Notebooks

## Fritz Machlup, the Knowledge Industry,'' and Alvin Toffler

28 Feb 1996 17:14

Austrian-American economist, probably best known for The Production and Distribution of Knowledge in the United States (1962). Using an extremely generous definition of the knowledge industry,'' whereby it includes the production and distribution of stationary and typewriters (to say nothing of advertising), he estimated that knowledge production in 1958 was almost 29 per cent of adjusted GNP.'' (p. 362. The adjustment was entirely technical and need not concern us.) Lo: the information economy was born.

The sequel, The Knowledge Industry in the United States, 1960--1980, was a book he was working on at the time of his death, and was completed and published by his disciples. As far as was humanly possible, they used exactly the same definitions and massaged the data in exactly the same way.

Chapter Three is very interesting, and I call your attention to table III-2 (p. 19) and most especially Table III-6 (p. 24), which I have taken the liberty of summarizing.

Year	Knowledge Industry as % of GNP
Current Dollars		Constant (1972) Dollars
1958	28.6			34.5
1963	31.0			34.7
1967	33.3			36.1
1972	33.9			33.9
1977	34.2			34.7
1980	34.3			36.5

The average nominal rate of growth is just over 0.8% per annum. As they say, the numbers in the constant-dollar series are to be taken with several grains of salt, but they may also be taken as the best estimate available'' (p. 24).

Early on, the authors of The Knowledge Industry remark that compared to some of the extravagant predictions that began to appear after the publication of The Production and Distribution of Knowledge in the United States, this represents an extremely modest rate of growth relative to the average rate of growth of other components of total GNP.'' (p. 3). Among those who made the extravagant predictions was Alvin Toffler (or, as it now appears, Alvin and Heidi Toffler). Since The Third Wave (1980), Toffler has been citing Machlup's 1962 book to argue that nothing less than the very economic foundations of civilization are shifting, an event matched in importance only by the invention of agriculture and industry (the first and second waves, respectively). Machlup is still being cited in Powershift (1990), but readers of that book would have no idea The Knowledge Industry existed, much less that it shows no essential change over the decades in which, if Toffler is correct, the Third Wave has become a tsunami. Such is the quality of the thought regarded as gospel by thousands of leaders in government and business, including Prime Minister Gingrich.

See:
• Fritz Machlup, The Production and Distribution of Knowledge in the United States (Princeton UP, 1962)
• Michael Rogers Rubin and Mary Taylor Huber with Elizabeth Lloyd Taylor, The Knowledge Industry in the United States, 1960--1980 (Princeton UP, 1986)
• Alvin Toffler, The Third Wave (NY: Bantam, 1980)
• Alvin and Heidi Toffler, Powershift (NY: Bantam, 1990)
To save fruitless questions, of which there have already been a great number: I do not have an address, phone-number or e-mail address for Toffler (and don't particularly want to learn it, either). I imagine writing to him care of his publisher (the usual procedure; Bantam Books, 666 Fifth Avenue, New York, New York 10103 USA) would work. Sorry.

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