The Knowledge Economy

hen Thomas Hodgskin in 1827 lamented that ‘the influence of knowledge was not noticed by economists till very lately’ (Hodgskin, 1827:3), he was not being entirely fair to, for example, Adam Smith and Dugald Stewart. Broadly speaking, however, questions about technology, that is, useful knowledge, were neglected in the classical period. In modern times there has been a flood of writing about the Information Revolution and, more recently, the Knowledge Economy but those efforts have, for the most part, focused on the acquiring of information machines, especially the telephone and the computer, rather than on the production, distribution and use of knowledge. It seems reasonable to say that a central role in economic analysis for knowledge has yet to be created. The latest World Development Report 2005 drives home several points: reform is a process; more and better-directed government is needed; institutions must evolve; and ‘rent-seeking’ must be reduced (World Bank, 2004). The approach is to deliver the basics. But surely knowledge falls in this category. The preamble to a book review does not permit detailed discussion but this major issue has to be put in perspective in order to do justice to Joel Mokyr’s superb book. Consider what Luigi Pasinetti said in his 1993 R. C. Mills Memorial Lecture (p. 3):