The Competitiveness of Nations

in a Global Knowledge-Based Economy

2nd Draft March 2005

Table of Contents

9.0 Competitiveness

9.0 Competitiveness

9.1 Production Function

9.1.1 Inputs

9.1.2 Outputs Form Function Qubit

9.1.3 Reconciliation

9.2 Competitive Advantage

9.2.1 Monad

9.2.2 Dyad

9.2.3 Triad

9.2.4 Qubit

9.2.5 Quintessence


It is safe to say that enterprise which depends on hopes stretching into the future benefits the community as a whole.  But individual initiative will only be adequate when reasonable calculation is supplemented and supported by animal spirits, so that the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death.

John Maynard KeynesThe General Theory of Employment, Interest and Money: Chapter 12 The State of Long-Term Expectations, 1936.

1.            As noted by Stéphane Garelli, Director of the World Competitiveness Project, some scholars believe that nations do not compete, only their business enterprise (Garelli 2002).  This flies in the face of history.  The nation-state is the most complex human organization yet evolved.  It functions in an environment populated by other nation-states.  In one form or another, it has been involved in competition with its fellows since the beginning of recorded history, often the most violent competition - war.  Even in times of peace, nation-states constantly defend and strive to extend their influence and power through diplomatic and other means including state-sponsored industrial espionage (Whitney and Gaisford 1996).  And war, of course, is but “the continuation of state policy with other means” (Clauswitz 1832). 

2.            With the fall of the Berlin Wall the search began for the pattern or leitmotif of a new post-Cold War world.  For Samuel Huntington, it was “The Clash of Civilizations?” (Huntington 1993); for Robert Kaplan, it was “The Coming Anarchy” (Kaplan 1994).  A very different sets of geopolitical scenarios were cast, however, at about the same time.  One concerned alternative futures for the “information superhighway”, the Internet or World-Wide Web (WWW).  Another concerned corporate and national competitiveness in a global economy.

3.            With respect to the WWW, on the one hand, this electronic gateway was seen to open onto Marshal McLuhan’s pastoral landscape of the 1960s “global village” with unlimited access to knowledge by anyone anywhere in the world.  On the other, the “net” was portrayed as a cybergothic nightmare chillingly and presciently charted by William Gibson (Gibson 1984, 1986, 1988, 1993).  In Gibson’s version of our webbed future, the mind’s eye fills with swirling multimedia, merging and mutating into a consensual hallucination called “cyberspace” (a term coined by Gibson).  This virtual reality rushes forward fueled by techno-greed for knowledge contained in streaming columns of bits and bytes graphically portrayed in the Wachowski Brothers’ motion picture The Matrix (Wachowski Bros. 1999).  Hackers and “console cowboys” fight for encrypted information using what today we call electronic spam, Trojan Horses, viruses and worms as well as what Gibson, from the French, names ‘black ICE’, i.e., intrusions countermeasures electronic and fatal. In the process, individuality and privacy erode before the ceaseless search for power and profit by techno-elites that know which buttons to push while the rest of humanity cannot program its VCRs. In Gibson’s future world corporations (and governments too) protect their know-how and trade secrets by implanting “neural bombs” in employees.  If an employee’s loyalty slips, the bomb goes off killing or mentally maiming: the bottom line, knowledge is protected.   Even artificial intelligence has a place in Gibson’s world qualifying for citizenship in Switzerland (Gibson 1984).

4.            A very different information-based scenario emerged, however, with the 1992 World Competitiveness Report published by the World Economic Forum and the Institute for Management Development in Geneva, Switzerland since 1980 (WEF & IMD 1992, 3).  In this report, WEF introduced the concept of “the softer side of competition” reflecting the shift to a knowledge-based economy.  It noted that in “the industrialized world today, only 15% of the active population touches a product.  The other 85% are adding value through the creation, the management and the transfer of information” (WEF & IMD 1992, 4).  This scenario can be summed up as competitiveness in a global knowledge-based economy.

5.            Economic competitiveness has always been with us.  Contemporary usage, however, extends traditional mass market price competition to “working smarter” in response to consumer demand for higher quality more customized goods and services, globalization and technological advance.  Competitiveness promises profitable and progressive industries, more satisfying jobs, higher salaries and higher tax revenue collected at lower rates for social investment in deficit and debt retirement, education, health, infrastructure and welfare.  It also promises to make one’s country, community or company “top dog” in a confusing kaleidoscopic post-Market/Marx war world in which our enemies have become our trading partners.

