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Policy Futures in Education, Volume 1, Number 1, 2003
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EDITORIAL
Education in the Knowledge Economy [1]
This issue – the first – of Policy Futures in Education is devoted to the notion of
the knowledge economy and its significance in education. It is now fashionable
to claim that economic progress depends upon knowledge and the utilisation
of knowledge – the so-called ‘knowledge economy’. Yet economic progress
and expansion has always depended on new ideas and innovation. Indeed, it
was Francis Bacon who first suggested, ‘knowledge is power’. What has
changed, perhaps, is that knowledge is now recognised as being at least as
important as capital (physical and financial) and natural resources as a source
of economic growth. In short, knowledge is now regarded as a national
economic asset and the basis of national competitive advantage. Accordingly,
education at all levels, and especially higher education, with its potential to
enhance productivity through research, is seen as the global panacea to
economic policy. As one of the major areas of public policy investment,
governments around the world, in both advanced and developing economies,
are restructuring education systems, often in transparent terms that reflect the
new policy template of the ‘knowledge economy’.
The officially received view on the knowledge economy – the view that
emanates from the world policy institutions like the World Bank and
Organisation for Economic Cooperation and Development (OECD) – tends to
emphasise two long-term trends that support the shift to a global knowledge
economy. First, globalisation, considered in terms of the political project of
‘world economic integration’ achieved through free trade agreements, often
starts from the assumption that economic activity can be undertaken without
being constrained by international borders. It does seem that developments in
communications technologies have resulted in the falling cost and rising
efficiency in the transmission, retrieval and analysis of information. On this
basis, it is claimed knowledge in the global economy is used as both an input
and an output.
Second, it is claimed that knowledge use and, in particular, the ability to
innovate have become a national determinant of wealth and the basis of
comparative advantage. On this view knowledge is the fundamental means to
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improving the efficiency of production and distribution processes, improving
the quality and quantity of products, and increasing the choice of products and
services for consumers and producers. National policies for encouraging
knowledge generation, knowledge acquisition, knowledge diffusion, and the
exploitation of knowledge have become the most pressing priorities in the
science, research and education policy regimes. The emphasis, accordingly,
has focused upon the twin strategies of developing the appropriate knowledge
infrastructures, including the reform of knowledge institutions, together with
a strong focus on so-called ‘human resources’ or ‘human capital’; that is,
people who know how to learn and who continue learning by upgrading
existing skills and acquiring new skills. The knowledge economy is seen to
demand meta-cognitive skills that are both broad and highly transferable, such
as problem-solving and the ability to learn. Knowledge workers are now
encouraged to continuously upgrade and broaden their skills, through formal
education, lifelong learning, as well as through learning in the workplace and
in less formal surroundings. Firms are encouraged to turn themselves into
‘learning organisations’ which can harness the synergies of human capital in
the form of teams, and to avail themselves of the new techniques of
knowledge management. As part of this they are now being offered incentives
to develop research into such areas of their businesses. In order to pursue
these twin strategies, governments are informed that they must be prepared to
build the knowledge infrastructure by investing heavily in transportation,
education and telecommunications. More and more, the principles of rational
science planning demand investments in national research facilities and in the
higher education sector, alongside broad policies to encourage private
investment in human capital development, such as education, training and
apprenticeship.
One could argue that the discourses out of which the knowledge
economy has grown were strongly influenced by the Austrian school of
economics.
Economics of Information and Knowledge
Modern economics of knowledge and information received a unique impetus
from the work of the Austrian school. Peter Boettke (2001) has argued that the
distinction between notions of information and knowledge in Austrian
economics is what really lay behind the dispute over risk and uncertainty in
information economics. When time and information were incorporated into
analysis, the standard model tended to treat them as constraints or objective
commodities. Economists tended to view information as a stock and flow
concept and to eliminate discussions of knowledge, yet ‘information is a flow
concept and knowledge is a stock notion’. Boettke (2001) argues, ‘The
Austrians want to emphasise not just the proficient use of existing information,
but the discovery and use of new knowledge’ and he proceeds to discuss the use
of ‘information’ and ‘knowledge’ within the Austrian literature, focusing on
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Hayek’s two influential papers, written in 1936 and 1945, Fritz Machlup’s
studies on innovation and the knowledge industry, Israel Kirzner’s (and later
Don Lavoie’s) theory of the entrepreneurial market process, and Joseph
Stiglitz’s work on informational efficiency.
