The Economics of Knowledge

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ECONOMIZING ON WHAT WE KNOW [Posted on 2007-12-19]
The "idealized" sense of knowledge places it at the opposite end of the spectrum from considerations of cost and benefit, profit and loss. That esoteric sense of knowledge prevailed from the pre-Socratics to the Renaissance. However the Enlightenment and the subsequent Modern Era challenged that view and have been successively replacing it with a practical, if mundane alternative. But even though the esoteric view is now obsolete, it hovers like Hamlet's ghost in the background, with the result that few have actually developed a formal analysis of "knowledge transactions." Prof. Foray has now excoriated that ghost.

As it turns out however, there is a lot of ground to cover in any attempt to introduce an economic analysis of the important characteristics of knowledge. In a basic sense, the two encompassing categories of concern are the "internal" and the "external" aspects of knowledge. Foray tackles both in a comprehensive overview. The internal aspect refers to the generation and organization of knowledge itself, to the costs and benefits of producing something that is reliable enough to be designated an economic resource. The external aspect refers to the economic utilization and social impact of knowledge, how it bears on the calculations of profit and loss, and how it is becoming an increasing source of value-added if properly used.

The book covers everything from Patent Law to the Public Good, because knowledge figures intrinsically in each of these factors. Analytically speaking, knowledge is like a horizontal layer that passes through all of the vertical specialities, including law, public policy, industrial organization, and market activities. What Foray does is to set the context for further research and theorizing in each of these areas - there are so many factors that none of them can be covered in great depth. Still, this book is the guide for what remains to be done, which is developing a more refined economic analysis of each of the areas where the economics of knowledge has a bearing on how knowledge is produced and mobilized for purposes of productivity and/or creativity.

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