6.            Competitiveness is usually expressed in sports metaphors: “skating where the puck is going, not where it is” which captures its anticipative nature (Wilson 1992).  In this game, however, some win and some lose in an “us/them” conflict deciding the destiny of our children, our communities and our country.  In a sense, the concept of global competitiveness quenched the last embers of the ‘60s revolution of rising expectations.  Fear of job loss has smothered hopes of citizen consumers and workers in North America.  Instead of George Bush Sr.’s “kinder and gentler society”, we live with George Bush Jr. in fear of downsizing, “foreign devils”, obsolescence, out sourcing, privatization, redundancies and technological displacement.  This alternative future threatens:

·         living to work rather than working to live;

·         vocational training and specialization rather than education and cultural rounding;

·         fear of job loss rather than pride in one’s work; and,

·         fear of the Third World and immigrants as threats to economic security, rather than as partners in a cosmopolitan, cultivated, equitable, peaceful, prosperous, stable and tolerant tomorrow.

7.            A global knowledge-based economy, however, is not just a Darwinian struggle for individual, corporate, communal or national survival.   Arguably it is the apotheosis of the human species or its “departure or release from earthly life” (OED, apotheosis, 4).  Born of the earth, humanity, driven by its biological need to know, has spawned a global economy based on intangible or ‘virtual’ property called knowledge.

8.            Whether or not the global knowledge-based economy becomes a heaven or a hell on earth, the game is afoot.   National innovation systems are being constructed.  Educational systems are being transformed including re-introduction of standardized testing.  Intellectual property rights are being continuingly updated in an effort to keep up with new technologies and their related matrices to codify and tool knowledge.  Firms are appointing Chief Knowledge Officers.  And, in this game, the object at play is the production function of the firm and nation-state.


9.1 Production Function

1.            Having demonstrated that knowledge from Science and Design coalesce as personal & tacit, codified and tooled knowledge and appear as economic inputs as codified & tooled capital, personal & tacit labour and toolable natural resources bought, sold or freely appropriated from the public domain, the question arises: How are knowledge inputs combined to produce intermediate and final outputs - the Person, Code & Work.  Put another way, what is the production function of a knowledge-based economy?  The concept of the production function is one of the most important and elegant contributions of economics to human thought.  It is the recipe of inputs (factors of production) to maximize the output of a firm or nation.  It is defined “by a given state of technical knowledge” (Samuelson 1961, 570). [A]  In simple symbolic form, a production function can be stated as:

Y = f (K, L, N) t


Y = output

f = some function of …

K = capital

L = labour

N = natural resources

t = time

2.            This reads: Output (Y) is some function (f) of capital (K), labour (L) and natural resources (N) in a given time period (t).  In effect, the state of technical knowledge, or technology, is implicit in the ‘f’ of the equation.  It is the recipe.  How much of each input, in what combinations and under what conditions can ingredients be mixed to produce maximum output and minimize cost?  This is technology.  It is also time specific, i.e., it has vintage. 

3.            If the object at play, the ball or puck, is the production function then each firm or nation is a team constantly adjusting in play to gain competitive advantage against opponents playing with a similar ball.  For a knowledge-based economy, the production function and each of its parameters can now be stated in terms of knowledge as derived from the MDTQ model.   I will briefly summarize these parameters and then present the production function of a knowledge-based economy.


9.1.1 Inputs

1.            Traditional factors of production – capital, labour and natural resources - can be expressed using the MDTQ as codified & tooled capital, personal & tacit labour and toolable natural resources.  Labour as personal & tacit knowledge is somatically fixed in an individual as neuronal bundles of memories and the trained reflexes of nerve and muscle.  It comes in three forms: productive, managerial and entrepreneurial.

2.            Capital can be expressed as codified and tooled knowledge, i.e., knowledge fixed or tooled into an extrasomatic matrix.  It is “knowledge imposed on the material world” (Boulding 1966, 5), or, “frozen knowledge” (Boulding 1966, 6).  It comes in many forms including:

·         codified knowledge in the form of human-readable information management systems and databases, operating manuals and libraries as well as associated intellectual property rights such as copyrights, patents, registered industrial designs and trademarks; and,

·         tooled knowledge in ‘hard-tooled’ physical plant and equipment plus related ‘soft-tooled’ knowledge such as machine-readable computer & genomic programs, standards and techniques. 

