Sunday, March 9, 2008

Knowledge Economics

The beauty of the internet, one can talk to people far and wide. A new friend I have just met, she resides in the UK and we would never have been in touch without the Internet. Wonderful the use of knowledge to create such a viable tool as the internet. In our discussion she made a point she has never discussed issues with a knowledge economist, what is knowledge economics.

Knowledge is a new field, but its roots go back into antiquity; all societies throughout the ages have discussed what knowledge is Knowledge economics does not delve into answering those questions. Knowledge economics deals with knowledge as an economic good.

Therefore knowledge economics is not something that deals with imperfect information, it does not discuss the issues of rationality of humans or that humans cannot be rational because they lack information. Therefore the book written by Roman Frydman and Micheal Goldberg and forwarded by Edmund S Phelps entitled “Imperfect Knowledge Economics: Exchange Rate Risk” is totally off the mark and misleading, dealing as it does strictly with information and not dealing with knowledge as a commodity. It does not matter who endorses it or their reasons, it is still off the mark, and it has nothing to do with knowledge economics. It is basically discussing exactly what the great Hayek first discussed in his paper “The Use of Knowledge in Society”.

A better understanding of knowledge economics comes from the Netherlands Bureau for Economic Policy Analysis. They define knowledge economics as “The sector Growth, industrial structure, and knowledge economics conducts policy-relevant institutional and empirical economic analyses in the areas of education, innovation, R&D and ICT, and is responsible for the linking of these micro-economic subjects with the macro economy. A major aim is gaining insight into the causes and consequences of productivity growth. To that end, the sector conducts empirical research primarily on the micro level. The underlying context of this research is, however, typically a macro-economic one. Effort is therefore made to incorporate the micro research into a macro-economic analysis.” Netherlands Bureau for Economic Policy Analysis

All production is born of knowledge, therefore since antiquity knowledge has been the basic resource. It did not suddenly become a knowledge economy in 1997 with the spread of the internet, the economy just became more information dense.

Simply, knowledge economics is the economic analysis of knowledge as a commodity, and knowledge is the most important commodity. Knowledge economics therefore deals with the knowledge cycle, from the idea to the knowledge transfer process. Knowledge economics must look at the behavior of knowledge, in the short and in the long term because only then can we understand how to speed up the process of knowledge. Knowledge needed its own unit of measurement that I have created - because how do you even attempt to analyze something you can not even fathom of measuring?

That is knowledge economics friends.

Bhekuzulu Khumalo





2 comments:

Michael J said...

Nice post. Thank yhou.

Institute of Knowledge said...

Pleasure

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Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom