on the share of "information activities" are not easily comparable with mine. His major procedural innovation was to divide the "informa­ tion economy" into a "primary information sector," comprising "those firms which supply the bundle of information goods and services exchanged in a market context," and a "secondary informa­ tion sector," which "includes all the information services produced for internal consumption by government and noninformation firms."19 In 1967 the "value added" originating in the primary in­ formation sector amounted to 25.1 per cent of GNP, and that of the secondary sector to 21.1 per cent, together, 46.2 per cent. This is a larger share than that projected by Marschak for the same year. Nev­ ertheless, Porat held that my total for 1958 may have been too high.20

Research for a Second Edition or a New Work I knew nothing about Porat's research when I decided in 1972 that I had a moral obligation to undertake myself the job of updating the statistical analysis, provided I could secure the necessary financial support. The National Science Foundation and the National En­ dowment for the Humanities agreed to sponsor my research. I chose 1970 as the terminal year for the update of the statistics and assem­ bled a research staff of twelve graduate students, chiefly part-time, for the statistical work. In the third year of our effort, I allowed myself to take on an addi-

18 Maic Uri Porat, The Information Economy (Washington: U.S. Department of

Commerce, Office of Telecommunications, 1977). Volumes 3-8 were written with the

assistance of Michael R. Rubin, who signed as sole author for volume 9.

19 These definitions should not be taken literally. For example, "the wages of work­

ers employed in public education" were included in the primary sector, because edu­

cation "has direct analogs in the primary information sector." Ibid., vol. 1, p. 51.

20Porat was not critical of my statistical efforts: "The omission of value-added es­

timates from earlier work undoubtedly reflected the state of data processing facilities

available at the time. Without fast computers and, more importantly, very extensive

interlocked machine readable data bases, it is doubtful whether a more comprehen­

sive report could have been prepared. In the 15 years since Machlup's research, a

wealth of information became available and accessible." (Ibid., vol. 1, p. 47) Porat's

emphasis on "value-added estimates" reflects constructs and operational concepts of

the knowledge industries rather different from mine; but this will be discussed in a

later volume.

30THE STORY OF THIS WORK

xxix

tional task, an ambitious inquiry into the economics of scholarly publishing, a project also sponsored by the National Science Foun­ dation and the National Endowment for the Humanities. This in­ quiry seemed to promise a rich harvest of new data on book publish­ ing, journal publishing, abstracting and indexing services, and libraries; very little was known about these sectors of knowledge pro­ duction, and I thought that this expansion of the scope of my data base was worth the delay in completing my second edition or new work. Now that I have completed the four volumes on Information through the Printed Word,211 am not sure that the new material en­ riches the particular parts—probably in Volume V of this work— sufficiently to justify the long delay and the renewed effort of another updating of all my statistical series from 1970 to, say, 1978. On the other hand, I must admit that it is more helpful to have the series brought forward by several years. All statistical series in this work will go to the latest available year, and the grand total will be calculated for 1975 or the latest year for which it can be done.

21 Fritz Machlup, Kenneth Leeson, and Associates, Information through the Printed

Word: The Dissemination of Scholarly, Scientific, and Intellectual Knowledge. Vol. 1,

Book Publishing, vol. 2, Journals, vol. 3, Libraries (New York: Praeger Publishers,

1978), vol. 4, Books, Journals, and Bibliographic Services (New York: Praeger Pub­

lishers, 1980).

32VOLUME I

KNOWLEDGE AND KNOWLEDGE PRODUCTION CHAPTER 1

34INTRODUCTION

EVERY BRANCH of learning takes a good many things for granted. If these things have to be explained, "Let George do it." George is al­ ways someone in another discipline. Hence, the analysis of the pro­ duction and distribution of knowledge falls into George's field.

George has always been a popular fellow. People were inclined to rely upon him even if they did not know whether he really existed. In recent years, however, Georges have actually appeared on the scene in increasing numbers. Many of them are called "interdisci­ plinary research workers."

THE ECONOMIST AS A STUDENT OF KNOWLEDGE PRODUCTION

Anything that goes under the name of "production and distribution" "sounds as if it clearly fell into the economist's domain. An analysis of "knowledge," on the other hand, seems to be the philosopher's task, though some aspects of it are claimed by the sociologist. But, if one speaks of the "communication of knowledge in the United States," the specialist in education may feel that this is in his bailiwick; also, the mathematician or operations researcher spe­ cializing in communication theory and information systems may prick up his ears. In fact, some of the knowledge to be discussed here is technological, and thus the engineer may properly be interested. When I tried out the title of this study on representatives of various disciplines, many were rather surprised that an economist would find himself qualified to undertake this kind of research. Of course, they did not really know what kind of research I was planning under that intriguing title.

Knowledge as a Datum in Economic Analysis Knowledge has always played a part in economic analysis, or at least certain kinds of knowledge have. There has always been the basic assumption that sellers and buyers have knowledge of the markets, that is, of their selling and buying opportunities. The theories of supply and demand, of competition and monopoly, of relative prices, interdependence, and all the rest, all have been based on the

35INTRODUCTION

4

assumption that sellers know the highest prices at which they can sell and buyers know the lowest prices at which they can buy. In ad­ dition, it has always been assumed that producers have knowledge of the technology of the time, that is, of their production opportuni­ ties. In other words, the assumption has been that they know the lowest cost at which they can produce. The usual supposition has been that all producers in an industry are familiar with the "state of the technical arts." This does not mean that economic theorists have regarded tech­ nological knowledge as unchanging. But to most economists and for most problems of economics the state of knowledge and its distribu­ tion in society are among the data assumed as given. There is noth­ ing wrong with this. When an economist analyzes the effects of new taxes, of changes in interest rates or wage rates, it would be unrea­ sonable for him not to assume a given state of technology. And, even when he analyzes problems of growth and development, he will often find it expedient to assume either a given state of the arts or a given rate of progress, whatever this may mean.

