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 finance. A onetime Austrian businessman (in cardboard). Economist Machlup, 60, came to the U.S. in 1933, taught for years at Johns Hopkins, and is now president of the American Association of University Professors.

The Price of Mother. Last week Machlup published a massive study titled The Production and Distribution of Knowledge in the United States (Princeton University Press; $7.50). In words as witty as his statistics are weighty, Machlup argues that knowledge spreading is indeed a definable industry, which in 1958 produced goods and services worth $136.4 billion. Machlup breaks it down into five subindustries with 52 branches. He includes not only publishing, broadcasting, research and development, but even religion, a $2.5 billion item for everything from clergy to construction. Machlup even puts a price tag on mothers of preschoolers : the pay they give up by staying home, or roughly $4.4 billion. All forms of education (including mothers) cost $60 billion, or almost 13% of the 1958 gross national product. The total knowledge industry, says Machlup. accounted for 29% of the G.N.P.—and is now growing about 2½ times faster than the industries that produce all other kinds of goods and services.

As Machlup sees it, all this contributes to a growing U.S. labor crisis. First, machinery slashed the need for muscle laborers; then automation began displacing mental laborers such as file clerks. As a result, the U.S. confronts "creeping unemployment" among the least educated, while crying for ever brainier people to run computers and other "thinking machines." The urgent need is "a drastic improvement of school programs that raises the lazy and unambitious to higher levels of accomplishment."

The Cost of More. Many educators aim to do just that by raising the school-leaving age to produce more youngsters with more schooling. In provocative contrast, Machlup suggests just the opposite: lowering the age. The chief effect of raising it, he says, "is to spread the same academic curriculum over a longer period." As a result, it takes more time to learn the same thing, and teaching may get worse. The dull hate learning more than ever, and the bright suffer because standards fall. In the end, this simply costs more money, requires more teachers, and produces fewer truly educated people. Machlup's idea is to compress the entire span of education so that students finish high school by the age of 15, and college by 18. Not only would this save $12 billion a year, he says, but it would sharply improve U.S. education.