3.            Initially a natural resource may appear as simply part of the environment – animal, plant, mineral, etc.  With new knowledge, however, such an environmental artifact becomes recognized as toolable into goods and services serving human purpose, satisfying human needs, wants and desires, i.e., toolable natural resources.

4.            At any point in time there is a given stock or quantity of factors of production.  In the Standard Model, such stocks are treated as static or fixed until additional factors are acquired, hired or purchased.  In a knowledge-based economy, however, a stock of knowledge is not static but rather dynamic and organic, exhibiting mutation, change and increase even with no additional factors.  Fusion rather than fission takes place.  For example, even with no additional capital plant and equipment, through experience labour can learn to use existing equipment more effectively and to tinker (known as ‘development’) to adjust it to better serve its purpose or its rated capacity or tolerance. 

5.            In this way, inputs to a knowledge-based economy are more like financial than physical capital.  The English word ‘stock’, in its financial sense, is not found in other Teutonic languages except by adoption. Its origin is obscure linking a trader's capital to a trunk or stem from which gains are the outgrowth (OED, stock, VI). 


9.1.2 Outputs

1.            The economic value of knowledge lays in its ability to satisfy the human biological need to know:

a) directly, as final goods or services satisfying carnal as well as intellectual, emotional and intuitive needs to know; and/or,

b) indirectly, through intermediate or producer goods used to make such final goods and services and which either become part of the final product or lose their identity in the production process. Form

1.            Knowledge takes three forms as both an intermediate or producer output (a means to another end) and as a final consumer good (valued in-and-of-itself) - the Person, Code and Work.  For clarity, I restrict Person to the natural person in possession of personal & tacit knowledge.  I restrict Code to matter coded to carry knowledge as meaning and I restrict Work to matter tooled to carry knowledge as function, i.e., to measure and/or manipulate the physical world as sensor, tool or toy.  A Code or Work, however, takes on meaning or function only through the agency of a Person.

2.            Personal & tacit knowledge is carried by a natural person, or in law, also by a legal person and is generally protected by contractual employee confidentiality of ‘know-how’ & trade secrets.  A Code is extra-somatic knowledge carrying semiotic meaning (textual, graphic and/or auditory) fixed in a non-utilitarian matrix and protected by copyright & trademark.  A Work is extra-somatic knowledge tooled into a utilitarian matrix carrying function which may be utilitarian (a sensor and tool) or non-utilitarian (a toy) and is protected by patents & industrial designs. 

2.            I am compelled to use the word ‘toy’ because there appears to be no word in the English language denoting a Work valued in-and-of-itself with no other purpose or utilitarian value.  One plays with a toy; one works with a tool.  Again, a Code or Work, however, has meaning or function only through the agency of a Person.  In this sense, the Person is the ultimate input and output of a knowledge-based economy.  And in the guise of personal & tacit labour one can therefore meaningfully speak of a ‘labour theory of knowledge’. Function

1.            Knowledge outputs serve three primary functions.  First, an knowledge output may serve knowledge-for-knowledge-sake.  In the philosophy of science this is usually associated with the research community embracing universities, colleges and affiliated research institutes.  The importance of university or academic research lies in the ability of its practioners to undertake independent studies not restricted by immediate applicability. [B]  In aesthetics, specifically in the nonprofit fine arts, it is associated with art-for-art’s-sake.  The consumer interest in knowing for the sake of knowing cannot be under-estimated as NASA and other scientific as well as religious institutions know too well.  The hunger to know is a force that moves budgets. 

2.            Nonetheless, as previously demonstrated, traditionally Art and Science have been subject to epistemological limits by Church and State as well as those self-imposed.  In the natural & engineering sciences, knowledge by sight is increasingly dominant, i.e., seeing the numbers, seeing the graph, seeing is believing (Idhe 1991).  Other senses are suppressed.  In aesthetics, traditionally the distant senses of sight and sound are dominant with the contact senses of taste, touch and smell suppressed (Berleant 1964).  In economics, however, knowledge-for-knowledge-sake is not subject to epistemological inhibition.  Satisfying the human ‘need to know’ subject to limited means is the nature of an economics which recognizes, explicitly, that some limitations are imposed by law and artificially restrict our means.  This refers to culturally variable and changing forms of ‘forbidden knowledge’ such as carnal knowledge of altered states of conscious, of knowing, induced by any combination of taste, touch, sound, smell and sight, e.g., sex, drugs & rock’n roll.  If there is a need to know, the economic question becomes: Is there a profit? not, Is there a Law?

