Understanding the Economics of Knowledge: A Perspective

Understanding the Economics of Knowledge: A Perspective
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Binish Qadri

The Economics of knowledge is, to a large extent, about laying down the conditions and settings for knowledge to look like a normal good, that is, something similar a producible and reproducible tangible product. It, however, raises the following questions and issues: How knowledge-in terms of competence and innovation, that is, knowledge appearing both in terms of input (competence) and output (innovation) is produced? How knowledge is mediated? Is the consent of the producer needed for the mediation to be successful? How knowledge is an asset? Can knowledge be transferred? How difficult is it to transfer knowledge and what are the transfer mechanisms? How important is the broader socio-cultural context for the transferability of knowledge? Can knowledge be copied against the will of the producer? And, above all, how knowledge serves as a tool for research and development?
It is important to note that various distinctions and differences between different kinds of knowledge helps in understanding and taxonomy of the above cited questions. Responding to all these questions is a way of specifying and postulating the foundations of the knowledge base of the economy which are the key drivers of growth and development of the education sector. If knowledge were completely public, it would be meaningful to speak of one common knowledge base for the whole economy and there would be a strong need for synchronizing investments in knowledge production at the global level. If, conversely, knowledge were completely individual and private there would be no common knowledge base at all and investment in knowledge production could be left to the individuals themselves.
But, reality and veracity is that most knowledge is neither completely public nor completely private. The knowledge base is fragmented, sporadic and patchy which may best be illustrated as created by a number of semi-public pools to which access is shared regionally, professionally and through networking. Good research (academic or sponsored research) is required for networking and consortium so as to generate knowledge–in terms of competence and innovation. Universities can collaborate and develop consortiums so as to generate knowledge hubs for creating and multiplying knowledge and promote innovations.
Good linkages between Public Knowledge and Public Research and Development (R&D) on one hand and Private Knowledge and Private Research and Development (R&D) on the other hand can develop good intra and inter university collaborations which consequentially develop excellence in education and Research and Development (R&D). Accordingly, such linkages escalate economics of knowledge and promote Growth and Development in an economy (Romer, 1986 as cited by Romer, 1994; Lucas, 1988). Furthermore, bad Public Knowledge and bad Public Research and Development (R&D) hamper good intra and inter university collaborations and vice versa.Universities in developing economies in general and India in particular lack intra and inter university partnerships, with the result they fail to achieve excellence in education and Research and Development (R&D).
Economics of knowledge analyses knowledge as an asset and while this analysis, its properties in terms of transferability across time, space and people are dominant. This issue is at the core of two different strands of economic debate. One is the public/private dimension of knowledge and the role of government in knowledge production; the second is about the formation of industrial districts and the local character of knowledge. In the economics of knowledge it is important to know whether knowledge is a private or public good.
One reason for the interest in this issue is that it is crucial for defining the role of government in knowledge production and education. If knowledge is a public good that can be accessed by anyone, there is no incentive for rational private agents to invest in its production. If it is less costly to imitate than to produce new knowledge, the social rate of return would be higher than the private rate of return and again private agents would invest too little. Nelson and Arrow’s classical contributions demonstrated that in such situations there is a basis for government policy either to subsidize or to take charge directly of the production of knowledge. In a sense, this fundamental problem remains at the core of economics of knowledge production.
Therefore, in order to promote good research and development and generate best education outcomes, we need to be well versed with the public/private dimension of knowledge and the role of government in knowledge production, without compromising the local character of knowledge because in economics of knowledge understanding local knowledge is equally important. Sharing of local knowledge is very important for expanding domestic sectors in an economy. Debate is going on the issue of sharing of that knowledge which is difficult to mediate. From the last decade or so a strong debate has been going on the issue of knowledge sharing within and between firms and importance of local knowledge. It is very important to note that in order to achieve excellence in education, understanding local knowledge is imperative.
The distinctions in different levels of education and different technologies are necessary as well as sufficient condition for understanding the economics of Knowledge, in the first place, and the technology and education linkages in the second place. Bu, t this is not the end in itself for the higher end being understanding of the actual dynamics of inter-relationship between Knowledge and Technology and Technology and Higher education. The understanding of such relationships will help us to determine whether economics of Knowledge can be held responsible for creating better research, better skills, more knowledge, more ideas or not?
Introducing ‘Economics of Knowledge’ as a separate subject in our colleges and universities at graduate and post graduate level will definitely help in making Research and Development(R&D) sector stronger. This will generate human capital which is an important driver of Growth and Development. Furthermore, value education should be given emphasis so that technology will not be misused and misguided because such mismanagement of technology forgets the very purpose of education which is welfare of mankind in the best possible manner.

References:
Lucas, R.E. (1988).On the mechanics of Economic Development. Journal of Monetary Economics.Vol.22 (1).
Romer, P.M. (1994). “The Origins of Endogenous Growth”. The Journal of Economic Perspectives.Vol.8 (1): 3–22. Doi:10.1257/jep.8.1.3.

The author is a Research Scholar at the Department of Economics, Central University of Kashmir. She is also an Academic Counselor, IGNOU STUDY CENTRE 1209, S.P. College, and Srinagar and can be reached at: qadribinish @ gmail.com