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The knowledge economy (or the knowledge-based economy) is an economic system in which the production of goods and services is based principally on knowledge-intensive activities that contribute to a rapid pace of advancement in technical and scientific innovation as well as accelerated obsolescence.The key element of value is the greater dependence on human capital and intellectual property for the source of the innovative ideas, information and practices. Organisations are required to capitalise this "knowledge" into their production to stimulate and deepen the business development process. There is less reliance on physical input and natural resources. A knowledge-based economy relies on the crucial role of intangible assets within the organisations' settings in facilitating modern economic growth.
A knowledge economy features a highly skilled workforce within the microeconomic and macroeconomic environment; institutions and industries create jobs that demand specialized skills in order to meet the global market needs.Knowledge is viewed as an additional input to labour and capital. In principle, one's primary individual capital is knowledge together with the ability to perform so as to create economic value.
In a knowledge economy, highly skilled jobs require excellent technical skills and relational skillssuch as problem-solving, the flexibility to interface with multiple discipline areas as well as the ability to adapt to changes as opposed to moving or crafting physical objects in conventional manufacturing-based economies. A knowledge economy stands in contrast to an agrarian economy, in which the primary economic activity is subsistence farming for which the main requirement is manual labour or an industrialized economy that features mass production in which most of the works are relatively unskilled.
A knowledge economy emphasizes the importance of skills in a service economy, the third phase of economic development, also called a post-industrial economy. It is related to an information economy, which emphasizes the importance of information as non-physical capital, and a digital economy, which emphasizes the degree to which information technology facilitates trade. For companies, intellectual property such as trade secrets, copyrighted material, and patented processes become more valuable in a knowledge economy than in earlier eras.
The global economy transition to a knowledge economyis also referred to as the Information Age, bringing about an information society. The term knowledge economy was made famous by Peter Drucker as the title of Chapter 12 in his book The Age of Discontinuity (1969), that Drucker attributed to economist Fritz Machlup, originating in the idea of scientific management developed by Frederick Winslow Taylor.
An economic system that is not knowledge-based is considered to be inconceivable.It describes the process of consumption and production activities that are satisfied from the application of workers' expertise - intellectual capital and typically represents a significant level of individual economic activities in modern developed economies through building an interconnected and advanced global economy where sources of knowledge are the critical contributors.
The present concept for "knowledge" is origins from the historical and philosophical studies by Gilbert Ryleand Israel Scheffler who conducted knowledge to the terms "procedural knowledge" and "conceptual Knowledge" and identified two types of skills: "routine competencies or facilities" and "critical skills" that is intelligent performance; and it's further elaborated by Lundvall and Johnson who defined "knowledge" economically highlighting four broad categories:
In a knowledge economy, human intellectual is the key engine of economic enhancement. It is an economy where members acquire, create, disseminate and apply knowledge for facilitating economic and social development.The World Bank has spoken of knowledge economies by associating it to a four - pillar framework that analyses the rationales of a human capital based economies:
The initial foundation for the knowledge economy was introduced in 1966 in the book The Effective Executive by Peter Drucker. In this book, Drucker described the difference between the manual worker (page 2) and the knowledge worker. The manual worker, according to him, works with their hands and produces goods or services. In contrast, a knowledge worker (page 3) works with their head, not hands, and produces ideas, knowledge, and information.
The key problem in the formalization and modeling of knowledge economy is a vague definition of knowledge , which is a rather relative concept. For example, it is not proper to consider information society as interchangeable with knowledge society . Information is usually not equivalent to knowledge. Their use depends on individual and group preferences (see the cognitive IPK model) which are "economy-dependent".
From the early days of economic studies, though economists recognised the essential link between knowledge and economic growth, it was still identified only as a supplemental element in economic factors. The idea behind has transformed in recent years when new growth theory gave praise to knowledge and technology in enhancing productivity and economic advancement.
Thus far, the developed society has transitioned from an agriculture-based economy, that is, the pre-industrial age where economy and wealth is primarily based upon agriculture, to an industrial economy where the manufacturing sector was booming. In the mid-1900s, the world economies moved towards a post-industrial or mass production system, where it is driven by the service sector that creates greater wealth than the manufacturing factor; to the late 1900s - 2000s, knowledge economy emerged with the highlights of the power of knowledge and human capital sector, and is now marked as the latest stage of development in global economic restructuring.Knowledge economy operates differently from the past as it has been identified by the upheavals (sometimes referred to as the knowledge revolution) in technological innovations and globally competitive need for differentiation with new goods and services, and processes that develop from the research community (i.e., R&D factors, universities, labs, educational institutes). Thomas A. Stewart points out that just as the industrial revolution did not end agriculture because people have to eat, the knowledge revolution is unlikely to end the industry because society remains in demands for physical goods and services. .
