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How Do We Know We Are In a Knowledge Economy? - Part II

Last week, we considered the expanding role of knowledge in today's economy.  This week we will look at how the changing roles of capital and labor define our economy.

With workers in today's economy increasingly working outside of factories or even the traditional Dilbertian environment, how does capital serve the ordinary worker?  It is here where the  Collaborative Business Environment (CBE) addresses the idea of working capital for the knowledge worker.  Collaborative Business Environments are the nexus of all tools used by the knowledge worker today including e-mail, discovery, and real-time communications.  In an industrial economy, buying a new machine for a factory might result in more widgets flying out the factory door, a factor known as productivity.  In the knowledge economy, productivity is a concept not as easily defined (we'll look more at productivity in future columns).  Several very important questions arise:

  • What is the output of a knowledge worker?
  • How does one define the productivity of a knowledge worker?
  • How can this productivity be increased?

We tried in the 1980s to increase knowledge workers' productivity by using artificial intelligence, but that's a topic for another day.

At the dawn of the U.S. industrial age in the mid 1800s, 95% of the workforce was comprised of agrarian workers.  Today, only 1.5% of the workforce is agrarian yet our productivity in this area has been increasing at the rate of 1.94% every year since 1960.  Similarly, whereas 19.6% of the workforce in 1979 was comprised of industrial workers, the highest since 1939, our industrial output today has increased since 1985 even though knowledge workers today represent a plurality of the workforce (today the industrial workers figure is closer to 10%).  We are of course getting much more out of our factories than ever before - and why is that?  We have applied knowledge to the factory environment.  Since 1987, the number of industrial workers has decreased by 20% yet output has increased by 50%.

One thing becomes clear: while it was possible to have had a pure agrarian economy, it is next to impossible to envisage a pure knowledge economy.  Instead, the outputs of the so-called knowledge economy will interact with the agrarian and industrial elements creating more of a hybrid economy than anything else.

Given the continuously changing structure of the economy we will need to find different ways of defining such terms as output and productivity.  So what about the knowledge economy?  After all, even if we use knowledge sharing and collaboration to design a better refrigerator, eventually the refrigerator will be built in a factory.  We will build it more efficiently, it may be a better refrigerator, but nonetheless it will still be a refrigerator.

We'll continue to look at these questions in the coming weeks - in the meantime, I need to check the fridge.

Sachin Anand, a colleague of mine at Basex, assisted with the research in preparing this piece.

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