Machlup’s two-sector knowledge framework shaped how OECD still measures the economy

Evidence

While his work on patents was influential, Machlup’s place alongside Hayek as the leading thinker on the knowledge question in neoliberal circles was cemented, above all, with his 1962 book on The Production and Distribution of Knowledge in the United States, where he popularized the terms “production of knowledge,” “the knowledge economy,” and “the knowledge industry” and introduced a means of quantifying knowledge that is used by the OECD up until the present. Machlup’s framework reimagined the economy as a whole, attempting to displace the idea of a three-sector economy—of raw materials, manufacturing, and services—developed in the 1930s, for one with only two sectors: knowledge-producing and non-knowledge producing. In the process he came to the startling conclusion that 29 percent of the US GNP sat in the knowledge industry. Machlup was a pioneer of the epistemic shift, which would follow structural change, from a focus in the US on manufacturing objects to manufacturing—and collecting rent on—ideas. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 185

Categorization

• XREF: Connects to the broader project of fracturing the neoliberal caricature — Machlup’s knowledge-economy framework is a specific intellectual contribution that predates and complicates later ‘knowledge economy’ discourse on the left. — connects to: Machlup invented the two-sector knowledge economy concept now used by the OECD — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 185; Machlup’s knowledge-economy model replaced labor value with information exchange — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 189
• DEFINE: Defines Machlup’s two-sector knowledge/non-knowledge economy framework and the terms knowledge economy and knowledge industry.