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Fritz Machlup
and the infosphere
This page deals with economist Fritz Machlup.
It covers -
Machlup
is one of the fathers of thinking about what has come
to be labelled the information society and the information
economy.
Although he had a distinguished career as an academic
economist, writing on subjects as diverse as international
currency reform and managerialism, for us he is interesting
for pioneering efforts to map the shape and impact of
information production in the 'new economy'.
Researchers such as Lyman & Varian, for example, build
on his studies.
life
Fritz Machlup was born in Wiener Neustadt (Austria)
on 15 December 1902, the son of a minor industrialist.
After studying at the University of Vienna under Ludwig
von Mises his dissertation on the gold standard - Die
Goldkernwahrung - was published in 1925.
By that time he had expanded his father's holdings, becoming
a partner in cardboard-manufacturing companies in Austria
and Hungary. That success contrasted with the business
failure of his contemporary Joseph Schumpeter.
He became a member of the Austrian cardboard cartel in
1927, retaining his academic links by serving as treasurer
(later secretary) of the Austrian Economic Society and
participating in von Mises's Geistkreis seminars.
He wrote widely on economic liberalisation, on war reparations
payments, and on the stock market and capital formation.
In 1933 Machlup left Austria, travelling to Columbia,
Harvard, Chicago, and Stanford as a Rockerfeller Fellow.
He held a professorship at the University of Buffalo from
1935 to 1947 (home to Ronald Coase),
with visiting positions at Cornell, Northwestern, Berkeley,
Michigan, Harvard and Stanford.
During the war he served as Special Consultant to the
Post War Labor Problems Division of the federal Department
of Labor and in the Office of Alien Property. As a monetary
supply and foreign exchange theorist he published extensively,
gaining recognition as a critic of John Maynard Keynes.
Machlup became professor of political economy at Johns
Hopkins University in 1947, writing influential books
on pricing and industrial organization. He was visiting
professor at Columbia University (1948), UCLA (1949),
Kyoto and Doshisha Universities of Japan (1955), and a
Ford Foundation Research fellow (1957-58). He served as
Walker Professor of International Finance and director
of the International Finance Section at Princeton University
from 1960 to 1971.
During that period he was a visiting professor at City
University of New York, New York University, Osaka and
Melbourne. Machlup was a consultant to the US Treasury
from 1965 to 1977, having formed the Bellagio Group of
academics to study international monetary problems in
1963.
His investigations of innovation and knowledge beginning
in 1950 led to major studies on Information Through
The Printed Word: The Dissemination of Scholarly, Scientific
& Intellectual Knowledge and Knowledge: Its
Creation, Distribution & Economic Significance,
three volumes of a projected ten volume series.
Machlup coauthored Optimum Social Welfare & Productivity
with Jan Tinbergen, Abram Bergson & Oskar Morgenstern
in 1972. In conjunction with work on the international
monetary system and the economics of knowledge, he published
A History of Thought on Economic Integration (1977)
and Methodology of Economics & Other Social Sciences
(1978).
Machlup died on 30 January 1983 in Princeton, New Jersey
shortly after finishing the third volume of Knowledge.
biographies
There is a concise biography in Breadth & Depth
in Economics: Fritz Machlup: The Man & His Ideas,
edited by Jacob Dreyer (1978).
A bibliography of his work is contained in the Selected
Economic Writings of Fritz Machlup edited by George
Bitros (1976).
writings
Machlup's early work on the language of economics
is collected in Essays in Economic Semantics (1963,
1967, 1975).
His most important papers include 'The Commonsense of
the Elasticity of Substitution' in Review of Economic
Studies 2 (1935), 'The Theory of Foreign Exchanges'
in Economica (1939 & 1940); 'Elasticity Pessimism
in International Trade' in Economia Internazionale
(1950), 'Concepts of Competition & Monopoly' in American
Economic Review (1955), 'The Problem of Verification
in Economics' in Southern Economic Journal (1955),
'Relative Prices & Aggregate Spending in the Analysis
of Devaluation' in American Economic Review (1955)
and 'Theories of the Firm: Marginalist, Managerial, Behavioral'
in American Economic Review (1967).
Information related publications include The Economic
Review of the Patent System (1958) and The economic
foundations of patent law (here),
The Production & Distribution of Knowledge in the
United States (1962) and the three volume Information
through the Printed Word: The Dissemination of Scholarly,
Scientific & Intellectual Knowledge (1978).
At the time of his death he'd written the first three
volumes of Knowledge: Its Creation, Distribution
& Economic Significance (80-83). He also co-edited
The Study of Information: Interdisciplinary Messages
(New York: Wiley 1983) with Una Mansfield and wrote Education
& Economic Growth (1970).
responses
In retrospect Machlup's research seems more heroic but
less original than it appeared to his contemporaries.
It is an eerie echo of late-Victorian economist Alfred
Marshall, with an almost religious faith in enumeration
and categorisation: measurement (like winning football)
isn't the best thing, it's the only thing.
That's a belief system evident in the US concentration
during the Vietnam War on quantification at the expense
of interpretation. It's also evident in the McKinsey consulting
group jingle that 'everything can be measured and what
can be measured can be managed' (or perhaps merely billed).
Making sense of the data is more problematical.
Contemporary critics noted that his definition of the
'knowledge industry' was extremely wide, encompassing
everything from the production of typewriters and filing
cabinets to electronic and print advertising. Kenneth
Arrow - in The Economics of Information (Cambridge:
Harvard Uni Press 1984) - commented that the economic
"meaning of information is precisely a reduction
in uncertainty", which would exclude 'information
producing' activity such as advertising, market research
and most reports about the new economy.
Since his death there's been little agreement about Machlup's
data or his conclusions. Skeptics such as Paul Ormerod,
author of Butterfly Economics (London: Faber 1997),
have suggested that at best we'll only be able to devise
a crude retrospective approximation of modern economies.
Most markets are too dynamic, information is unavailable
and relationships change.
His influence, however, is evident in the 2000 and 2003
How Much Information report
by Hal Varian & Peter Lyman, in projects such as the
Cisco-UT Measuring the Internet Economy project
(the local version is noted here)
and at the 1999 US conference
on Understanding The Digital Economy: Data, Tools &
Research or OECD's 1997 report
on Measuring Electronic Commerce.
It's also evident in questions by critics such as Robert
Gordon about supposed major productivity increases associated
with use of information technology and the growth of electronic
networks since the late 1970s.
There's been no research on a similar scale in Australia.
In the US an extension was provided by Michael Rubin,
Mary Huber & Elizabeth Taylor in The Knowledge
Industry in the United States, 1960-1980 (Princeton:
Princeton Press 1986) and by Marc Porat's nine-volume
statistical collection The Information Economy (Washington:
US Dept of Commerce 1977).
A perspective is provided by essays in The Political
Economy of Information (Madison: Uni of Wisconsin
Press 1988) edited by Vincent Mosco & Janet Wasko,
in Frank Webster's Theories of the Information Society
(London: Routledge 1995), Ian Miles' Mapping &
Measuring the Information Economy (Boston Spa: British
Library 1990) and Measuring the Information Society
(Thousand Oaks: Sage 1988) edited by Frederick Williams.
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