KNOWLEDGE ECONOMY.

Knowledge economy is the economy ‘encompassing the exploitation and use of knowledge, in all production and service activities, not just those sometimes classified as high-tech or knowledge intensive. [And] one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth’ (United Kingdom Department of Trade and Industry as cited by Houghton & Sheehan 2000: 1; Rikowski 2000; Ernst & Young 2006).

The terms ‘information economy’ and ‘knowledge economy’ are usually used interchangeably. According to Cogburn & Adeya (1999) information economy refers to the economic contributions of a limited number of industries" while the knowledge economy could be seen as including "the entire industrial fabric of the economy.” And they prefer to use both terms as nearly synonymous. However like Verzola (2006) they favor the term information economy since it is information that is being transferred or exchanged. And they define information economy as ‘global economic structure, wherein the production of information goods and services dominates wealth and job creation, and is underpinned by the use of information and communications technologies (ICTs) and a global information infrastructure’

The term knowledge economy is attributed to Machlup who used terms “knowledge economy” or “knowledge industries” or “knowledge-based industries” in 1962, after he established that by 1959, ‘knowledge-producing occupations had surpassed the other occupations in terms of numbers’. Most authors were referring to this period as ‘post-industrial’ economy. (Verzola 2006).

To shed more light on terms knowledge economy and information economy I would like to introduce two other related terms: knowledge society and information society. Lor& Britz (2007) point out that these terms are used interchangeably to describe a society in which:
• Knowledge is the most vital factor of production.
• A culture of knowledge production with emphasis on higher education
• Use of Information Communication Technologies (ICTs).
The authors distinguish information society from knowledge society in terms of :
Information society to Knowledge society
Information&communication technologies to Knowledge technologies(e.g.collaborative software
Collection to Production
Dissemination to Analysis, evaluation
Packages to Content
Measurement to Judgement
Facts to Texts
Outputs to Outcomes
Quantity to Quality
Reliability to Validity
Accuracy to Truth, trust

So to them knowledge is weightier and well organized than information and they define knowledge society as ‘a society that operates within the paradigm of the economics of information. Human capital is valued as the highest asset and is seen as the prime input to production and innovation. The creation of knowledge (content) is a unique feature of a knowledge society. As such, a knowledge society is underpinned by a well developed information as well as physical infrastructure allowing participation in the different socio-economic and political activities’.

Knowledge is mostly categorized into explicit- formal, codified, structured, and Tacit- knowledge gained from experience, rather than that instilled by formal education and training. In addition to Know-what- knowledge about facts, this type is losing its relevance. Know-why - knowledge about the natural world, society, and the human mind. Know-who refers to the world of social relations and is knowledge of who knows what and who can do what. Knowing key people is sometimes more important to innovation than knowing scientific principles. Know-where and know-when are becoming increasingly important in a flexible and dynamic economy. Know-how refers to skills, the ability to do things on a practical level. (Ernst & Young 2006).

The New growth theory by Paul Romer is a shift from the neo-classical model and sees technology and knowledge as an intrinsic part of the economy. Going by this theory:
Knowledge is basic form of capital New technological breakthrough, though random, forms a platform for further innovations.Technology rise return on investment.Investments can make technology more valuable (Ernst & Young 2006).

I prefer the term knowledge economy to information economy because in knowledge economy, knowledge is the main factor of production, and is embedded in the products and services. Despite the fact that what is being traded for is literally information, but in actual sense it is the skills, the know-how, entrenched in these products and services.

References
Cogburn, DL & Adeya, CN. 1999. Globalization and the Information Economy:
Challenges and Opportunities for Africa. http://www.unu.edu/africa/papers/cogburn-adeya.pdf (Accessed 16 March 2012).

Ernst & Young. 2006. The Knowledge Economy
www.med.govt.nz/.../MultipageDocumentPage____17263.aspx
(Accessed 16 March 2012)

Houghton, John. 2009. What Happens When a Knowledge Economy Turns Down?
www.allbusiness.com/economy...news/12375735-1.html (Accessed 16 March 2012)

Lor, PJ & Britzls, JJ. 2007. A knowledge society possible without freedom of access to
information? Journal of Information Science, 33(4): 387 –397.

Rikowski,R. 2000. The knowledge economy is here – but where are the information
professionals? Business Information Review, 17(3):157-167.