An increasing number of economists these days concern them­ selves with the prospective growth of the economy during the next twenty or thirty years. Needless to say, they cannot take the state of technical knowledge as given and constant. On the other hand, they do not want to burden their models with more stuff than is abso­ lutely necessary for their task and, therefore, they choose to assume a given rate of advance of productivity, to project the past rate of ad­ vance into the future. In other words, the progress of technical knowledge is made an exogenous variable, or a simple trend func­ tion, a function of time. Incidentally, the same practice prevails concerning other impor­ tant variables in growth economics—for example, population and labor force. There was a time when economists regarded the expla­ nation of population growth as their business. Later they got out of this job and assigned it to George—this time a specialist, the demog­ rapher. Only very exceptional economists today concern themselves with the economic determination of population changes and would include population as a dependent variable in their growth model. The choice between taking a variable as exogenous or making it an endogenous one, a variable determined by the system of functions, is a matter of relevance and convenience. No economist, for example, would refuse to recognize the explanation of capital formation as a part of his job. He constructs elaborate models in which investment functions and saving functions, together with several other equa­ tions, are supposed to serve this task. Yet, there are problems—for

36INTRODUCTION

5

example, projections of national-income figures into the future—for which a rate of accumulation will expediently be assumed as given, and the underlying functions be left aside.

Now, the growth of technical knowledge and the growth of pro­ ductivity that may result from it are certainly important factors in the analysis of economic growth and other economic problems. But with one very minor exception—namely, the theory of patent protec­ tion—the stock of knowledge and especially the state of technology have customarily been treated as exogenous variables or as trend functions in economic models. Yet we have implicitly recognized that the stock of knowledge can be increased by special efforts; that the allocation of resources to education and to research and de­ velopment is an important economic variable which can signifi­ cantly alter the rate of increase of knowledge, both basic and applied. In recent years economic statisticians have given a good deal of at­ tention to the appropriations made by society for the creation and communication of knowledge. The economics of education and the economics of research and development are new areas of specializa­ tion which have rapidly developed, partly with the generous aid of research foundations.

Knowledge as a Product, a Function of Resource Allocation The "promotion" of knowledge from the rank of an exogenous inde­ pendent variable to that of an endogenous variable dependent on in­ put, on the allocation of resources, is an important step. Not that this idea is a novel one. Adam Smith in 1776 wrote that "man educated at the expense of much labor and time ... may be compared to one of those expensive machines,"1 and the notion of the "capital concept applied to man"2 has never completely disappeared from the eco­ nomic treatises. It was especially emphasized by writers, such as Friedrich List, who gave much prominence to the development of the productive powers of man. In connection with several policy is­ sues, the differences between the private and social benefits from such investment in knowledge were discussed with great inten­ sity—for example, in the arguments for infant-industry protection. But never before our time was the interest of economic writers so closely concentrated upon the analysis of economic growth and de­ velopment, and thus it is not surprising that there is now such a burst of activity in studying the productivity of investment in knowledge.

1 Adam Smith, An Inquiiy into the Nature and Causes of the WeaJth of Nations

(London:George Routledge and Sons, 1903 [1st ed., 1776]), pp. 78-79.

2 Raymond J. Walsh, "Capital Concept Applied to Man," Quarterly Journal of Eco­

nomics, vol. 49 (1935), pp. 255ff.

37INTRODUCTION

6

The focus of these studies is upon education, basic research, and applied technical research and development, thus, upon the produc­ tion of such types of knowledge as may be regarded as investments in the sense that they will pay off in the future through increased productivity. A few economists aim their analytical weapons at a somewhat different target: market research. Recognizing that the as­ sumption of full knowledge of selling and buying opportunities cannot be maintained for all problems, and that increased effort in market research may lower the costs and raise the revenues of the firm, economists have started to analyze the marginal efficiency of investment in market research. All these kinds of knowledge have in common that they are instrumental in increasing the efficiency of the economy. There are, however, many other types of knowledge besides those designed to pay off in the future; there are, for example, types of knowledge that give immediate pleasure to the recipients, and soci­ ety is allocating ample resources to the dissemination of such knowledge. Although it would, of course, be possible to confine a study of the production and distribution of knowledge to types of knowledge that are expected to yield a future return in terms of increased productivity, such a limitation would not satisfy a tran­ scendent intellectual curiosity. Moreover, whether an investigator's interests be wide or narrow, he could not study "productive" knowledge without paying considerable attention to "unproduc­ tive" knowledge because ever so often they are joint products. What is taught at school, printed in books, magazines and newspapers, broadcast over the radio, or produced on television is knowledge of many sorts—and to study one is to analyze all.

An even further expansion of the scope of the study seems promis­ ing. As an economy develops and as society becomes more complex, efficient organization of production, trade, and government seems to require an increasing degree of division of labor between knowledge production and physical production. A quite remarkable increase in the division of labor between pure "brain work" and largely physi­ cal performance has occurred in all sectors of our economic and so­ cial organization. This increase can be observed in the growing role, measured in terms of manpower, of the government of most political bodies as well as of the management of business firms; it can also be observed in the ratios of "nonproductive" to "productive" labor in many industries. The so-called nonproductive workers are those who shuffle papers and give signals, who see to it that others "know" what to do. To include this sort of "knowledge production" may look strange to most readers at first blush but will become more

38INTRODUCTION

7

understandable and look more sensible at later stages of the discus­ sion. Thus, besides the researchers, designers, and planners, quite naturally, the executives, the secretaries, and all the intermediary transmitters of knowledge in the economy will eventually come into the focus of our analysis of the production and distribution of knowledge. If society devotes considerable amounts of its resources to any par­ ticular activity, economists will want to look into this allocation and get an idea of the magnitude of the activity, its major breakdown, and its relation to other activities.

TERMINOLOGICAL PROPOSALS

The economist undertaking this study will have to prepare himself for it by developing a conceptual framework for an analysis for which he does not find ready-made tools. He will have to use terms that have established meanings in other fields of discourse and may not find these meanings suitable for his task. The problems arising from these needs will be taken up for careful scrutiny later in this volume. At this point, however, we propose a time-saving termi­ nological agreement.