In the knowledge economy, the specialised labor force is characterised as computer literate and well-trained in handling data, developing algorithms and simulated models, and innovating on processes and systems. Harvard Business School Professor, Michael Porter, asserts that today's economy is far more dynamic and that comparative advantage is less relevant than competitive advantage which rests on "making more productive use of inputs, which requires continual innovation".Consequently, the technical STEM careers including computer scientists, engineers, chemists, biologists, mathematicians, and scientific inventors will see continuous demand in years to come. Additionally, well-situated clusters, which Michael Porter argues is vital in global economies, connect locally with linked industries, manufacturers, and other entities that are related by skills, technologies, and other common inputs. Hence, knowledge is the catalyst and connective tissue in modern economies. Ruggles and Holtshouse argue the change is characterized by a dispersion of power and by managers who lead by empowering knowledge workers to contribute and make decisions.
With Earth's depleting natural resources, the need for green infrastructure, a logistics industry forced into just-in-time deliveries, growing global demand, regulatory policy governed by performance results, and a host of other items high priority is put on knowledge; and research becomes paramount. Knowledge provides the technical expertise, problem-solving, performance measurement and evaluation, and data management needed for the trans-boundary, interdisciplinary global scale of today's competition.
Worldwide examples of the knowledge economy taking place among many others include: Silicon Valley in California; aerospace and automotive engineering in Munich, Germany; biotechnology in Hyderabad, India; electronics and digital media in Seoul, South Korea; petrochemical and energy industry in Brazil. Many other cities and regions try to follow a knowledge-driven development paradigm and increase their knowledge base by investing in higher education and research institutions in order to attract high skilled labor and better position themselves in the global competition.Yet, despite digital tools democratizing access to knowledge, research shows that knowledge economy activities remain as concentrated as ever in traditional economic cores.
It has been suggested[ by whom? ] that the next evolutionary step after knowledge economy is the network economy, where the relatively localized knowledge is now being shared among and across various networks for the benefit of the network members as a whole, to gain economic of scale in a wider, more open scale.[ citation needed ]
The technology requirements for a national innovation system as described by the World Bank Institute must be able to disseminate a unified process by which a working method may converge scientific and technology solutions, and organizational solutions.According to the World Bank Institute's definition, such innovation would further enable the World Bank Institute's vision outlined in their Millennium Development Goals.
The United Nations Commission on Science and Technology for Development report (UNCSTD, 1997) concluded that for developing countries to successfully integrate ICTs and sustainable development in order to participate in the knowledge economy they need to intervene collectively and strategically.Such collective intervention suggested would be in the development of effective national ICT policies that support the new regulatory framework, promote the selected knowledge production, and use of ICTs and harness their organizational changes to be in line with the Millennium Development Goals. The report further suggests that developing countries to develop the required ICT strategies and policies for institutions and regulations taking into account the need to be responsive to the issues of convergence.
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Sustainable development is the organizing principle for meeting human development goals while simultaneously sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The desired result is a state of society where living conditions and resources are used to continue to meet human needs without undermining the integrity and stability of the natural system. Sustainable development can be defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainability goals address the global challenges, including poverty, inequality, climate change, environmental degradation, peace and justice.
Human capital is the stock of habits, knowledge, social and personality attributes embodied in the ability to perform labour so as to produce economic value.
One can define economic growth as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. Statisticians conventionally measure such growth as the percent rate of increase in real gross domestic product, or real GDP.
An information society is a society where the usage, creation, distribution, manipulation and integration of information is a significant activity. Its main drivers are information and communication technologies, which have resulted in rapid information growth in variety and is somehow changing all aspects of social organization, including education, economy, health, government, warfare, and levels of democracy. The people who are able to partake in this form of society are sometimes called either computer users or even digital citizens, defined by K. Mossberger as “Those who use the Internet regularly and effectively”. This is one of many dozen internet terms that have been identified to suggest that humans are entering a new and different phase of society.
Knowledge transfer refers to sharing or disseminating of knowledge and providing inputs to problem solving. In organizational theory, knowledge transfer is the practical problem of transferring knowledge from one part of the organization to another. Like knowledge management, knowledge transfer seeks to organize, create, capture or distribute knowledge and ensure its availability for future users. It is considered to be more than just a communication problem. If it were merely that, then a memorandum, an e-mail or a meeting would accomplish the knowledge transfer. Knowledge transfer is more complex because:
In sociology, the post-industrial society is the stage of society's development when the service sector generates more wealth than the manufacturing sector of the economy.
