Essay 58: Machlup and Knowledge-Watching

Fritz Machlup is an underappreciated emigre economist from Vienna. His 1962 book, The Production and Distribution of Knowledge in the United States (Princeton University Press, 1962), is a “bible” of knowledge-watching and the zones where knowledge meets information, where Machlup was very prescient.

Fritz Machlup was an Austrian-American economist who was president of the International Economic Association from 1971–1974.  He was one of the first economists to examine knowledge as an economic resource, and is credited with popularizing the concept of the information/knowledge society.

Born: December 15, 1902, Wiener Neustadt, Austria
Died: January 30, 1983, Princeton, NJ

Machlup distinguishes five types of knowledge:

  1. Practical knowledge
  2. Intellectual knowledge
  3. Small-talk and pastime knowledge
  4. Spiritual knowledge
  5. Unwanted knowledge

These five kinds of knowledge are discussed and analyzed in Machlup’s The Production and Distribution of Knowledge in the United States starting on page 21 (and are discussed in Daniel Bell’s The Coming of Post Industrial Society, 1976, Basic Books, page 175).

The more comfortably one can link types 1, 2, and 4 in the list above, the more “together” one’s understanding might become.  One does not have to be “dismissive” of Type 3.

Pleasant diversions are a a part of life and have their honorable place. One reason (to give a simple example) we’re drawn to poets like Wallace Stevens is that they seem to “sit comfortably” in their various (knowledge) roles: insurance salesman, poet, thinker and don’t “line up” or “array” these types of knowledge in a conflictual way but seem to “smile down” on all of them finding beauty everywhere.

Workaday knowledge might not have to “fight with” other kinds of knowledge. Insurance, say, is a form of risk-management and risk is essential to life and economics, as we have seen elsewhere.  Economics looks at cost-benefitrisk-uncertainty all together when it goes beyond the narrow confines of academe to become a fuller quest.  Cost-benefit analysis by itself is too restrictive.  Start with Machlup as a highly intelligent “backdoor” into these domains of knowledge, information, learning, social contexts.  This would help give you a handy additional “flashlight” on schooling in society including universities and campuses.

Essay 52: Economics Reconsidered to Include Uncertainty

Standard definitions for economics say that it is about “cost-benefit” thinking. Everything costs time or money or effort or lost opportunities but offers different levels of expected benefit.  Economics, in this view, matches decisions to this “menu” of items and prices.

Actually, that is not a complete description at all because economics is about cost-benefitrisk-uncertainty thinking and that implies one needs to get into the dimensions of risk and uncertainty. 

A real decision involves more than costs and benefits but implies all kinds of “how can I be sure?” questions which means risk and uncertainty considerations

World-watching modified in this way is explored at (Kellogg School of Management, Northwestern University)

This implies the need for new indicators such as:

Call for papers:  “Uncertainty and Economic Activity:  Global Perspectives” [PDF]

The extraordinary rise in trade policy uncertainty [archived PDF].

Policy News and Stock Market Volatility [PDF].

They say that practitioners of a field are always like general “fighting the last war” not this one, like the French generals in 1940 who were mentally in 1914. 

One must augment all economics textbook talk in this direction of risk-and-uncertainty without which all analyses are like backward-looking “stills” as opposed to forward-looking “moving pictures.”  All standard textbooks are uninformative on these issues.