"Production and Distribution" So far in this introduction we have always referred to pairs of eco­ nomic activities, such as "production and distribution," "acquisi­ tion and transmission," "creation and communication" of knowl­ edge. We can save words and drop the twin phrase as soon as we realize that we may designate as "knowledge" anything that is known by somebody and as "production of knowledge" any activity by which someone learns of something he or she has not known be­ fore, even if others have. In this sense, disclosure, dissemination, transmission, and com­ munication become parts of a wider concept of "production of knowledge." Of course, we shall then have to distinguish a special kind of "socially new knowledge"—that which no one has had before—but since we shall have much more to say about the produc­ tion of old knowledge in new minds—"subjectively new knowl­ edge," if you like—the proposal will on balance save words.

Thus, if I tell you something that you have not known, or have only vaguely known, or have forgotten, I am producing knowledge, although I must have had this knowledge, and probably several others have too. In other words, "producing" knowledge will mean,

39INTRODUCTION

8

in this book, not only discovering, inventing, designing, and plan­ ning but also disseminating and communicating. This applies to how-to knowledge as well as to knowledge of something and knowl­ edge about something. To know what and to know that are neither less nor more important than to know how. (See below, Chapter 2.)

"Knowledge and Information" By the same token, I prefer that we get rid of the duplication "knowledge and information" when we refer to what people know or are informed about. One may, with good reasons, insist on distin­ guishing "information" from "knowledge" by having "information" refer to the act or process by which knowledge (or a signal, a mes­ sage) is transmitted. Even when the word is not used for the act of communicating but for the contents of the communication, one may want information to refer to the knowledge currently conveyed by that act in contrast to the knowledge previously accumulated in the knower's mind or records. This would be analogous to the econ­ omist's indispensable distinction between flows and stocks, where the flows may constitute current additions to the stocks. One may liken the flow of incoming knowledge to income that can be added to the existing stock of knowledge, capital.3

To others, however, the pair of words suggests different dicho­ tomies. By "information," for example, some mean to refer to dis­ connected events or facts and by "knowledge," they allude to an interrelated system (though others want to confer upon systematic or ordered knowledge the nobler title "science"). One author, for example, proposes to contrast "knowledge," or "contextual knowl­ edge," which "illuminates the basic causal structure of some field of operations," with "information," which "provides current data on the variables in that field."4 In the same vein, another author says that "Information . . . is essentially raw data, Knowledge . . . is inter­ preted data."5 The specialist in "information theory" uses the word, as he

3 "It is certainly tempting to think of knowledge as a capital stock of information,

knowledge being to information what capital is to income. ..." Kenneth E. Boulding1

"The Economics of Knowledge and the Knowledge of Economics," American Eco­

nomic Review, vol. 56, Papers and Proceedings (May 1966), p. 3.

4 The same author, however, decides later to treat both as "information," yet he con­

tinues to oscillate between talking about "bits of knowledge" and "bits of informa­

tion." Anthony Downs1An Economic Theory of Democracy (New York: Harper and

Row, 1957), pp. 81, 208, 215, 219.

5 Charles West Churchman, "Problem and Representation in Problem-Solving and

Inquiry," in M. Mesarovic, ed., Formal Models and Non-Numerical Problem-Solving

by Computers, Proceedings of Fourth Systems Symposium (Cleveland: Case Western

Reserve University, 1969).

40INTRODUCTION

9

frankly admits, in a "rather strange way," in "a special sense which ... must not be confused at all with meaning." To him, "information is a measure of your freedom of choice when you select a message. . . . Thus greater freedom of choice, greater uncertainty, and greater information all go hand in hand."6 This concept serves a significant purpose in an important field, but it is not what is commonly meant by "information." Perhaps the fact that the special use of the word is becoming increasingly current should make it more desirable to use, whenever possible, the word "knowledge" for the ordinary meaning of "information." Webster's Dictionary defines "information" as "knowledge communicated by others or obtained by personal study and investigation," or, alternatively, as "knowledge of a special event, situation, or the like." Hence, in these ordinary uses of the word, all information is knowledge. I shall, in certain contexts, give in to common usage and refer to particular kinds of knowledge as information, but I shall try to avoid the redundant phrase "knowl­ edge and information" when both are meant to signify contents. On the other hand, I shall not mind saying "knowledge and informa­ tion" when the first refers to the contents and the second to the process.

THE PROGRAM FOR THIS WORK

Perhaps more should be said about the desirability of my undertak­ ing: an economist investigating the production and distribution of knowledge. The production of knowledge is an economic activity, an industry, if you like. Economists have analyzed agriculture, mining, iron and steel production, the paper industry, transportation, retailing, the production of all sorts of goods and services, but they have neglected to analyze the production of knowledge. This is surprising because there are a good many reasons why an economic analysis of the pro­ duction of knowledge seems to be particularly interesting and prom­ ising of new insights. Some of the reasons refer to observed facts, others to probable relations to economically significant develop­ ments, still others to novel hypotheses that call for investigation.

Some of the Reasons for Our Curiosity (1) It is a fact that increasing shares of the nation's budget have been allocated to the production of knowledge.

6Warren Weaver, "The Mathematics of Information," in Automatic Control (New

York: Simon and Schuster, for The Scientific American, 1955), pp. 100, 104.

4110

INTRODUCTION

(2) It can also be shown that a large portion of the nation's expend­ itures on knowledge has been financed by government, so that much of the production of knowledge depends on governmental appropri­ ations. (3) One may strongly support the judgment that the production of some kinds of knowledge yields social benefits in excess of the pri­ vate benefits accruing to the recipients of that knowledge.

(4) It is probable that the production of certain kinds of knowledge is limited by inelasticities in the supply of qualified people, which raises questions of policy, especially concerning the allocation of public funds. (5) The facts that the production of knowledge of several types is paid for by others than the users of the knowledge and that these types of knowledge have no market prices raise questions of their valuation for national-income accounting as well as for welfare-eco­ nomic considerations. (6) The production of one type of knowledge—namely, tech­ nology—results in continuing changes in the conditions of produc­ tion of many goods and services. (7) One may advance the hypothesis that new technological knowledge tends to result in shifts of demand from physical labor to "brain workers." (8) There is evidence of a change in the composition of the labor force employed in the United States, in particular of an increase in the share of "knowledge-producing" labor in total employment.

