The transaction cost of ‘knowledge of knowledge’: a problem in the sociology of business

The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know.

(Hayek, 1945, “The Use of Knowledge in Society,” link)

One of the empirical features of ‘advanced capitalism’ is the feedback loop between capital and heavily mediated audiences. This interaction is made possible by communication technology and institutionalized by the legal and economic imperative of intellectual property. Social, cultural, political, and even some economic capital today is capital in large part because an audience interprets it as being capital. Even the most “economistic” objects are subject to this interaction: ‘money’ is subject to the interpretation of bondholders, inflation is bound by “expectations,” housing by “confidence.” As a result, economic actors and organizations are in constant communication with audiences.

And so, the pursuit of traditional economic interests necessitates knowing your audiences. Not only what they think, but why they think it. And knowing what the scenarios are in which audiences shift what they think.

Knowledge of audiences — effectively, knowledge of knowledge — becomes itself a key piece of capital creating economic advantage for those who hold it. This capital is hard to quantitatively “account for” — but not entirely impossible to measure, or evaluate. Regardless, knowledge of knowledge is a necessary transactional problem, and an opportunity in the sociology of business.

This entry was posted in accounting, advanced capitalism, intellectual property, Media and knowledge, sociology, sociology of business. Bookmark the permalink.

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