Although it is difficult to point to any single phenomenon as paramount over all the rest in our slate of late 20^th century watersheds, it would be foolish to avoid the most significant economic development of the last quarter-century, namely, the loss of manufacturing base in each of the post-WWII self-identified industrial economies, especially after the demise of the Communist bloc. This transformation has been comprehensively described by social scientists, and so we will not need to cover it in detail here. The relevance for our present analysis is that it was not simply some smooth shift from one indifferent economic “sector” to another, as in the kinds of adjustments to ‘comparative advantage’ imagined by economists. The industrial base had previously defined many aspects of what it meant to live in a developed economy, in everything from the culture of consumption to the promotion of certain sorts of science, so the erosion of the manufacturing base within these economies could not help but have far-reaching implications, even for those who might be proud never to have even set foot on a shop floor. It was moreover a transnational phenomenon, hitting many different nations more or less in the same rough time frame; it should therefore not be confused with the internal economic trajectories of individual nation states. Indeed, current estimates for the older OECD countries suggest services and related industries now account for two-thirds of all economic value added.

The United States has been losing net manufacturing employment to production facilities overseas since 1989. Not only were entire geographical locales devastated; these losses raised the issue of the aims and purposes of education under such circumstances. For instance: Had we done our economic rivals the favor of training their indigenous cadres in our universities, which were then responsible for their own industrialization? What were the causes and implications of US citizens progressively giving the natural sciences a wide berth in higher education? Why get so concerned over waning public support for fields like science and engineering when many of the industries that had previously depended upon them for new personnel were shifting not just production capacity but supervisory functions overseas? Furthermore, Education used to perform certain critical domestic political functions, such as the creation of an informed citizenry over and above crude vocational considerations; but with the collapse of the Communist bloc, the urgency of those goals had perhaps also subsided.

Some pundits proceeded to try and paste a positive ☺face on the phenomenon, by suggesting that advanced economies were becoming increasingly ‘weightless’, or else would graduate to a third stage of capitalism consisting almost exclusively of the service sector, or indeed disengage from gross physical production processes altogether. Of course, most people recognized that much talk bordered on delusional, but nevertheless managed to attain a patina of sensibility by engaging in locutions such as “The Information Society” or “The New Knowledge Economy”. For the reader, these terms may seem impossibly trendy, but that would discount the extent to which these notions have become entrenched as second nature amongst bureaucrats and the denizens of business schools. As Walter Powell put it, “If the knowledge economy is measured by the rise in knowledge management services among consulting firms or by the rapid growth in intellectual property as a legal specialty, then its growth has been considerable.” The rise of “knowledge management” as a professional specialization in business schools and management consultancies has had more than superficial impact upon the modern regime of science management. How many faculty are aware if their university’s administration has brought in paid consultants from McKinsey (for example) to turn their supposedly “dumb organization” into something resembling a “smart organization” like McDonalds or WalMart? Indeed, we can pinpoint the emergence of the Information Economy as a statistical category with the revision of the Standard Industrial Classification (SIC) previously used by bureaucracies worldwide into the 1997 North American Industry Classification System. This took various industrial activities which had been scattered by function throughout the previous SIC code, and grouped them together as dealing with an object or product called ‘information’ which itself could be rendered subject to ownership and control.

Under these circumstances, for students the contemporary options must seem rather bi-polar, with the future consisting either of slinging hamburgers at minimum wage, or else becoming a Knowledge Worker in some urban office building. The temptation to reify these insights into some grand synthesis of a new Information Mode of Production has proven irresistible for a broad swathe of sociologists, lawyers, and cultural theorists. But more to the point, it has had a profound influence upon very vocabulary that we use to discuss the economy, and in particular, upon orthodox neoclassical economic theory. Neoclassical economics of 1950s vintage used to divide its subject matter up into the physical world of commodities, and thereby contrast it with the subjective world of mental impressions and preferences; growth was treated rather straightforwardly as more tangible stuff. Yet deindustrialization tended to threaten that nice picture, and undermine the clear separation between mind and the world inscribed in the equations of general equilibrium.

All of this has put severe strain upon the neoclassical economics to buttress an upbeat assessment of modern developments; the stakes had been rudely raised in trumpeting that capitalism was really the production and distribution of knowledge rather than, say, fostering heavy industry. Lest the reader think this merely the airy froth of the chattering classes, let us quote a recent Nobel economist:

The scientific revolution of the past century has resulted in the systematization of change itself… Knowledge and information is being produced today as cars and steel were produced one hundred years ago… the standard theorems of welfare economics, which underlay the presumption of the efficiency of the market economy, assume that information and knowledge is unaffected by any action taken by any participant. Thus standard economic theory has little to say about the efficiency of the knowledge-based economy… We are slowly shedding the limitations of Matter to unleash the expansiveness of non-rivalrous Ideas.

However much the siren song of Pure Transcendent Idealism did or did not manage to bewitch economics at the end of the millennium, or however much it was in the nature of the Capitalist Spirit actually to slip the surly bond ratings of earth, it seems fairly clear that neoclassical economics was coming under heavy pressure to analyze knowledge as well or better than it could analyze freight cars or steel. The fact that it had only sporadically attempted to do so in a desultory manner prior to the 1980s was not regarded as an insurmountable obstacle: indeed, encomia to the Knowledge Economy flowed forth abundantly in the modern era. It was no accident that in this period that we started to hear all sorts of claims about knowledge being a public good, science being the true ‘first cause’ of all growth, and so forth. You couldn’t attend a seminar without hearing about how knowledge was ‘special’, because it was non-rival and non-exclusive, though sometimes unfortunately ‘a-symmetric,’ and how it gave rise to a bountiful cornucopia of Good Things. Whether or not the new-found enthusiasm for the “Economics of Information” had been adequately logically rectified with the previous neoclassical theoretical tradition is not something that needs to be decided here, since it rarely seemed to perturb anyone else.

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