(9) There is ground for suspicion that some branches of the pro­ duction of knowledge—formal education, in particular—are quite inefficient, although it is difficult to ascertain input-output ratios and to make valid comparisons, especially since the very wasteful­ ness is held to be productive of psychic incomes and social benefits.

(10) It has been suggested that some of the growth in the produc­ tion of knowledge may be an instance of "Parkinson's Law," which implies that administrators tend to create more work for more ad­ ministrators. (11) There is probably more validity in the hypothesis that the in­ crease in the ratio of knowledge-producing labor to physical labor is strongly associated with the increase in productivity and thus with the rate of economic growth, though one may suspect that only a small fraction of all currently produced knowledge is a cause of en­ hanced productivity, whereas a much larger part is the consequence of the increased incomes derived from gains in productivity.

These and a good many other points indicate some of the reasons why it may be said that an economic analysis of the production of 11

42INTRODUCTION

knowledge is not only justified but overdue. What I shall have to offer may be only prolegomena to the subject. And, to repeat, it will not be possible for me in this attempt to stay within the confines of economics. Indeed, I shall linger with particular pleasure in some outlying fields, and I trust that the representatives of these fields of learning will be hospitable to the ingressions of a friendly outsider. This kind of benevolence and indulgence may be needed especially for those parts of my work that lie in territories over which philoso­ phers, historians, sociologists, and educationists claim sovereignty. They might regard my incursions into their fields as not necessary for my scholarly objectives—and I would have no other defense than my unbounded intellectual curiosity. If I write a work on knowl­ edge, I simply cannot restrain myself and "stick to my last" as a pro­ fessional economist.

In Quest of Light or Fruit? The stated observations, suggestions, hypotheses, and problems are, I submit, sufficient reasons for being curious about the economics of knowledge production. Is it purely intellectual curiosity or is it an anticipation of pragmatic insights that motivates our inquiry? For those who accept the generalization advanced by Pigou, a great Brit­ ish economist, social studies are to be justified chiefly by the expec­ tation of an attractive pay-off: When a man sets out upon any course of inquiry, the object

of his search may be either light or fruit—either knowledge

for its own sake or knowledge for the sake of the good

things to which it leads. . . . there will, I think, be general

agreement that in the sciences of human society, be their

appeal as bearers of light ever so high, it is the promise of

fruit and not of light that chiefly merits our regard.7

I must confess that I am less mission-oriented than Pigou wanted social scientists to be. I would undertake my inquiry even if it prom­ ised nothing but light; but I believe that fruit can grow and ripen only where there is enough light, and that most inquiries that shed light on problems, societal or not, eventually prove useful to society. I fear, however, that a requirement to justify each research project in the social sciences by its "promise of fruit" can become a stultifying constraint. I do not insist, on the other hand, on keeping this inquiry "pure" and "basic." On the contrary, I shall unashamedly indulge in

'Arthur Cecil Pigou, The Economics of Welfare (London: Macmillan, 1920),

pp. 3,4.

43INTRODUCTION

12

value judgments and policy recommendations wherever I think that they are reasonable. Thus, I embark on this investigation primarily in a quest for light, but I shall gladly pluck every fruit that it may bear. Another utilitarian advocacy of the production and widest possi­ ble distribution of knowledge may be quoted here, though the prom­ ised fruit was intangible, in the realm of nonmaterial values. It stressed the importance of "the diffusion of knowledge among the people. No other sure foundation can be devised, for the preserva­ tion of freedom and happiness."8 In making this statement, Jefferson no doubt was thinking of the types of knowledge that may qualify for "nice" adjectives, such as intellectual, useful, truthful, broadening, deepening, uplifting, and similar terms of approbation. How strange that for most liberal thinkers—academics as well as statesmen— knowledge is almost always "good" and worthy of wide diffusion, although history is full of attempts by governors—political, moral, and religious leaders, and well-meaning parents—to discourage the spread of "dangerous" or "unwholesome" knowledge. There has been in the past, as there is at present, "forbidden knowledge," and production and distribution of particular kinds of knowledge is dis­ couraged by governmental proscription or public disapproval. Al­ though most respecters of human freedom oppose any and all re­ strictions on the dissemination of knowledge, many parents hope to postpone the acquisition of pornographic knowledge (and even the most innocent sex information) by their young children; most social workers wish that the knowledge of where to obtain harmful drugs were less widely diffused; and workers for the cause of internal and international peace want to prevent the spread of the knowledge of how to make bombs, both of the primitive Molotov type and of the highly developed nuclear type. Many high-spirited statements about the blessings of unlimited diffusion of laiowledge are sensible only if one is aware of the exceptions and exclusions which the speaker or writer would surely propose were he more cautious in his pro­ nouncements. What I shall have to say, in the next and in subsequent chapters, on various types of knowledge may make it clear that unspecified and unqualified pronouncements are rarely valid even on such mat­ ters as human knowledge, including "more knowledge about knowledge."

8 Thomas Jefferson, in a letter of August 13, 1786 to George Wythe, his most ad­

mired "mentor and friend," a cosigner of the Declaration of Independence. Reprinted

in The Writings of Thomas Jefferson (Washington: The Thomas Jefferson Memorial

Association, 1903), vol. 5, p. 396.

44INTRODUCTION

13

A Preview of the Eight Volumes At the end of "The Story of This Work"—which preceded this Introduction—I explained why a large expansion of my original 1962 book was not merely justified but well-nigh imperative. Expan­ sion of the scope was dictated by the extension of the statistical series by at least seventeen years (1959 to 1975), and possibly twenty years (to 1978); by changes in institutions (governmental, legal, technological) and in social priorities; and by the explosion of the literature. Beyond these imperatives, there was substantial expan­ sion imposed by my personal intellectual curiosity: I had been read­ ing with increasing fascination in the areas of philosophy and intel­ lectual history of knowledge. No one, I hope, will deny that more extensive discussions of issues in these areas are pertinent to the subject of my work. They account for expansions and additions in what will now be presented in Parts One and Two in Volume I, and for the development of entirely new themes in Volume II.

