Education: The Knowledge Industry

Economists take infinite pains in diagnosing the auto, oil or steel industry, but almost no one tackles the industry that makes 'the most important product of all. It is knowledge, defined as information, old or new, which is produced and disseminated by all kinds of agents—Mom, TV, Harvard, Madison Avenue or the Roman Catholic Church. Can anyone judge their economic efficiency, or even the cash value of their services?

The job would give most economists the willies, but it fascinates Fritz Mach-lup (pronounced mock-loop), holder of Princeton's Walker professorship of economics and international...