Knowledge Economy Essay
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What is the nature of the transformation associated with the prevailing knowledge based economy, and what is driving the transition?
“Capitalism,” wrote Florida & Kenny (1991), “is undergoing an epochal transformation from a mass production system where the principal source of value was human labour to a new era … where the principal component … is knowledge”. This encapsulates the knowledge-based economy, referring in the most basic sense to the new centrality of knowledge in the production process. In conjunction with globalisation, this appears to promise the abolition or reduction of material constraints on growth, and an age in which nations and regions compete not on the basis of their endowments of traditional production factors, but on their knowledge and human capital (Houghton & Sheehan 2000). However, than knowledge-based economy is a complex and sometimes fuzzy concept incorporating a range of different but interlinked transitions. This essay will examine the context and nature of these transitions, and reflect briefly on the processes that are driving them.
As numerous authors have pointed out, the application of knowledge has always played a role in economic production (David & Foray 2001; Leydersdorff &
Eskowitz 2002; Mokyr 2002). The increasing sophistication of knowledge in production processes and commerce, writes Mokyr (2002), underpinned the industrial revolution and the economic ascent of the Western World. Marx recognised this importance of knowledge in industrial production with the example of the dye-stuff industry, while Schumpeter (1943) argued that technological innovation was a fundamental dynamic of capitalism. From the 1960s and 70s, however, a growing number of authors were arguing that knowledge had taken on an even greater importance. To some extent this was thought to be in terms of the significance of
‘intangible capital’ (including knowledge and human capital) as a factor of production (David & Foray 2001). However Bell (1973) saw the rise of service occupations as heralding the emergence of ‘Post-Industrial Society’ in which knowledge rather than industry would be the most significant economic driver.
This new centrality of knowledge as the driver of the economy is at the core of the contemporary idea that we are transitioning into a ‘knowledge-based economy’. To some extent this is manifested in an even further increased intensity in the application of technical and organisational knowledge to traditional production, representing “more a ‘sea-change’ than a sharp discontinuity” with the historical role of knowledge in manufacturing (David & Foray 2001). However in the tradition of Bell, authors such as Castells (1996) have written how this is accompanied by the rise of knowledge itself as the most important component of economic production – which Castells calls ‘informationalism’. A vast and exponential expansion in volumes of information (largely associated with new information technologies) is met with a
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