Hayek’s work emphasised the limited nature of knowledge: the price
mechanism of the ‘free’ market conveys information about supply and
demand that is dispersed among many consumers and producers and cannot
be coordinated by any central planning mechanism. His early work
emphasised that the key to economic growth is ‘knowledge’ and this insight
provided him with the grounds for casting doubt on socialism and state
planning, and for advocating that the market was the best way to organise
modern society. In an early paper entitled ‘Economics and Knowledge’,
delivered to the London Economic Club in 1936 (and reprinted in Economica
IV, 1937, pp. 33-54), Hayek contended:
The empirical element in economic theory – the only part which is concerned not
merely with implications but with causes and effects and which leads therefore to
conclusions which, at any rate in principle, are capable of verification – consists of
propositions about the acquisition of knowledge.
This insight, in part, he attributes in a footnote to Karl Popper’s notion of
falsification outlined in the 1935 German edition of The Logic of Scientific
Discovery, thus indicating a close relationship to his distant cousin that helped
to determine intellectual history of the twentieth century. Hayek provided an
analysis of the tautologies that comprise formal equilibrium theory, arguing
that the extent that these formal propositions could be filled out with empirical
propositions about how we acquire and communicate knowledge determines
our understanding of causation in the real world. With that statement he
distinguished the formal element of economics as the Pure Logic of Choice – a
set of tools for investigating causal processes. The problem he addressed
receives its classical formulation in the following question: ‘How can the
combination of fragments of knowledge existing in different minds bring
about results which, if they were to be brought about deliberately, would
require a knowledge on the part of the directing mind which no single person
can possess?’ And he proceeds to offer a solution in terms of the now
celebrated notion of spontaneous order: ‘the spontaneous actions of
individuals will, under certain conditions which we can define, bring about a
distribution of resources which can be understood as if it were made according
to a single plan, although nobody has planned it’. This is also an answer, he
surmises, to the problem of the ‘social mind’.
In 1945 Hayek returns to the problem of knowledge in an article entitled
‘The Use of Knowledge in Society’ when he poses the problem of constructing
a rational economic order, and he criticises the approach from an economic
calculus which assumes that we all possess the relevant information, start out
from a given system of preferences and command complete knowledge of
available means. By contrast, he maintains the problem is not merely one of
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how to allocate given resources; rather, ‘it is a problem of the utilisation of
knowledge which is not given to anyone in its totality’. Hayek emphasises the
importance of knowledge of particular circumstances of time and place, which
constitutes the unique information which every individual possesses, and he
champions practical and contextual or ‘local’ knowledge (‘unorganised
knowledge’) against the scientific or theoretical knowledge, as an
understanding of general rules, in economic activity. This ‘local knowledge’ is
the sort of knowledge, he hastens to add, which cannot be made into statistics
or conveyed to any central authority.
Hayek’s 1945 article, then, is considered the classic argument against
central planning and the state. It is an argument that he develops through the
notion of evolutionary economics, for he considers the pricing system as an
institution that has developed as a means of communicating information
where ‘prices act to coordinate the separate actions of different people in the
same way as subjective values help the individual to coordinate the parts of his
plan’. This he takes to be the central theoretical problem of all social science –
not the habit of thinking what we are doing but the number of important
operations which we can perform without thinking about them, a kind of
spontaneous system that has developed as practices and institutions over time.
Some have argued that Hayek’s genius was to recognise that liberal
democracy, science and the market are such spontaneous self-organising
systems based on the principle of voluntary consent that serve no end beyond
themselves.
With respect to the economics of knowledge and information today, we
can tentatively identify at least six important strands, all beginning in the post-
World War II period and all but one (i.e. new growth theory) associated with
the rise to prominence of the neoclassical second (1960s-70s) and third
(1970s-today) Chicago schools [2]:
the economics of information pioneered by Jacob Marschak (and co-
workers Miyasawa, and Radner), and George Stigler, who won the Nobel
Memorial Prize for his seminal work in the economic theory of
information;
Fritz Machlup (1962), who laid the groundwork and developed the
economics of the production and distribution of knowledge (see Mattessich,
1993);
the application of free-market ideas to education by Milton and Rose
Friedman (1962), although Friedman’s form of monetarism has become
relatively less important;
the economics of human capital developed first by Theodore Schultz (1963),
and later by Gary Becker (e.g. 1964) in New Social Economics;
Public Choice theory developed under James Buchanan and Gordon
Tullock (1962);
new growth theory has highlighted the role of education in the creation of
human capital and in the production of new knowledge and explored the
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possibilities of education-related externalities, not specified by neoclassical
theory.
The public policy focus on science and technology, in part, reflects a growing
consensus in macroeconomics of ‘new growth’ or ‘endogenous growth
theory’, based on the work of Solow (1956, 1994), Lucas (1988) and Romer
(1986, 1990, 1994), that the driving force behind economic growth is
technological change (i.e. improvements in knowledge about how we
transform inputs into outputs in the production process). On this model
technological change is endogenous, ‘being determined by the deliberate
activities of economic agents acting largely in response to financial incentive’
(Snowdon & Vane, 1999, p. 79). The neoclassical growth model developed by
Solow assumed technology to be exogenous and therefore available without
limitation across the globe. Romer’s endogenous growth model, by contrast,
demonstrates that technology is not a pure public good, for while ideas are
non-rivalrous, they are also partially excludable through the legal system and
patents. The policy implication is twofold: knowledge about technology and
levels of information flow are critical for economic development and can
account for differential growth patterns. Knowledge gaps and information
deficiencies can retard growth prospects of poor countries, while technology
transfer policies can greatly enhance long-term growth rates and living
standards.[3].
