Wednesday, July 26, 2017

Knowledge and Economic Growth

The rise of our entrepreneurial society, the information economy, global capitalism, and modern prosperity are all inextricably linked together with the cultivation, dissemination, and management of knowledge. Increasingly, knowledge itself and the transfer of knowledge, are widely recognized as the key factors in long-term economic growth.

Many consider this pivotal role of knowledge to be a new development, but, in fact, knowledge has always been a critical driver of economic growth. The roots of today’s “knowledge economy” can be traced back to the beginning of the Industrial Revolution when society first learned how to create, organize, and exchange useful knowledge.

Scientific Thinking and the Spread of Invention

Interestingly, prior to the Industrial Revolution, periods of invention did not create sustained economic growth in society. For example, population increased with the growth of agricultural yields, but the standard of living remained nearly equivalent for centuries. It was not until the 18th and 19th centuries that invention, for the first time, flourished and drove continuous economic growth.

The Industrial Revolution was categorically different from everything that preceded it because knowledge became a driver of economic growth. Previously, invention had occurred intermittently. But because the inventor lacked any real understanding of why things worked, knowledge of any single invention generally failed to spread to others or drive notable economic progress.
During the Middle Ages, individuals, through trial and error, discovered and produced many isolated inventions. However, these early inventors weren’t able to articulate their inventions nor develop general theories that could explain and extend their success to other and further invention. For example, medieval inventors could not generalize from a water wheel to the “theory of hydraulics.” Thus, while others may have discovered or copied a water wheel, it was without a comprehension of the knowledge behind the invention. It worked, but inventors didn’t really understand why it worked, so they couldn’t expand their know-how to create other inventions.

During the 18th century, with the beginning of scientific reasoning and the recognition of causality, thinkers and inventors began to understand why techniques and inventions worked. Soon, previously held truths began to be questioned and revised as new ideas emerged, yielding an intellectual and cultural dynamism that led to widespread innovation and entrepreneurial activity. As this cultural dynamic gained momentum, early scientists, thinkers, inventors, and practitioners all began to generalize and share the emerging knowledge, collecting together their practices and principles and creating some of the first encyclopedias, handbooks, and periodicals of “useful knowledge” that spread new knowledge across society.

Without widely applicable scientific theories and a knowledge base, it was unlikely that one invention would stimulate other inventions. Fertilizer offers a good example. Fertilizer has been used since antiquity, but, before the 19th century farmers did not know that nitrogen was a crucial ingredient of agricultural success, nor did they know how it got into the soil. Thus, after harvesting, they cleared their fields with slash and burn technology, thereby releasing the nutrients into the air rather than returning them to the soil. Once the role of nitrogen was discovered, scientists were able to develop synthetic fertilizers to significantly improve upon farming practices.

Innovation and Knowledge Management

With the development of propositional knowledge, causal relations, and scientific generalizations it became possible to turn science into knowledge and for knowledge to drive invention. Soon all knowledge began to be mined for its extended, practical applications.

Since the advent of the Industrial Revolution, discoveries and inventions have continued to build bridges, creating and applying knowledge to drive economic growth and prosperity. Today, epitomized by the new discipline of knowledge management and its technologically enabled practices such as patent mapping and the computerized review of vast areas of knowledge, knowledge and know-how are being aggressively optimized.

What began in the United States during the 18th century with the first patent issued in 1790, has exponentially compounded into over seven million patents today, and the foundations for a global economy that promises further growth through innovation and the increasingly sophisticated management of knowledge.

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