Economy in the Age of the Knowledge Economy

Economy in the Age of the Knowledge Economy

In the current epoch, often referred to as the Age of Knowledge, transformative changes across various domains have ushered in the Technology and Information Revolution. This rapid evolution underscores the paramount importance of innovation and adaptability in propelling progress. The ability to convert information into knowledge and subsequently transform that knowledge into a tangible product is central to navigating this era successfully. Notably, the role of knowledge has transcended mere information dissemination; it has become a crucial driver of wealth generation. The emergence of the knowledge economy, marked by its rapid development, has set it on a trajectory that challenges and surpasses the traditional economy.

To comprehend the intricacies of the knowledge-based economy, a foundational understanding of the traditional economy’s characteristics becomes imperative. A comparative analysis of the two economies sheds light on the distinctive traits of the knowledge economy.

Examining the features of the knowledge economy reveals its status as an economy of abundance. Unlike finite resources that deplete with use, knowledge possesses an inherent abundance. The more knowledge and information are utilized, the more they proliferate, fostering a cycle of perpetual expansion. Leveraging suitable technology facilitates the creation of virtual markets and platforms, obliterating temporal and spatial constraints through e-commerce. This enables seamless information and knowledge sharing, fostering growth through utilization.

Contrastingly, the traditional economy was marked by the significance of geographical location, a characteristic that has waned in the knowledge economy. Virtual markets and organizations, facilitated by apt technology, ensure swift transactions round the clock and worldwide. The challenge lies in applying national-level laws, barriers, and taxes, given the fluid and borderless nature of the knowledge economy. The concept of knowledge “filtering” gains prominence, wherein demand dictates value, barriers diminish, and products or services rooted in knowledge command higher prices than their cognitively less dense counterparts. Pricing dynamics and the contextual relevance of products or services become pivotal considerations.

In this paradigm, knowledge assumes varied values for different individuals at different junctures. When ingrained within systems or processes, knowledge attains a higher fundamental value compared to unregulated knowledge residing solely in individuals’ minds. Human capital emerges as the quintessential component of value in knowledge-based institutions. The distinctive demand for efficient and knowledgeable labor characterizes this new economy, as knowledge ownership remains non-transferable. The knowledge economy, described as an abundant economy, stands in stark contrast to materialism, with the economic dynamics emphasizing the abundance and shared nature of knowledge.

Knowledge’s unique attributes, learning, practice, and increased value through dissemination, contribute to the argument against scarcity. The difficulty in applying national-level laws and restrictions further distinguishes the knowledge economy from its traditional counterpart. Trade liberalization, regional blocs, the ascendance of multinational corporations, and technological advancements constitute transformative elements shaping this new economic landscape.

In response to these transformative shifts, the world has entered a phase where states are driven by the pursuit of competition. Traditional sources of competition have diminished in significance, prompting a reevaluation of new competitive factors. These factors extend beyond capital intensity to encompass knowledge, information, technologies, skills, and control over modern technology. A focus on creativity, innovation, change, and initiative has become instrumental in gaining a competitive edge.

A pivotal characteristic of the knowledge economy is the central role of knowledge as the primary factor in production, akin to the historical roles of land in the agricultural economy and capital in the industrial economy. Peter Drucker’s assertion that knowledge has evolved into an essential production resource underscores the shift in focus from raw materials and capital equipment to information, knowledge, and research. The economic value of knowledge is contingent upon its utilization, with the cognitive component significantly augmenting the value of products and services.

Human capital emerges as the linchpin of competitiveness in the knowledge economy. The non-transferability of knowledge ownership sets it apart from traditional production elements. Emphasis on conceptual entities like ideas and brands, rather than tangible assets like machines and stocks, characterizes the knowledge economy’s value proposition. And with this, the discussion continues.


Author : Manahel Thabet
Published January 01, 2018
Al Bayan Newspaper

Related Post:

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp


Play Video
Manahel Thabet Ph.D. – President participated in the first Economic Leadership Workshop
Play Video