Knowledge Capitalism and the Knowledge Economy
The term ‘knowledge capitalism’ emerged only recently to describe the
transition to the so-called ‘knowledge economy’, which can be characterised in
terms of the economics of abundance (as opposed to scarcity), the annihilation
of distance, the deterritorialisation of the state, and investment in human
capital. For world policy agencies such as the World Bank and OECD, the shift
to a knowledge economy involves a fundamental rethinking of the traditional
relationships between education, learning and work, focusing on the need for
a new coalition between education and industry. ‘Knowledge capitalism’ and
‘knowledge economy’ are twin terms that can be traced at the level of public
policy to a series of reports that emerged in the late 1990s by the OECD (1996a
& b) and the World Bank (1998), before they were taken up as a policy
template by world governments in the late 1990s (see, for example, Peters,
2001b). In terms of these reports, education is reconfigured as a massively
undervalued form of knowledge capital that will determine the future of work,
the organisation of knowledge institutions and the shape of society in the years
to come.
The OECD report, The Knowledge-based Economy (1996a), for instance,
begins with the following statement:
OECD analysis is increasingly directed to understanding the dynamics of the
knowledge-based economy and its relationship to traditional economics, as
reflected in ‘new growth theory’. The growing codification of knowledge and its
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transmission through communications and computer networks has led to the
emerging ‘information society’. The need for workers to acquire a range of skills
and to continuously adapt these skills underlies the ‘learning economy’. The
importance of knowledge and technology diffusion requires better understanding
of knowledge networks and ‘national innovation systems’. (emphasis in
original)
The report is divided into three sections, focusing on trends and implications
of the knowledge-based economy, the role of the science system in the
knowledge-based economy, and indicators, essentially a section dealing with
the question of measurement (see also OECD, 1996b, 1996c, 1997; Foray &
Lundvall, 1996). In the summary, the OECD report discusses knowledge
distribution (as well as knowledge investments) through formal and informal
networks as being essential to economic performance, and hypothesises the
increasing codification of knowledge in the emerging ‘information society’. In
the knowledge-based economy, ‘innovation is driven by the interaction of
producers and users in the exchange of both codified and tacit knowledge’.
The report points to an interactive model of innovation (replacing the old
linear model), which consists of knowledge flows and relationships among
industry, government and academia in the development of science and
technology. With increasing demand for more highly skilled knowledge
workers, the OECD indicates:
Governments will need more stress on upgrading human capital through
promoting access to a range of skills, and especially the capacity to learn;
enhancing the knowledge distribution power of the economy through
collaborative networks and the diffusion of technology; and providing the enabling
conditions for organisational change at the firm level to maximise the benefits of
technology for productivity. (p. 7 emphasis in original)
The science system – public research laboratories and institutions of higher
education – is seen as one of the key components of the knowledge economy,
and the report identifies the major challenge as one of reconciling traditional
functions of knowledge production and training of scientists with its newer
role of collaborating with industry in the transfer of knowledge and
technology.
