Knowledge construction

The knowledge economy is the use of knowledge (savoir, savoir-faire, savoir-être) to generate tangible and intangible values. Technology and, in particular, knowledge technology help to incorporate part of human knowledge into machines. This knowledge can be used by decision support systems in various fields to generate economic value. Knowledge economy is also possible without technology.

The term was popularized by Peter Drucker as the title of Chapter 12 in his book The Age of Discontinuity (1969), that Drucker attributed to economist Fritz Machlup, originating in the idea of "scientific management" developed by Frederick Winslow Taylor.

Other than the agricultural-intensive economies and labor-intensive economies, the global economy is in transition to a "knowledge economy", as an extension of an "information society" in the Information Age led by innovation. The transition requires that the rules and practices that determined success in the industrial economy need rewriting in an interconnected, globalized economy where knowledge resources such as trade secrets and expertise are as critical as other economic resources.

A key concept of the knowledge economy is that knowledge and education (often referred to as "human capital") can be treated as one of the following two:

It can be defined as:

[P]roduction and services based on knowledge-intensive activities that contribute to an accelerated pace of technical and scientific advance, as well as rapid obsolescence. The key component of a knowledge economy is a greater reliance on intellectual capabilities than on physical inputs or natural resources.

The initial foundation for the knowledge economy was introduced in 1966 in the book The Effective Executive by Peter Drucker. In this book, Drucker described the difference between the manual worker (page 2) and the knowledge worker. The manual worker, according to him, works with his or her hands and produces goods or services. In contrast, a knowledge worker (page 3) works with his or her head, not hands, and produces ideas, knowledge, and information.

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