3.            Second, any output (Person, Code or Work) may also serve a utilitarian purpose such as knowledge-for-decision-or-profit.  In the societal guidance mechanism (public, profit and nonprofit), new knowledge supports policy development and program implementation as well as product development, innovation, production and marketing.  In the military, knowledge as ‘intelligence’ plays a similar role.  The reality of decision (public, profit, nonprofit or military), however, is real and pressing time and knowledge limitations.  As discovered by Eric Jantsch (1967) in his pioneering survey of technological forecasting and assessment for the OECD, there is never enough time or enough knowledge to make a decision.  ‘No-knowledge’, i.e., knowing without knowing how one knows, inevitably plays a role.  The most a decision maker can hope for is ‘informed intuition’.  This is consonant with the failure of the calculatory rationalism of the Communist Bloc during the Market/Marx wars.   Von Hayek was right.  Simply put, there is more to knowledge than calculation.  Local knowledge combined with an anonymous price system works best.  Abstract knowledge combined with human hubris appears to work worst.

3.            Third, a knowledge output (Person, Code, Work) may serve as knowledge-for-ethos reinforcing or disestablishing, e.g., revolutionary tracts, the characteristic spirit, beliefs and customs of a nation, community, firm or individual.  The most extreme examples are the effects of Revelation carried by an Abraham, Moses, Christ, Mohammed, Buddha or Confucius as well as the supposedly ‘rational’ ideologies of the Market and of Marx.  The citizen is motivated by the need to know about his or her world.  How wide or narrow this world is varies between individuals and the times in which they live.  Ethos is the world of Walter Lippman’s Public Opinion and “the pictures in our heads”, i.e., that part of the world that we have not or cannot experience directly through our native senses (Lippman 1927).  This is the public domain of a knowledge-based democracy.  It is arguably the reason why intellectual property rights are granted, i.e., so that the public domain may grow.  The importance of the public domain should not be under-estimated (Lange 2003).  Among other reasons, it constitutes the national knowledge-base and exhibits increasing returns to scale. Qubit

1.            Each input and output of the knowledge-based economy can also be characterized as to content by Qubit: , i.e., the unique blend of its linguistic/cultural or etymological WIT, its domain/practice or epistemological EPI, its related discipline/specialty or pedagogic PED, its constitutional matrix or legal IPR, and, its production/market impact or economic FLX.


9.1.3 Reconciliation

1.            The production function for a knowledge-based economy is displayed in symbolic form as Exhibit 3.  It reads: Output (Y - Persons, Codes and Works) is the result of some function (f) operating in a given space/time continuum (vintage) using an embodied stock of codified & tooled capital (K), personal & tacit labour (L) and toolable natural resources (N) subject to embodied (e), endogenous (T), disembodied (d) and exogenous technological change (A) as well as government policies (G) towards specific domains/practices (EPI), discipline/specialty (PED) and intellectual property rights (IPR) with government acting as a custodian, facilitator, patron, architect or engineer of the national knowledge-base.

2.            If the production function is the object at play in the global-knowledge-based economy then each firm and nation is a team constantly adjusting and refining strategy, tactics and logistics to gain competitive advantage over opponents.  Accordingly an assessment of national competitive advantage with respect to each parameter of the production function is required.  To do so I examine competitive advantage with respect to MDTQ model components.


Exhibit 3

Production Function of a Knowledge-Based Economy


Y = f  d, s, t   ( K e, Le, N e )  T,   A, , G                                 (1)


Y = Person, Code & Work

K = codified & tooled capital

L = personal & tacit labour

N = toolable natural resources

f = some function of

s = space

t = time

d = disembodied technological change *

e = embodied technological change *

T = endogenous technological change *

A = exogenous technological change *

G = government **


T = g (P, O, D)                                (2)

A = h (P, O, D)                                (3)


g, h = some function of


P = physical technology ***

O = organizational technology ***

D = design technology ***


P = α ( p, c, t ) (4)

O = β ( p, c, t ) (5)

D = γ ( p, c, t ) (6)


α , β , y = some function of


p = personal & tacit knowledge

c = codified knowledge

t = tooled knowledge                                            


* Technological Change: impact of new knowledge on the production function of a firm or nation, alternatively: disembodied (systemic) or embodied (localized); and endogenous or exogenous to the firm or nation

** Government: as ‘rule maker’ of, among other things, intellectual property rights and national innovation systems.  While government partners with private owners of K, L & N & decision making is political and therefore exogenous to the economic system.  It plays one or more roles as Custodian, Facilitator, Patron, Architect and/or Engineer of the national knowledge-base.  