In its analysis of the knowledge-based economy in one of the earliest
reports to use the concept, the OECD observes that economies are more
strongly dependent on knowledge production, distribution and use than ever
before and that knowledge-intensive service sectors (especially education,
communications and information) are the fastest growing parts of Western
economies, which, in turn, are attracting high levels of public and private
investment. The report indicates how knowledge and technology have always
been considered external influences on production, and that now new
approaches are being developed so that knowledge can be included more
directly. (The report mentions Friedrich List on knowledge infrastructure and
institutions; Schumpeter, Galbraith, Goodwin and Hirschman on innovation;
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and Romer and Grossman on new growth theory.) New growth theory, in
particular, demonstrates that investment in knowledge is characterised by
increasing rather than decreasing returns, a finding which modifies the neo-
classical production function that argues returns diminish as more capital is
added to the economy. Knowledge also has spill-over functions from one
industry or firm to another, yet types of knowledge vary: some kinds can be
easily reproduced and distributed at low cost, while others cannot be easily
transferred from one organisation to another or between individuals. Thus,
knowledge (as a much broader concept than information) can be considered in
terms of ‘know-what’ and ‘know-why’, broadly what philosophers call
propositional knowledge (‘knowledge that’), embracing both factual
knowledge and scientific knowledge, both of which come closest to being
market commodities or economic resources that can be fitted into production
functions. Other types of knowledge, what the OECD identifies as ‘know-how
and ‘know-who’, are forms of tacit knowledge (after Polanyi, 1967; see also
Polanyi, 1958), which are more difficult to codify and measure. The OECD
report indicates that ‘Tacit knowledge in the form of skills needed to handle
codified knowledge is more important than ever in labour markets’ (p. 13,
emphasis in original) and reasons, ‘Education will be the centre of the
knowledge-based economy, and learning the tool of individual and
organisational advancement’ (p. 14), where ‘learning-by-doing’ is paramount.[4]
It is argued that the knowledge economy is different from the traditional
industrial economy because knowledge is fundamentally different from other
commodities, and that these differences, consequently, have fundamental
implications both for public policy and for the mode of organisation of a
knowledge economy. Following the New Keynesian, Joseph Stiglitz (1999a, b,
c; 2002), we can analyse the knowledge economy in terms of the scarcity-
defying characteristics of ideas. Stiglitz argues that knowledge is a public good
because it is non-rivalrous, that is, knowledge, once discovered and made
public, operates expansively to defy the normal ‘law’ of scarcity that governs
most commodity markets. Knowledge in its immaterial or conceptual forms –
ideas, information, concepts, functions and abstract objects of thought – is
purely non-rivalrous, that is, there is essentially zero marginal costs to adding
more users. While non-rivalrous, knowledge can be excluded – the other
property of a pure public good – from certain users through various forms of
legal ‘protection’. Yet even though knowledge is not a pure public good, there
are extensive externalities (spill-overs) associated with innovations, which do
not necessarily accrue to the innovators.
Danny Quah (1998), in a similar conception, suggests that the ‘weightless
economy’, the term he prefers to ‘the knowledge economy’ or the ‘new
economy, comprises four main elements: information and communications
technology (ICT) and the Internet; intellectual property, which includes not
only patents and copyrights but more broadly, brand names, trademarks,
advertising, financial and consulting services, financial exchanges, health care
(medical knowledge), and education; electronic libraries and databases,
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including new media, video entertainment, and broadcasting; and, traditional
libraries and databases, and pharmaceuticals. These four elements, he alleges,
constitute the fastest-growing sectors in modern economies – whether
measured in value added or employment and job growth.
The ‘weightless economy’ is governed by new rules and a new logic:
All components of the weightless economy can be represented, without loss, as
‘bitstrings’ – sequences of 1s and 0s. (This doesn’t mean they are digital in the
sense used in relation to computers. An advertising image is a bitstring, but it is
not insightfully viewed as part of computers and computer networks.) Since ideas
and knowledge can also be represented in this manner, it is an easy step to identify
them with the rest of the weightless economy. To minimise confusion I will call the
bitstring pieces of the weightless economy knowledge-products. This emphasises
their symbolic similarity to knowledge but, at the same time, maintains their
distinctness. (Quah, 1998)
He goes on to emphasise three points. First, like knowledge, knowledge-
products show infinite expansibility, meaning that, physically, they are not
depleted through use (e.g. computer software is not reduced the more users
run it). Second, like knowledge, ‘knowledge-products show superstar
dynamics’, by which he means that ‘we cannot distinguish between the
product and the idea behind it’ where multiple implementations require no
physical material and thus exhibit a zero-price in a well-functioning market.
Third, like knowledge, knowledge-products have a chain of production that is
irrecoverably intricate and uncertain. Applying more factor inputs in an effort
to increase output can be self-defeating. Quah writes:
These three properties imply that the way businesses operate should change and
that appropriate government policies will need to acknowledge those changes. As a
first step, one might think of economies comprised entirely of knowledge-products
– weightless economies – as being like large laboratories for producing intellectual
property broadly defined. The problem is that the systems of intellectual property
for organising patents and copyrights are based on principles and conceptions
which no longer apply in the weightless economy. The question is not whether a
new set of market rules has emerged, but the ways in which people, governments
and firms can respond to them.
Education in the Knowledge Economy
It is policy understandings based upon these characteristics that recently have
helped shape national policy constructions of the ‘knowledge economy’ not
only in the West – USA, United Kingdom, Ireland, Australia, Canada and New
Zealand – but also in the developing world, most notably, China and South-
east Asia. The United Kingdom’s White Paper, Our Competitive Future
(Department of Trade and Industry, 1998) [5], for example, begins by
acknowledging the fact that the World Bank’s 1998 World Development Report
took knowledge as its theme, citing the report as follows:
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For countries in the vanguard of the world economy, the balance between
knowledge and resources has shifted so far towards the former that knowledge has
become perhaps the most important factor determining the standard of living ...
Today’s most technologically advanced economies are truly knowledge-based.