The United Nations Information and Communication Technologies Task Force was a multi-stakeholder initiative associated with the United Nations which is "intended to lend a truly global dimension to the multitude of efforts to bridge the global digital divide, foster digital opportunity and thus firmly put ICT at the service of development for all".
Knowledge workers are workers whose main capital is knowledge. Examples include programmers, physicians, pharmacists, architects, engineers, scientists, design thinkers, public accountants, lawyers, and academics, and any other white-collar workers, whose line of work requires one to "think for a living".
The term information revolution describes current economic, social and technological trends beyond the Industrial Revolution. The information revolution was enabled by advances in semiconductor technology, particularly the metal–oxide–semiconductor field-effect transistor (MOSFET) and the integrated circuit (IC) chip, leading to the Information Age in the early 21st century.
Post-capitalism is a state in which the economic systems of the world can no longer be described as forms of capitalism. Various individuals and political ideologies have speculated on what would define such a world. According to some classical Marxist and some social evolutionary theories, post-capitalist societies may come about as a result of spontaneous evolution as capitalism becomes obsolete. Others propose models to intentionally replace capitalism. The most notable among them are socialism and anarchism.
The knowledge divide is the gap between those who can find, create, manage, process, and disseminate information or knowledge, and those who are impaired in this process. According to a 2005 UNESCO World Report, the rise in the 21st century of a global information society has resulted in the emergence of knowledge as a valuable resource, increasingly determining who has access to power and profit. The rapid dissemination of information on a potentially global scale as a result of new information media and the globally uneven ability to assimilate knowledge and information has resulted in potentially expanding gaps in knowledge between individuals and nations. The digital divide is an extension of the knowledge divide, dividing people who have access to the internet and those who do not. The knowledge divide also represents the inequalities of knowledge among different identities, including but nor limited to race, economic status, and gender.
Informatization or informatisation refers to the extent by which a geographical area, an economy or a society is becoming information-based, i.e. the increase in size of its information labor force. Usage of the term was inspired by Marc Porat’s categories of ages of human civilization: the Agricultural Age, the Industrial Age and the Information Age (1978). Informatization is to the Information Age what industrialization was to the Industrial Age. It has been stated that:
The Knowledge Indexes were designed as an interactive tool for benchmarking a country's position vis-a-vis others in the global knowledge economy. It was created by the World Bank Institute using the Knowledge Assessment Methodology (KAM).
Technology society and life or technology and culture refers to the inter-dependency, co-dependence, co-influence, and co-production of technology and society upon one another. Evidence for this synergy has been found since humanity first started using simple tools. The inter-relationship has continued as modern technologies such as the printing press and computers have helped shape society. The first scientific approach to this relationship occurred with the development of tektology, the "science of organization", in early twentieth century Imperial Russia. In modern academia, the interdisciplinary study of the mutual impacts of science, technology, and society, is called science and technology studies.
Technological unemployment is the loss of jobs caused by technological change. It is a key type of structural unemployment.
A knowledge society generates, shares and makes available to all members of the society knowledge that may be used to improve the human condition. A knowledge society differs from an information society in that the former serves to transform information into resources that allow society to take effective action while the latter only creates and disseminates the raw data. The capacity to gather and analyze information has existed throughout human history. However, the idea of the present-day knowledge society is based on the vast increase in data creation and information dissemination that results from the innovation of information technologies. The UNESCO World Report addresses the definition, content and future of knowledge societies.
A creative economy is based on people's use of their creative imagination to increase an idea's value. John Howkins developed the concept in 2001 to describe economic systems where value is based on novel imaginative qualities rather than the traditional resources of land, labour and capital.: Compared to creative industries, which are limited to specific sectors, the term is used to describe creativity throughout a whole economy.
21st century skills comprise skills, abilities, and learning dispositions that have been identified as being required for success in 21st century society and workplaces by educators, business leaders, academics, and governmental agencies. This is part of a growing international movement focusing on the skills required for students to master in preparation for success in a rapidly changing, digital society. Many of these skills are also associated with deeper learning, which is based on mastering skills such as analytic reasoning, complex problem solving, and teamwork. These skills differ from traditional academic skills in that they are not primarily content knowledge-based.
TVET is education and training which provides knowledge and skills for employment. TVET uses formal, non-formal and informal learning. TVET is recognised to be a crucial vehicle for social equity, inclusion and sustainable development.
Digital agriculture refers to tools that digitally collect, store, analyze, and share electronic data and/or information along the agricultural value chain. Other definitions, such as those from the United Nations Project Breakthrough, Cornell University, and Purdue University, also emphasize the role of digital technology in the optimization of food systems.