The new work is planned to take the form of a series of eight vol­ umes. The present outline envisages thirty-three parts, some short enough to share a volume with up to seven other parts, some long enough to claim the space of half a volume. The titles of some of the parts are still subject to change, as is also their sequence. The subti­ tles of the eight volumes, however, seem to be more nearly defini­ tive—though I shrink from making a firm commitment even on this score. It may turn out, as the writing proceeds, that an oversupply of material for one volume forces me or the editors of the press to re­ arrange the contents and to retitle the volumes accordingly. The present plan provides for the following sequence of volumes:

Volume I: Knowledge and Knowledge Production

Volume II: The Branches of Learning, Information

Sciences, and Human Capital Volume III: Education Volume IV: Research and New Knowledge, Cognitive

and Artistic Volume V: MediaofCommunication Volume VI: Information Services and Information

Machines Volume VII: Knowledge Production: Its Size and Growth

Volume VIII: Knowledge Occupations and the Knowledge­

able Society The proposed sequence is the result of several rearrangements; it is in fact the seventh version of my draft outline. Let me explain some of the considerations and reconsiderations that have led me to

45INTRODUCTION

14

the present outline. I had no difficulties finding the "best" solution for Volume I; I shall later explain it in detail. Volume Π, however, still gives me headaches. My present plans for it envisage five parts: "The Branches of Learning," chiefly an intellectual history of the classification of disciplines; "The Departments of Erudition," mainly an institutional history of the classification systems used in academies of sciences, universities, and libraries; "The Information Sciences," largely a descriptive and methodological survey of re­ cently developed, and still developing, disciplines dealing with in­ formation and communication; "The Economics of Knowledge and Information," for the most part a survey of specialties of economics, but concerned with such problems as incomplete and uncertain knowledge, the demand for better information and its cost, incen­ tives for the search for new knowledge, and many other topics that have occupied increasing space in the economic journals; and fi­ nally, "Knowledge as Human Capital," an old but recently revital­ ized theme of economic analysis with side-glances to educational, psychological, and sociological issues. To devote a part in Volume II to information science has been an afterthought, after most of the other parts of Volume II had been completed or drafted. It occurred to me that a comprehensive work on knowledge production could not reasonably disregard the exist­ ence and rapid growth of several relatively young disciplines that concern themselves with systems of information and communica­ tion. Attempts to integrate or unify them under the name "informa­ tion science" have not been successful, partly because some of the disciplines are jealously guarding their autonomy. Researchers in li­ brary science and information systems analysis seem to be prepared to accept a merger under the broader name "information science." This cannot be said, however, of the specialists in communication theory and, still less, of those in computer science and engineering. Cyberneticists and students of human communication, artificial in­ telligence, and living systems are still debating whether they repre­ sent constituent fields or only cognate fields of information science. Certain aspects of psychology on the one hand, and of semiotics, on the other, are also closely concerned with processes of transmission and reception of information. The interrelationships among the mentioned area of inquiry, and perhaps a few that I have omitted, should be explored. I propose to invite statements from several rep­ resentatives of these fields or subfields, each setting forth his or her views on the lines that connect them systematically or just tangentially with one another. My task then will be to analyze the congru­ ences, similarities, differences, and contradictions among the so-

46INTRODUCTION

15

licited papers, and to report the findings in Part Three of Volume II under the title "Information Sciences: Its Constituent, Complemen­ tary, and Cognate Disciplines." Volume III will be entirely devoted to Education. The present out­ line provides for eight parts. I may have to add chapters or rearrange the sequence of the thirty-eight chapters now planned, but I foresee no serious complications in the general organization of the contents.

Volume IV has been a great problem. Its proposed title, "Research and New Knowledge, Cognitive and Artistic," may not be suffi­ ciently explicit to convey that the volume will combine two major subjects of rather different nature: Research and Development, and Artistic Creation and Communication. I have long pondered the question of the most appropriate sequence. At one time I considered having R and D followed by my discussion of libraries; then I thought that Print Media of Communication, with an emphasis on books and journals, would make a better sequel to R and D and a bet­ ter antecedent to a discussion of libraries. I concluded, however, that the print media and the electronic media of communication ought not to be separated into different volumes, chiefly because they have several problems in common—for example, copyright protection and competition for, and income from, advertising. My decision to couple in the fourth volume R and D with Artistic Creation and Communication raises a few awkward problems because of the fre­ quent communication of fine arts through print media and of per­ forming arts through electronic media. On the other hand, the link­ ing of chapters on research in natural and social sciences and in the humanities with discussions of artistic creation will allow me to re­ flect on the issue of "the two cultures," the alleged chasm between mathematical-minded and humanistic-historical-minded scholars. In announcing this plan, I do not want to commit myself to its execu­ tion. When I eventually put things together, I may find a different sequence preferable in some significant respects.9

9 To indicate some of my present misgivings I may point to some problems of the

demarcation between creation and communication of knowledge, scientific and artis­

tic. The generation of new scientific knowledge in basic or applied research can be

separated from its subsequent communication through discussions with fellow re­

searchers, papers delivered at conferences or conventions, letters and articles in jour­

nals, or monographs and other books. In the fine arts, the demarcation line is still

sharp enough: in painting and sculpture the creation by the artist is quite separate

from the communication of his work through its exhibition in the art gallery or repro­

duction in print. In the performing arts, however, creation and communication in art

may be inseparably linked. In theater arts we have to distinguish the creative work of

the playwright, the director, the stage designer, and the costume designer from their

intercommunications in cooperative planning and rehearsing and from the work of

47INTRODUCTION

16

Volume V, "Media of Communication," will, if the present plan remains intact, treat of the Print Media of Communication, the Elec­ tronic Media of Communication, Problems of Copyright, Advertis­ ing and Public Relations, Conventions and Conferences, and Media of Addressed Communication (by which I mean telecommunica­ tions and postal services). Volume VI, "Information Services and Information Machines," is to contain parts on Libraries, Specialized Information Services, Management as Information System and Communication Process, Government as a Knowledge Industry, and Information Machines.