(http://www.dti.gov.uk/comp/competitive/main.htm)
The White Paper also mentions that the OECD has drawn attention to the
growing importance of knowledge, indicating that the emergence of
knowledge-based economies has significant policy implications for the
organisation of production and its effect on employment and skill
requirements. The report suggests that already other countries, including the
USA, Canada, Denmark and Finland, have identified the growing importance
of knowledge and reflected it in their approach to economic policy.
The White Paper emphasises that ‘knowledge economy’ does not mean
a return to interventionist strategies of the past but neither does it mean a
naïve reliance on markets. Tony Blair describes the role of government in the
Foreword to the White Paper:
The Government must promote competition, stimulating enterprise, flexibility and
innovation by opening markets. But we must also invest in British capabilities
when companies alone cannot: in education, in science and in the creation of a
culture of enterprise. And we must promote creative partnerships which help
companies: to collaborate for competitive advantage; to promote a long term vision
in a world of short term pressures; to benchmark their performance against the
best in the world; and to forge alliances with other businesses and with employees.
In education there is a strong emphasis on the culture of enterprise and
building skills of entrepreneurship, which is not very different, if at all, from
the policy emphases initiated by Lord Young under the Thatcher Government.
There is an equal emphasis on the promotion of research, on industry–
education relationships, especially in higher education, on workplace learning,
on building a culture of learning (including the establishment of individual
learning accounts).
Two Brief Examples: Scotland and New Zealand
The Scottish Executive released its White Paper, Targeting Excellence:
modernising Scotland’s schools [6], in 1999, which begins a section entitled
‘Targeting Excellence for the Knowledge Economy’ with the following
statement:
The knowledge economy will pose challenges and opportunities. Knowledge and
know-how are taking over from buildings and machinery as the most valuable
assets of business. The speed at which information can cross the globe, the
sophistication of modern products and services, and the sophistication of the
modern consumer all point to increasing globalisation of the economy, and to
increasing customisation of goods and services to meet people’s individual needs.
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Innovation, fresh thinking, the acquisition and application of knowledge, and
high levels of customer awareness are likely to be among the critical factors in
achievement in the future. Competitive advantage will come from the application
of intellect and knowledge to business problems. The skills Scotland will need to be
successful can and should be fostered and grown in schools.
The White Paper then lists initiatives already under way, including: the
implementation of the National Grid for Learning by 2002; investment in
training teachers in the use of ICT; development of the Scottish Virtual
Teachers’ Centre; the ‘Think Business’ programme to bring entrepreneurs into
the classroom; promoting enterprise skills in schools; support for the National
Centre: Education for Work and Enterprise; investment in industry and
enterprise awareness for teachers and schools. And it also identifies the next
steps as: extension of the National Grid for Learning to enhance lifelong
learning, in particular, support for community access; new guidelines on
improving work experience; new guidelines on careers education; expanding
the Education for Work and Enterprise agenda.
In New Zealand, the Information Technology Advisory Group (ITAG),
appointed by the Minister for Information Technology, has recently published
a report entitled The Knowledge Economy which begins its Executive Summary
with the following assertions:
More than 50 per cent of Gross Domestic Product (GDP) in the major OECD
economies is now based on the production and distribution of knowledge. We are
leaving the Industrial Age behind and moving into the Information Age.
In the US, Australia, the United Kingdom, Canada, Finland, and Ireland, the
growth of the Internet and other related new technologies have become the catalyst
for the creation of ‘knowledge economies’ …
Countries that have encouraged their people through education and life-long
learning and by investing heavily in research and development (R & D) are well
positioned to take advantage of these new global markets. Australia, Finland,
Ireland, Canada, Singapore, and the United States are countries which have
embraced the knowledge economy (some still with a strong commodity sector), and
are experiencing strong GDP growth as a result. There is much we can learn from
them. (see: http://www.knowledge.gen.nz/)
The report is interesting in terms of the claims it makes about ‘knowledge’:
‘know-how’ and ‘know-who’ is more important than ‘know-what’; knowledge
gained by experience is as important as formal education and training; and
lifelong learning is vital for organisations and individuals. The report goes on
to suggest that intellectual capital is a firm’s source of competitive advantage
and that information and communication technologies ‘release people’s
creative potential and knowledge’. It details what New Zealand’s competitors
are doing and indicates that Ireland accomplished a great deal, by investing
heavily in education, especially technical education; correcting major
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imbalances in the government finances and putting fiscal and monetary
policies in order; controlling excessive costs and keeping wage increases
moderate; opening up the economy and privatising many state-owned
enterprises; positioning Ireland as the ‘hub’ between Europe and the global
marketplace (Ireland trades 153% of its GNP); enacting strong legislation
designed to open up previously sheltered activities to competition in the
interests of consumers; creating incentives and stimulating the economy
through lower taxation.
