Monday, 9 September 2013

What is a 'Knowledge economy'?

Perhaps the most valuable thing about the 'knowledge' economy is  that it leads us to ask what an economy is in the first place. 'Knowledge' suggests that learning is in some way central to economic life, and this indeed has been the driver for national investments in education as ways of producing 'knowledge workers'. A similar expansion of education occurred in the 19th century with the growth of technical colleges in creating workers for the burgeoning industrial society.

There is little doubt that our current society is post-industrial. Factories as places of mass employment, have gone. Where are the places of mass employment now? There are government offices, hospitals, schools, universities, banks, call centres, online retail distribution centres, gas and electric companies. There are still steel mills, coal mines (and fracking companies!), car factories and high tech manufacturing, although automation has reduced the need for mass labour, and certainly low-skilled mass labour. Then there are places of non-mass employment (by an individual employer), but mass public participation: shopping centres. There are new 'cottage industries' - small companies on industrial parks writing software or providing specialised services to larger industries, and there are sole traders who increasingly are contracted into larger organisations (but often not as full employees) - electricians, plumbers, etc; their ranks may soon be swelled by part-time lecturers on zero-hours contracts! Certification, accreditation and membership of professional organisations is becoming important is these processes of social organisation. Civil and professional "inspection" (which is a form of certification) also is a growing "sector" (that jargonistic term deserves critical inspection). Does this mean that the tangible features of mass industrial production of the early 20th century (the industrial society) has been replaced with something intangible like 'knowledge'?

The social history of the 19th century reveals dreadful hardships for those living in rural communities as industrialisation took root. The options for people were very limited. Either move to where industrial production was occurring or face starvation. What were the calculations made by families? What was the 'pillow talk'? One cannot underestimate the decision to up-sticks and move a family, particularly without the benefits of modern transportation into a world which was largely unknowable, and equally threatening.

Part of the problem here is that economics, and particularly classical economics, deals with the macroeconomic abstract patterns of capital. Although individual motivations are sometimes considered (Adam Smith famously wrote about the need of a man of a certain social standing for a linen shirt), these desires and motivations are contextualised within the context of economic equilibrium and mechanisms that supposedly maintain prices. Greater attention to what became known as microeconomics grew from critiques by Menger (whose particular concern was abstraction), Jevon's theory of utility (where the utility of a commodity is related to the degree of its production: i.e. more coal production = more consumption), and Walrus's 'marginalism' (see

Economic theory advances in concert with the socio-economics conditions of the time. Keynes's general theory belonged to the world of the Wall Street Crash ("We have a magneto [alternator] problem"). But a current theory is rarely used to recontextualise received understanding of a previous age. In this way, a previous economy becomes  ossified in the language of the economics of its time, and contrasted in a historicist narrative with the 'new economy' of the current time. This is where I think our conception of the 'Knowledge economy' comes from.

To really unpick the roots of what we think might be the 'knowledge economy', the marketisation of education, the economic ideas of ministers and so forth, a broader testing of theory is required which not only examines the current historical period (and the narrative within which it is contextualised) but also revisits the data of a previous age and redescribes mechanisms understood from existing standpoints. Since the Lucas critique (see many economists consider that the exclusion of microeconomic concerns from macroeconomic theory is naive. But at the same time, our current economic situation has created the conditions for Lucas's critique in the first place: the role of the individual, subjective is more obviously pressing than it ever was in an age of ledgers of production output, sales and labour costs. Yet Lucas is right, and those microeconomic forces - even the forces of what we might call the 'knowledge economy' were always there. What was the information environment that 19th century workers made decisions in? How did they do it? What constrained them?

What I believe we see is shifting patterns of constraint. The extent to which information is, and always has been, constraint is becoming increasingly clear to us because this is what we live in. Exactly what its nature is, and how it works, is poorly understood. In particular, our responses to it currently involve creating more constraints within the education system, or relating previously unrelated constraints like "markets" and education. The relationship between information, confusion, anxiety and capability together with the impact of upbringing, opportunity and capital is the thing that I am most interested in.

There is no "Knowledge economy". There is only confusion in economics as it tries to look deeper at the ways people are living, and how and why we got here.

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