Note: this post can be read for itself, but might appears “out of the blue” as it relates to a more grounded argumentation in the French section of my blog. In fact it is principally here to sustain a conversation held through another post.

For ages, there has been collusion between cost and value, created by one fundamental principle of economy: scarcity and utility of resources. Work, in this perspective, is seen as a mean to reduce scarcity whereas currency, as it facilitate exchange, enable the measurement of both relative scarcity and work contribution (wage and profit). This postulate about scarcity induces the absence of issues around distribution, which induces an evaluation of performance based on execution (output) and not know-how or insight (input) et implies that investment decision making is the business of senior management.
The trick is that this logic (output is no issue) of the overall economic system that favors the supply side transformed into favoring the demand side. The relation with the customer evolves for a discontinuous to a continuous relation (this is why social media is relevant, in case you still wonder). This turnaround can be traced back for Europe back in the 70 and has two major causes. One is temporary and is based on the adequacy between reality and the scarcity approach (oil here). The second one is structural: households are equipped and the market is just about renewing. Basic needs are vastly covered and become non-basic needs. This induces decreasing yields (Quesnay). They lead to an underlying fall of the rate of profit (Riccardo, Marx) and opens to a freeze in wealth accrual and a static equilibrium. The answer was two-sided as the underlying fall of the rate of profit can be squared by:

1) the reduction of wages (that happens in the US and Europe no matter it is politically correct or not, thru a consistent reduction of social welfare and increased cost of living) and

2) innovation (and behind knowledge). As Giscard d’Estaing, President of the French Republic at the time said: “we have no petrol, but we have ideas!”.

The advent of reasoning over execution put the distribution issue on top of agendas. This is now the central issue for economic actors. The difficulty is not to produce, but to understand what consumers are willing to buy. Structure of costs change. Hardly predictable costs grow and replace predictable ones: communications and R&D become structural and significant part of the budget.
Consequence is that experts like Lorino trace back the origin of costs and reach the conclusion that there is an inadequacy between cost and value. They therefore suggest a value analysis rather than a cost analysis. In fact, the de-correlation between cost and value is the accounting acknowledgment of the true mutation of work and the dematerialization of capital as the prominence of reasoning (over execution) positions knowledge as a key economic factor.

For those who are familiar with Drucker’s work, they would notice that I consequently date the birth of the knowledge economy (reasoning over execution) well after him. Drucker’s position is that the knowledge economy was fuelled by the growth of white collars thanks to the conjunction of more educated people (thanks to a Roosevelt’s bill that secured education to enrolled Americans for WWII), the growth of private corporations and the retirements of founders. In fact, for me possibility of the knowledge economy is based on the groundbreaking results of the Macy’s conferences. They addressed in a multi-disciplinary approach the cognition issue and opened door to computer science, the base for the information revolution. Now back to Drucker and why I disagree with him. White collars are not knowledge people, they are information people. They are paid to process information upon a very traditional, top-down, command and control plan. They are not requested to think creatively to find better ways of doing things or addressing more successfully customer’s needs. Worse, they often are castrated for that, because the understanding that people who execute are not smart enough to think (classical anti-humanist Greek thinking behind :-(). What Drucker sees as the emergence of the knowledge economy, is the just the mere reproduction and implementation of Taylorists methods to the office. I still need to translate this whole bit  (sorry I am busy!, alternative is here)