Higher Education and the Knowledge Economy
Higher education, and in particular the universities, is at the heart of the new
policy developments surrounding the concept of the knowledge economy.
Policy-makers are pressed to ‘massify’ higher education and to achieve greater
access and higher participation rates up to and beyond the 50% level. At the
same time, state policy-makers face problems concerning the funding of higher
education in national systems that have experienced erosion of per capita
funding levels and poor relativities in academic and general staff salaries
compared to the private sector. There is a move towards a system
rationalisation at all levels, with an accent on enhancing and rewarding the
quality of research.
The transformation of higher education in many Western countries from
a universal welfare entitlement, first into a private investment in ‘human
capital’ and, second, to a fully consumer-driven system, has followed a now
familiar pattern: a transparent alignment of the university system to reflect the
needs of an emerging ‘post-industrial’ economy, with increasing demands for
highly trained, multiskilled, tertiary-educated workers; the introduction of
new forms of corporate managerialism and the emulation of private sector
management styles; the corporatisation of the university system; the
introduction of ‘ownership monitoring’ to reduce the financial risk of the state;
an attack on faculty and student representation in university governance and
the general attempt to discredit democratic forms of governance on ‘efficiency
grounds; the introduction of user-charges, student loans, and the creeping
privatisation of the system as a whole.
The ‘massification’ of higher education has been based on new funding
mechanisms involving an ever-increasing proportion of income from student
fees and contestable research funding. Even with the diversification of funding
sources, universities have struggled to cope financially. The early twenty-first
century seems destined to become an era of closure for some departments,
faculties and institutions, especially as the spectacular growth in participation
experienced during the last few decades levels out and institutions are forced
not only to compete with each other in the market for student places but also
to absorb the cost of providing extra, unfunded, student places, possibly at
declining levels of state funding.
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With the emergence of the policy concept of the knowledge economy,
universities are struggling to take competitive advantage in a new, complex
environment that no longer privileges national or regional sites. The
traditional roles of the state as funder, regulator and provider have to undergo
a sea change.
Cunningham et al (2000) usefully identify eight trends driving change in
modes of higher education provision:
globalisation, and the need to deliver appropriate courses worldwide, as
well as develop cross-cultural competencies at management level;
new information and communication technologies (ICTs) and the need to
continually upgrade skills in how to use ICTs throughout the organisation,
as the ‘half-life’ of knowledge falls dramatically;
the knowledge economy, and the need to reduce the cycle time between
developing and executing new ideas, as well as making knowledge portable
and transferable through sharing best practice;
the need to create a learning organisation, which promotes learning agility,
an orientation to change, and a commitment to lifelong learning
throughout the organisation – the major issue is no longer seen as the
acquisition of skills, but how to teach behaviours, which are primarily
learned through challenging experiences;
the growth of user-pays higher education, and closer attention on the part
of corporations to the ‘bottom line’ of externally provided training, as well
as the decline in public funding to universities;
use of ICTs to distribute knowledge through the organisation at lower
costs, through the Internet and corporate Intranets, in order to lever
competitive advantage through the sharing of intellectual capital;
growing demand for education and training with ‘credential creep’ in the
labour market and the professions, and the need for formal certification to
ensure ‘lifetime employability’, leading to the emergence of the ‘learner-
earner’ and ‘earner-learner’ education markets;
shortages of skilled personnel, particularly in the booming US economy
(until the 2000 recession after the World Trade Centre attack), and the
expectation of new employees (so-called ‘Generation Xers’) that continuous
training opportunities will be provided, and that a corporate university is a
marker of that commitment and hence an ‘employer of choice’.
Cunningham et al also draw upon analyses of the ‘new economy’ by corporate
analysts such as Merrill Lynch and the Gartner Group, who identified the
implications of these trends for post-secondary education in the terms outlined
in Table I.
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Old Economy
New Economy
Four-year degree
Forty-year degree
Training as Cost Center
Training as No. 1 Source of Competitive Advantage
Learner Mobility
Content Mobility
Distance Education
Distributed Learning
Correspondence and Video
High-Tech Media Centers
One Size Fits All
Tailored Programs
Geographic Institutions
Brand Name Universities and Celebrity Professors
Just-in-Case
Just-in-Time
Isolated
Virtual Learning Communities
Table I. Education in the ‘old economy’ and the ‘new economy’.
Source: Cunningham et al, 2000, p. 20.
Clearly, the so-called ‘new economy’ erodes the preserve of traditional
providers and provides a new logic of global competition. It also provides
universities and other institutions of higher learning with formidable
challenges – in resourcing, management, course delivery, staff and student
recruitment, modes of learning and teaching, and staff development – in the
developing knowledge economy. The knowledge economy raises new ethical
and legal questions concerning intellectual property rights and represents
fundamentally important issues concerning not only the creation, production
and transmission of knowledge but also the value, meaning and ownership of
knowledge.