Volume VII, titled "Knowledge Production: Its Size and Growth," will be the summary volume with the findings obtained by the in­ dustry approach followed in Volumes III to VI. The two main parts will be on Total Production of Knowledge and the National Product, and Differences in Growth Rates in the Knowledge Industries.

The eighth and last volume, carrying the title "Knowledge Occu­ pations and the Knowledgeable Society," will present new findings from the occupations approach towards estimating the relative share and growth of knowledge production. It will carry out an idea first proposed in the preface to my 1962 book, where I had said:

Producers of knowledge may, however, work on very

different levels: they may be transporters, transformers,

processors, interpreters, or analyzers of messages as well as

the actor; but some element of artistic creation may be present not only in the process

of rehearsing the play but actually in each performance. In the production of motion

pictures, creative and communicative activities are conjoined in the work of the

scriptwriter, the editor, the rewrite man, the director, the cameraman and the actors,

but their joint creation and temporary intercommunication is quite separate from the

ultimate process of communication through the showing of the film in cinemas or on

television. In symphonic music we note the "division of artistic labor" among com­

poser, conductor, and instrumentalists in the different processes of composing, re­

hearsing, and performing. If it is the performance to which we assign the function of

communication, it undoubtedly includes also more than a little artistic creation. In

the case of dance, say, classical ballet, we find a combination of the problems cited for

the theater arts and for symphonic music, made even more complex by the creative

work of the choreographer. The point is that each and every performance is both artis­

tic creation and communication.

If I may add another sentence in order to point to the blurred lines of demarcation

between generation and communication of knowledge, on the one hand, and between

scientific and artistic creation, on the other, let me remind the reader of the fact that

the scientist and scholar becomes an artist in communicating his findings to the

public—as lucid expositor, brilliant orator, writer of elegant prose—and that the pro­

duction manager in book publishing may be an artistic creator in designing the book

that is to communicate the scholar's findings.

48INTRODUCTION

17

original creators. What I have failed to do in this volume,

and would do if I had time for it, is to attempt a statistical

separation of knowledge-producing activity by these differ­

ent levels. Perhaps I shall undertake this task as a sequel to

the present book; or perhaps someone else will want to do

it, especially with reference to the changes in the occupa­

tional structure, discussed in the last chapter of this vol­

ume. I have made a preliminary study of changes in the structure of the knowledge-producing labor force in the United States from 1940 to 1970 and may be able to bring it forward to 1980. If the data permit, the proposed disaggregation should be not only in numbers of per­ sons in the active labor force, but also in incomes earned and in years of schooling completed. I do not expect any spectacular results from these studies; on the contrary, I fear that they will merely disconfirm some hypotheses long entertained by many of us. The last part of the work will be called "A Knowledgeable Society: Sociolog­ ical and Political Aspects." There I plan to discuss issues raised by writers on political science and sociology when they were con­ fronted with my discoveries: the large size and fast growth of knowl­ edge production in the United States. A structural development of these dimensions is, according to their argument, liable to alter the social and political makeup of our society.

The present outline of the thirty-three parts planned for the entire work provides for more than 150 chapters. This outline, however, is the result of six revisions, and I see no good reason for assuming that it will not be revised further as the writing proceeds. I therefore find it wiser to withhold the detailed table of contents of the seven subse­ quent volumes; I neither want to promise the reader that I shall de­ liver all the now envisaged chapters with exactly the titles that look good to me at the present moment, nor do I want to feel obliged to stick to an announced plan if I should prefer to change it.

A Preview of Volume I The present volume can be previewed in detail without fear or chance of change; it is all down, black on white. It offers, besides the preliminary materials and this Introduction, Part One, "Types of Knowledge," Part Two, "Qualities of Knowledge," and Part Three, "Knowledge as a Product." (Readers interested in a comparison with my 1962 book may note that these three parts treat in depth what I tried to discuss briefly—in only forty-seven pages—in Chapters n and in of the old book.)

49INTRODUCTION

18

Chapter 2, on The Known and the Knowing, begins as a simple exercise in semantics but soon transgresses into the domains of more complex language analysis and theory of knowledge. I am probably vulnerable to the philosophers' charge that I lack the credentials for a serious study of the problems tackled. Chapter 3, on Mundane, Scientific, Humanistic, Artistic, and Other Classes of Knowledge, may expose me to a charge that, as an immigrant from continental Europe, I show a nostalgia for traditional meanings of science and humanistic scholarship which have long been abandoned by English-speaking scientists and humanists. I expect less resistance to my discussions of Knowledge Without Words. Chapter 4, on Al­ ternative Classifications of Knowledge, retains most of what I pro­ posed in my 1962 book. Chapter 5, on Truth, Beauty, and Goodness as qualities of knowl­ edge, is again an incursion into the domain of philosophy. In view of the strong disagreements among different schools of philosophy, I cannot hope for general approbation of my discussion, but neither need I fear general rejection. Chapter 6, on Other Standards of Qual­ ity, though containing plenty of controversial issues, particularly regarding pornography and other forbidden knowledge dissemina­ tion, may be acceptable to a majority of readers. Chapter 7, on No­ tions of Negative Knowledge, is a relatively brief essay on thirteen possible meanings of negative knowledge; it comes to the conclu­ sion that we had better avoid the equivocal term.

