Papper

ISSN 1471-0498

DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES

AN INTRODUCTION TO THE ECONOMY OF THE KNOWLEDGE SOCIETY
Paul A. David and Dominique Foray

Number 84 December 2001

Manor Road Building, Oxford OX1 3UQ

An Introduction to the Economy of the Knowledge Society
By

Paul A. David and Dominique Foray

First English draft: 13 September 2001 This version: 5 December 2001This article elaborates upon the authors’ introduction to the Special issue of the UNESCO International Social Science Journal, n°171, on “The Knowledge Society,” prepared under the guest-editorship of Dominique Foray, forthcoming from Basil Blackwell Ltd. in March 2002

Please obtain the authors’ written permission before distributing copies of, or quoting extensively from this text.Contact Author: Prof. P. A. David, All Souls College, Oxford, OX1 4AL, U.K. Tel: 44+(0)1865+279313; Fax: 44+(0)1865+279299; E-mail: paul. david@economics.ox.ac.uk , pad@leland.stanford.edu

An introduction to the economy of the knowledge society Paul A. David and Dominique Foray

Abstract This introductory article reviews the main themes rel ting to the development of new a knowledge-basedeconomies. After placing their emergence in historical perspective and proposing a theoretical framework which distinguishes knowledge from information, the authors characterize the specific nature of such ec onomies. They go on to deal with some of the major issues concerning the new skills and abilities required for integration into the knowledge-based economy; the new geography that is taking shape(where physical distance ceases to be such an influential constraint); the conditions governing access to both information and knowledge, not least for developing countries; the uneven development of scientific, technological (including organizational) knowledge across different sectors of activity; problems concerning intellectual property rights and the privatization of knowledge; and the issuesof trust, memory and the fragmentation of knowledge.

Biographical Notes Paul A. David is Professor of Economics, and Senior Fellow of the Stanford Institute for Econom ic Policy Research at Stanford University; he also is Senior Research Fellow of All Souls College, and Professor of Economics and Economic History in the University of Oxford. David is internationally recognized for hiscontributions to American economic history and the economics of science and technology, fields in which he has authored over 120 articles and contributions to books. Email: paul.david@economics.ox.ac.uk; pad@stanford.edu Dominique Foray is a Director of Research at CNRS and Professor at the Institut pour le Management de la Recherche et de l’Innovation at Paris-Dauphine University. His work focuses on thecharacteristics and performance of knowledge -based economies. Email: dominique.foray@oecd.org

An introduction to the economy of the knowledge society
Paul A. David and Dominique Foray

1.

Historical perspective

Knowledge has been at the heart of economic growth and the gradual rise in levels of social well-being since time immemorial 1. The ability to invent and innovate, that is tocre ate new knowledge and new ideas that are then embodied in products, processes and organizations, has always served to fuel development. And there have always been organizations and institutions capable of creating and disseminating knowledge: from the medieval guilds through to the large business corporations of the early twentieth century, from the Cistercian abbeys to the royal academies ofscience that began to emerge in the seventeenth century. “Knowledge-based economy”, however, is a recently coined term. As such, its use is meant to signify a change form the economies of earlier periods, more a "sea-change" than a sharp discontinuity. This transformation can be analysed at a number of different levels. 1.1 The acceleration of knowledge production

The c of the issue lies in...