The Articles
The articles in this first issue of Policy Futures in Education offer a wide range of
perspectives on the knowledge economy. Paul David & Dominique Foray
provide a very useful overview of the whole field and show how the concept
of the knowledge economy requires explanation at various levels – historical,
technological, cultural, educational, legal. They emphasise the important
distinction between knowledge and information, examine the conditions
governing access to both, and discuss the new skills required as the pace of
knowledge production continues to increase. They also draw attention to the
role of knowledge-based communities as agents of economic change and note
the unevenness of development across different sectors of activity.
Interestingly, the work of teachers is identified as a field where the
‘Opportunities for regular knowledge exchanges between educational
researchers and teachers are few and far between’. David & Foray go on to
consider the significance of concerns about intellectual property rights and the
implications for trust among those involved in knowledge production. They
Michael A. Peters & Walter Humes
14
conclude with some challenging reflections on the impact of the new
technologies on our sense of history.
In response to David & Foray, Christopher Winch explores the
relationship between information, knowledge and learning. He argues that it is
important to understand distinctions between different types of knowledge
(non-discursive practical knowledge, discursive practical knowledge, applied
theoretical knowledge) and focuses particularly on the connection between
the development and support of applied theoretical knowledge and the
maintenance of social capital. His conclusion is that ‘The move to an
information society by itself creates the need for renewing institutions that
allow information to be turned into knowledge and which allow new skills to
arise to compensate for those lost in the transition to a greater reliance on
information’.
The necessity of appreciating subtle philosophical distinctions in the
meaning of key terms in the discourse of the knowledge economy is also
emphasised by Ruth Rikowski, but she goes on to develop a much more
political argument to the effect that ‘the knowledge revolution is the latest
phase of capitalism’. Central to her analysis is the concept of value, and she
returns to Marx to explain how in advanced market economies value is
extended from the tangible and material to information, knowledge and ideas.
The world of business seeks to transfer human capital into structural capital.
Rikowski presents a chilling picture of where this might lead: ‘The drive to
create value is infinite. The next drive may well be towards extracting value
from our emotions, our friendships, our convictions and our imagination’.
By contrast, a generally positive view of the possibilities of the
knowledge economy is advanced by Alan Burton-Jones. Focusing particularly
on the private sector, his article describes ‘a framework for identifying
organisational knowledge assets and learning needs, optimising knowledge
supply and planning knowledge growth’. He draws attention to the tacit
nature of much organisational knowledge and the need to be more explicit
about both existing knowledge resources and future knowledge needs. The
contribution of different groups to the development of a growth model of
organisational knowledge is outlined. He does, however, acknowledge that
there is ‘a dark side as well as a bright side to the new economy’ and observes
that the gap between the ‘knowledge rich’ and the ‘knowledge poor’ is likely
to widen.
Several articles consider how the knowledge economy is influencing the
work of academics. Steve Fuller and Henry Giroux provide sharp critiques of
the effects on universities of the commodification of knowledge brought about
by the influence of corporate culture on higher education. Fuller contrasts the
traditional conception of knowledge as a public good with the emerging
situation in which knowledge is more accurately described as a positional
good, subject to market definitions of expertise, credentials and intellectual
property. He argues that academics remain largely in denial about the nature
and scale of the changes that are taking place, which involve redefining
EDUCATION IN THE KNOWLEDGE ECONOMY
15
universities not only as ‘engines of economic growth’ but also as ‘dispensers of
credentials’. In the latter role they have become ‘the premier mechanism for
discriminating and stratifying the population’, taking over from class and race.
Giroux makes a strong case for the reinstatement of the values of
democracy, justice, freedom, rights and equality at the heart of public
discourse about the function of universities. He deplores the ascendancy of
commercial values in the academy and argues that ‘the struggle to reclaim
higher education must be seen as part of a broader battle over the defense of
public goods, and at the heart of such a struggle is the need to challenge the
ever-growing discourse and influence of neo-liberalism, corporate power, and
corporate politics’. He urges academics to develop modes of resistance that
enable them to reclaim their important social role as public intellectuals
inspired by a sense of civic duty (as distinct from professional self-interest).
Although starting from similar concerns, a rather different perspective on
the changing character of universities is offered by Merle Jacob. Surveying
developments in Europe, she notes the desire of policy-makers to change both
the ‘organisational structures’ and ‘cognitive agendas’ of universities. The
central purpose of her article is ‘to explore the issue of how commodification
of scientific knowledge is enacted’. She suggests that this is part of a broader
social process to attach a market value to more and more aspects of
(post)modern society. Like Giroux, she is critical of some of the responses of
academics to the trends she identifies and asserts the importance of ‘a socially
responsible science’ as distinct from a science that is driven largely by funding
pressures and the potential for commercial exploitation.