In the seven chapters of Part Three, I am back in my home territory as a professional economist. Some of these chapters are useful prep­ aration for the analyses in Volumes III to VIII. Chapter 9, on Stocks and Flows of Knowledge, and Chapter 10, on The Economic Cost of Knowledge, may be helpful to noneconomists as well as economists. Chapter 11, on Transmission and Reception, is rather exceptional in that it retains, without alteration, several pages from my 1962 book. Chapter 12, on Consumption, Investment, Intermediate Product, makes distinctions which are essential for the entire study of knowl­ edge production as an economic activity. Chapter 13, on Uses, Value, and Benefits of Knowledge, was written chiefly for the en­ lightenment of noneconomists who, probably by exposure to un­ sound economic analysis, have become snared in serious fallacies. Chapter 14, on Knowledge Industries and Knowledge Occupations, explains the alternative approaches towards estimating the relative size and growth of knowledge production: the occupations approach will be used only in Volume VIII, whereas the industry approach will be pursued in Volumes ΙΠ to VII; the difference between the two

50INTRODUCTION

19

techniques of estimation has to be understood if the findings are to make much sense. The explosion of the literature occurred both in the general area of information science and in several special fields of communication. An entire part of this work (Volume II, Part Four) will be devoted to the survey of the literature; in addition, many references to individ­ ual publications will be made in the discussions of various substan­ tive issues in the parts on education, research and development, mass media of communication, and all the rest. The number of refer­ ences to books and articles will probably be ten times that of my ear­ lier work, not because in 1962 I was oblivious to the literature, but because most of the literature has come into existence since then.

Some readers of the first book have been impressed chiefly by the estimates of the total of knowledge production—its share in the na­ tional product and its rate of growth relative to the production of goods and services not related to knowledge production—whereas many others have been more interested in the composition of the total and in the changes of the composition over time. Has the cost of education increased its share in the national product? How have the proportions between primary, secondary, and tertiary education been changed over the years? How have research and de­ velopment fared, and how have the relative allocations to basic re­ search, applied R and D, humanistic studies, and the arts been al­ tered? What has happened to book production, to scholarly journals, general-interest magazines, specialized newsletters, local newspa­ pers? How have the electronic mass media—radio, television— developed in recent years? Has the role of advertising in all mass media been maintained or changed? These are only a few of an enormous array of questions to be answered in this new work.

It is an incidental benefit of the delay in the publication of this work that it gives me an opportunity to compare the techniques used by Porat with my own. In the nine volumes produced by the U.S. Department of Commerce, he presented data for a larger number of knowledge industries than I had in my tabulations for 1958, partly because, for 1967, statistical information was available that did not exist nine years earlier, but also because Porat included among the "quasi-information industries" in his "secondary sector" some in­ dustries to which I had not given this status and which I still prefer to exclude. In a sense, Porat's statistics constitute a partial merger of my two approaches, giving some knowledge occupations the status of quasi industries. It will be interesting to ascertain the magnitude of the resulting discrepancies.

51INTRODUCTION

20

The research for the new work continues while these lines are being written, and it will continue for several years, to supply the material for use in later volumes of the work. The research is carried out with a staff of varying size—between five and fifteen associates and assistants—under grants from various foundations and agen­ cies: the National Science Foundation (two different divisions sponsoring research on different aspects of the study), the Ford Foundation, the Earhart Foundation, the Sloan Foundation, and the National Institute of Education.

Scope of the Expanding Work Statistical curiosity, comparisons of relative shares, and fascination with comparative growth rates have not been the only reasons be­ hind the demand for an expanded and updated edition of my work. At least three developments since 1958, besides the statistical re­ cords, have called for attention: changes in several knowledgeindustry sectors (new kinds of information services, new types of in­ formation machines, new laws and regulations, new social and political concerns), changes in the socio-economic climate (expan­ sion of the public sector, stronger egalitarian pressures, more drastic youth unemployment, acceleration of price inflation), and a verita­ ble explosion of the literature on information. This literature has to be surveyed and the implications of the economic, social, and in­ stitutional changes have to be examined. All these and hundreds of similar questions can be answered only on the basis of statistical estimates, and to produce these estimates is one of my assignments. But it would be a grave misunderstanding if my undertaking were regarded as just a statistical inquiry. Although quantitative analyses are indispensable for my work, my own incli­ nation is to emphasize its qualitative aspects. Every branch of every knowledge industry has its economic, political, and social problems. To present and examine these problems is my ultimate concern, al­ though there is a risk involved in such a broad interest: it implies transgressions from so-called positive and "objective" statistical data into the realms of theoretical speculation and "subjective" value judgments. That such transgressions add to the social signifi­ cance of my work, rather than detract from it, is my sincere hope.

Two CHARGES AND APOLOGIES

In discussions of my plans for this work, two charges have been leveled against its design: excessive expansionism—too many un-

52INTRODUCTION

21

necessary excursions into extraneous domains—and vulgar mate­ rialism—putting money values on things where only moral and cul­ tural values ought to count. I think I should answer these charges.

Going Too FarAfield I may be forgiven for trying to answer by raising a question. Does a work which, beginning from its first paragraph, dedicates itself to an interdisciplinary and transdisciplinary approach need an apology for its meandering through several fields of inquiry? I intended this question to be purely rhetorical, to be answered with a convinced and convincing "of course not." Yet, a good many specialists in var­ ious fields have asked me why I had to go into this or that area, why it was necessary for a work "essentially" interested in historical statistics pertaining to the changing structure of the economy to take up problems of language philosophy, epistemology, intellectual history, political philosophy, ethics, aesthetics, and what not. Ad­ mittedly, I did not have to and it is not necessary. The admirable nine-volume work on The Information Economy by Marc Porat is suf­ ficient proof that one may confine oneself to economic statistics. However, if I do not want to stay within such limits, do I—because my training was in economics—need passport and visas to enter fields usually cultivated only by specialists duly certified by aca­ demic authorities? Perhaps those who question my interdisciplinary peregrinations do not mean to deny me free entry into other ter­ ritories but merely doubt the wisdom of extending an economic in­ vestigation of information services and other knowledge-producing activities into a work of encyclopaedic format or into a work on "Ev­ erything you always wanted to know about knowledge, and even more." Thus it seems that I do have to say a few more words about the wide scope of this work. The work of which this is the first volume does not purport to be a treatise on the economics of knowledge and information. One of its thirty-three parts is, in fact, to deal with this relatively new specialty of economic science (Part Four, Volume II); but there it will be shown that my work deals with only a fraction of the topics included in that specialty. I have deliberately chosen to call my work Knowl­ edge.· Its Creation, Distribution, and Economic Significance, because I wanted to convey to the reader that the discussion of "economic significance" is only a part of my objective. Thus, although the scope of my concern with knowledge is much wider than a discussion of its economic significance, it is much narrower than that of the various problems now treated under the heading "economics of informa­ tion." This explains why economists may accuse me of doing too lit-

53INTRODUCTION

22

tie of what they regard as important with regard to knowledge and information, whereas noneconomists may fault me for doing too much of what they deem irrelevant for my (supposed) purposes.