*** Physical Technology emerges from the Natural & Engineering Sciences (NES); Organizational Technology emerges the Humanities & Social Sciences (HSS); Design Technology emerges from the Arts – literary, media, performing and visual.




9.2 Competitive Advantage

1.            In the Standard Model a comparative or competitive advantage means that a nation's opportunity cost of producing an item is less than another nation's opportunity cost of producing the same item.  An opportunity cost is the next best alternative foregone.  Each choice thus assumes giving up the next best alternative.  In economics, unlike accounting, business or commerce, all costs are opportunity costs. In what follows, any choice by a nation-state implies an opportunity cost.  If, for example, a nation-state chooses, for religious or other reasons, not to develop or pursue certain strains of knowledge, e.g., stem cell research, an opportunity cost is incurred.  In competitive terms, this cost may grow through time as the knowledge base matures and its application spreads among other nation-states.

2.            Similarly, strategic competitiveness in a global knowledge-based economy cannot be based on a simple linear or one dimensional strategy.  In the sixth century before the Common Era, the Chinese sage Sun Tzu suggested in his classic The Art of War that a battle may be won before it is fought through a clear understanding of the terrain (Sawyer 1994). [C] The terrain of a knowledge-based economy, as defined by the MDTQ model, consists of knowledge as a Monad, Dyad, Triad and Qubit, all underpinned by Government (Exhibit 4).  It is also a terrain in which mathematics can be but “a complement to, not a substitute for, thought” (Boulding 1966, 10). 

3.            Given the diversity of nation-states by geographic and population size, by resource endowment and language, competitive advantage must be assessed relative to relevant rivals.  At the moment, for example, relevant economic rivals to the United States are those competing across the full industrial spectrum, i.e., the European Union, Japan, China and the Russian Federation a distant fourth.  For the Netherlands, on the other hand, rivals are those competing in relevant market segments or niches no matter nationality, e.g., home electronics (Phillips).  Arguably, the division and specialization of knowledge, and therefore of competitiveness, is limited by population and resource endowment.  What strains of knowledge to pursue becomes an economic question, i.e., how to satisfy the need to know and thereby effectively compete with limited national means.  Increasingly this choice is being formally answered by national innovation systems linking universities, business and government.

4.            In what follows I will outline the choices and opportunity costs of competitiveness in a global knowledge-based economy using the MDTQ model.  It is only a sketch (Exhibit 4: Competitiveness Paradigm).  It is illustrative, not a detailed evaluation.  It does, however, provide examples and additional tools of thought that, hopefully, will thicken public policy debate and discussion.


Exhibit 4




Biological Need






Trans-Disciplinary Induction









Production Function





Personal &Tacit




Personal &Tacit Labour

Codified &Tooled Capital

Toolable Natural Resources






Event Horizon






Etymology **






Psychology ***






Epistemology ****




The Arts

The Practices







Law *****





Public Domain

Economics ******






 *    A functional or holistic expression of a four-fold measure of knowledge

**    Derived from the Oxford English Dictionary (OED)

***  Adapted from the Analytic Psychology terms for the four human faculties of knowing: thinking, intuition, feeling and sensation

**** NES = Natural & Engineering Sciences

HSS = Humanities & Social Sciences

The Arts = Literary, Media, Performing & Visual Art

The Practices = Accounting, Architecture, Engineering, Law, Medicine & other self-regulating professions

*****   Legal requirement that new knowledge be fixed in a material matrix to qualify for protection as property bought and sold before eventually entering the public domain.  Alternatively the matrix may be utilitarian, non-utilitarian or a person. Without fixation knowledge immediately enters the public domain.

****** Technological change in Economics is defined as the impact of new knowledge on the production function of the firm or nation.  Alternatively, such new knowledge may be disembodied (systemic) or embodied (localized); and/or, endogenous or exogenous to the firm, economy or the nation.