The ideological bases of the knowledge society are examined by Gerard
Delanty. He detects three main strands of influence – postmodernism, neo-
liberalism and Third Wayism. He argues that these impact on higher
education in ways that lead to deep cultural contradictions between, for
example, teaching and research, efficiency and scholarship, and management
and leadership. He also suggests that the impact of the three ideologies entails
new relations between higher education, the state and the market. In the face
of these pressures, universities need to reposition themselves. Delanty states
that they have the best chance of playing a major role in the knowledge
society if they accept that they are no longer exclusive sites of expertise but,
rather, sites of public discourse.
David Guile questions the adequacy of current thinking about the
knowledge economy, especially among policy-makers and educational
planners. Appeals to notions of ‘lifelong learning’, ‘learning organisations’ and
the ‘learning society’ fail to engage with the real issues. They represent, for
Guile, ‘comforting illusions’. Similarly vague talk about the need for a ‘new
learning relationship’ between education and work does not meet the case
either. What he proposes instead is a total reconceptualisation of the nature of
learning. No longer is it about the acquisition of knowledge. Instead,
worthwhile learning should be seen as a form of participation in a ‘community
of practice’. The emphasis must be on the situated, social and dynamic
Michael A. Peters & Walter Humes
16
character of the learning process (rather than on a decontextualised body of
knowledge). Thus, the capacity to transform ‘communities of practice’ will be
enhanced.
Taken together, the collection of articles represents a powerful set of
insights into one of the central economic, social and political concepts of our
times. The implications for the future of educational systems are profound.
Future Issues – Call for Papers
Planning is well advanced for forthcoming issues of the journal on a number of
topics, including new utopian thinking, education and work, and social
inclusion. We would, however, like to invite contributions to two special
issues to be published in 2004. The first is on the future of the academy.
Universities are subject to many pressures that are changing their institutional
character significantly. What will they look like by the middle of the twenty-
first century? We would welcome articles on this theme from a variety of
perspectives (economic, managerial, pedagogic, disciplinary, cultural).
The second special issue for which we are seeking papers is on teacher
education and interprofessional training. It is now widely accepted that
professionals from different backgrounds must learn to work with each other,
and learn from each other, to a much greater extent than has been the case in
the past. Is this belief well founded and, if so, how can it best be achieved? In
particular, what are the implications for the training of the teachers of the
future?
For both of these special issues, papers would be required no later than
December 2003. We would welcome informal enquiries from potential
contributors.
Michael A. Peters & Walter Humes
Editors
Correspondence
Professor Michael A. Peters, Department of Education, University of
Glasgow, 8 University Gardens, Glasgow G12 8QH, United Kingdom
(m.peters@educ.gla.ac.uk or ma.peters@auckland.ac.nz).
Notes
[1] Parts of this editorial draw upon Peters (2001a, 2001b, 2002a, 2002b, 2002c).
[2] See the New School site on the Chicago School:
http://cepa.newschool.edu/het/schools/chicago.htm
[3] This is not to deny that other social sciences have contributed to the discourse
on the knowledge economy and its earlier sibling concept of the knowledge
society. In sociology, for instance, the notion of post-industrial society was first
EDUCATION IN THE KNOWLEDGE ECONOMY
17
coined by Daniel Bell (1974) and Alain Touraine (1973) 20 years ago, and
developed as the information society and the network society by Manuel
Castels (2000). In management theory, knowledge capitalism has been picked
up in terms of the burgeoning field of ‘knowledge management’.
[4] The emphasis on tacit knowledge is developed out of the work of Polanyi
(1958, 1967), which is also strongly developed in terms of the concept of
practice in both Heidegger and Wittgenstein. The emphasis on practice,
perhaps, is a major distinguishing characteristic of much twentieth-century
philosophy, sociology and cultural analysis (see, for example, Turner, 1994)
with a focus on the practical over the theoretical and ‘background practices’
against which theoretical knowledge is articulated and/or codified. The
concept of practice, mostly unexamined, figures largely in education and
pedagogy and in the relatively new concept of ‘communities of practice’ that
has been developed in the context of business and organisational learning.
[5] For a set of papers presented at a conference jointly organised by the
Department of Trade and Industry and the Centre for Economic Policy
Research, ‘The Economics of the Knowledge Driven Economy’, see:
<http://www.dti.gov.uk/comp/competitive/pdfs/kdeproc.pdf> including
papers by Quah and Stiglitz, among others.
[6] For a summary of the White Paper, see:
http://www.scotland.gov.uk/library/documents-w6/edsp-00.htm
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I. Introduction, 65. — II. A model of long-run growth, 66. — III. Possible growth patterns, 68. — IV. Examples, 73. — V. Behavior of interest and wage rates, 78. — VI. Extensions, 85. — VII. Qualifications, 91.