Parochialism in academic disciplines may not have existed in ear­ lier centuries, but nowadays it characterizes many representatives of various university departments. When one of my professorial col­ leagues from a natural-science department learned of the title of my work, he had no doubt that I was writing about "science" in the nar­ rowest sense—the physical sciences. A colleague from the eco­ nomics department assumed that I was writing about the effects of imperfect and uncertain knowledge on markets with various degrees of competition, and on the demand for information on the part of suppliers or users of goods and services. Professors in graduate schools of business expected me to write about management science and information systems. A professor of electrical engineering was sure I was dealing chiefly with communication theory and computer science. My friends in the library thought that I was working on li­ brary science and perhaps information science. The philosophers were less parochial, but some of them took it for granted that I would confine myself to "true" knowledge, since they had proclaimed that one can know only what was, subjectively as well as objectively, true. These are only a few of my experiences of scholarly expecta­ tions on the part of my academic colleagues, experiences which convinced me that I had to say why all these conceptions of knowl­ edge were far too narrow for my purposes.

Take the case of the philosopher who wants to reserve the word "knowledge" for propositions with absolute truth value or almost perfect probability value. Propositional knowledge—"knowing that this is so"—is only a small part of the knowledge disseminated in schools at all levels. At lower levels, teaching to "know how to do," especially the basic skills, is the chief objective of the educational system and absorbs a substantial portion of the nation's expendi­ tures for dissemination of knowledge. Knowing how to read and to write has little to do with knowing that something is true. On the other hand, educational theorists and psychologists have in recent years produced very interesting findings about teaching and learn­ ing, both know-how and know-that. If these findings prove accept­ able in many situations and for many people, they may lead to the adoption of new teaching techniques. I mention this only because it explains why learning theory has to be included in my agenda for Volume III. The charge of expansionism may also be interpreted as a charge of imperialism. As empires expand, annexing new territories and ex-

54INTRODUCTION

23

tending their political and economic influence over foreign lands, they become "imperialist" powers. Economists have been accused of imperialist propensities as they expand into domains of other disci­ plines, not only to look, see, and learn, but also to advise, influence, and take over. This is not my design. I am not trying, for example, to tell philosophers what they ought to mean by knowing and knowl­ edge. I am trying, instead, to reconcile what some of them have been saying with what I regard as helpful when I talk about creating and disseminating knowledge and about the economic significance of such activities. I may add that economists who read the chapters in question may suffer no harm if they become acquainted with the problems which philosophers find pertinent when they ponder the ways of knowing. None of this explains why I deal in Volume II with the history of ideas about the branches of learning. The answer is simply that it fascinates me, and I think that others may be interested too. Moreover, this intellectual history is closely connected with the in­ stitutional history of higher learning—academies, libraries, and universities—and can explain some of the systems of classification and departmentalization at present. Useless knowledge? Perhaps. But knowing for fun is a respectable human activity; and having fun need not be judged useless.

Valuing the Invaluable Having tried, successfully or not, to defend myself against the charge of intellectual immodesty and academic expansionism, I should now attempt to clear myself of the accusation of crass mate­ rialism, a charge wholehearted noneconomists are wont to level at those who put money valuations on such intrinsically valuable, or invaluable, things as knowledge. By devoting many chapters in this work to assess the economic significance of knowledge-producing activities, I openly admit my endeavor to put dollar tags on such things as education, research, and art. To do so is sometimes regarded as an attempt to confuse, confound, or lump economic values with cultural values, which many of my friends in academe see as a serious error, if not a heresy, a sacrilege. Using economic calculation in valuing cultural pur­ suits? Vulgar commercialism, insensitive grossness!

This charge is based on a misunderstanding. To find out how much, in terms of dollars or as a fraction of the gross national prod­ uct, the nation spends on education, research, art, advertising, and so forth, neither involves a normative judgment—for example, that the relative allocation of resources to various types of education, re-

55INTRODUCTION

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search, art, and advertising is "just right," or that it reflects this or that bias—nor does it presuppose that the dollar amounts spent on various knowledge-producing activities indicate, let alone measure, the values of the benefits they bestow upon society. There is nothing that demeans the fine arts if we record how much, or how little, was spent for any particular cultural activity in 1978 or any other year. And, if we record the amounts of public and private expenditures for basic research in a certain year or over a longer period, this is not to deny that the eventual benefits from the investment may be worth a multiple of the outlays. Some sensitive critics take offence at the very thought of having dollar values or dollar costs attached to various cultural activities which they deem intrinsically valuable. In the discussions on the productivity of education, for example, philosophers, psychologists, and sociologists have been irritated with attempts to calculate rates of return to private and social investments in schooling. They reject benefit-and-cost analyses that disregard nonassessable benefits and may therefore give misleading cues for public policy. In actual fact, those who decide on the appropriations of public funds do not, as a rule, disregard nonpecuniary benefits when they consider whether additional millions or billions of dollars should be appropriated to education, research, public health, transportation, environmental programs, social security, national defense, aid to agriculture or sugar refining, and so forth. One may take exception to the implied valuations of the alternative nonpecuniaTy benefits expected from the competing objectives; one may question the system of prefer­ ences revealed by choices made by elected representatives of the people, but one cannot reasonably claim that they are guided only by calculations based on pecuniary returns. None of these considerations, however, could possibly support a position of know-nothingism. No matter whether we like or dislike the way our public and private decision-makers have decided to spend the funds at their disposal, it is interesting and may even be helpful to know how much is being spent for what: the charge that a study of the recorded or estimated money values constitutes vulgar materialism or insensitiveness to moral and cultural values is un­ founded.