9.2.1 The Monad

1.            With respect to knowledge as a Monad, there are two types of opportunity costs faced by a nation-state - discretionary and non-discretionary.  I take an example of the last first.  In the pre-global market prior to 1995 for most nation-states knowledge was, with respect to language, a Monad, i.e., virtually all knowledge was expressed in a single national language.  Bilingual and multilingual nation-states struggled to maintain political coherence, e.g., Belgium, Canada and India.  With the arrival of the global knowledge-based economy and the coincidental ascendance of English as the language of international commerce, computing and science most nation-states, excepting those constituting the Anglosphere, now have no competitive choice but to become functionally bilingual.  Knowledge of English has become a critical global knowledge asset.  Anglosphere countries therefore enjoy a monadic advantage, one, however, that they tend to take for granted.

2.            If splitting the Monad is the first step towards a knowledge-based economy then a discretionary choice not to split it presents a potentially significant opportunity cost.  Government has, in fact, censored and suppressed knowledge throughout history.  Whether it was pagan Roman emperors suppressing Christian teachings or Christian zealots burning the Library at Alexandria or the first emperor of China condemning 2500 years of recorded human culture to the flames, some knowledge is not allowed to be split off, to be studied or examined and, thereby by, not allowed to grow.  It is forbidden knowledge.

3.            It is not, however, just codified knowledge that has been censored or suppressed.  Three examples of tooled knowledge will demonstrate.  First, the ancient Indus Valley culture (about 3,000 to 1,500 B.C.E.) appears to have rejected a new technology of war - the socket-headed axe.  It then fell under the blows of invaders who adopted it (Piggott 1950).  Second, 15th century China had gunpowder and transoceanic sailing ships (Diamond 1997) but to maintain harmony in the Middle Kingdom the Emperor burnt the vessels, their plans, shipyards and their shipwrights. Third, medieval Islamic medicine was the best of its time.  But the human body, created in God's image, is, in Moslem tradition, a temple not to be violated.  When dissection emerged in Western Europe as the next step in medical science, Islamic law inhibited its use and Islamic medicine rapidly fell behind the West.  These societies succeeded in suppressing knowledge but at the price of decline and/or fall. 

4.            Two contemporary examples demonstrate the opportunity costs involved.  First, the People’s Republic of China wants Chinese culture recognized as one of the founding human civilization along with the ancient Egyptians and Sumerians of what is now Iraq (Eckholm 2000).  There is, in fact, written or codified knowledge tracing the ancient Egyptian and Sumerian civilizations, dynasty by dynasty, back to at least 3,000 B.C.E.  The Chinese government, however, is frustrated because much of the written record prior to the great book burning of the first emperor, Qin Shi Huangdi, in 213 B.C.E. literally went up in smoke (Wilhelm, 1950, xlvii) along with his alleged aphorism: Before Me, No History!

5.            A second example comes from genomics. Genomics is not a single technology but rather a multi-purpose tool or engine, like the computer.  It has the potential of affecting every sector of the economy and society.  Resistance to genomic innovation tends therefore to be sectoral and culturally selective rather than general or across the board.  This is evident with respect to fetal tissue research.  Sweden has embraced it; Britain regulates it; the United States rejects it; and, Canada hasn’t made up its mind.  Similarly, xenogenetic transplants, especially from the standard animal surrogate  - pigs, will not be accepted in Islamic or Jewish cultures.  The fact that the European Union is resistant to genetically modified foodstuffs but accepting of medical genomics and the reverse is the case for the United States highlights the selective nature of genomic rejection.  In competitive terms, the cost may grow through time as the knowledge base matures and application spreads among innovating nation-states.  Similarly, benefits of rejection, e.g., maintaining traditional cultural values and life ways, may still decline overtime due to trade and exchange with innovating states.  An example is suppression of ‘rock n’roll’ by communist states during the Cold War that proved untenable as radio broadcasts and trade with the West grew.


9.2.2 The Dyad

1.            While the opportunity cost of acceptance or rejection may be relatively straight forward that associated with the Dyad, however, is not.  Knowing by Science and knowing by Design - by reduction and construction - are compliments not substitutes or opposites.  Each contains the seed of the other like the Chinese “t’ai chi t’u” - a white dot on black, a black dot on white. 

2.  At any given point in time a nation-state may, relative to relevant rivals, enjoy a competitive advantage in one or the other.  If so, then the question becomes whether to exploit this advantage, or, alternatively, to try to balance it or, at the extreme, initiate an epistemological revolution.  In Japan, such a revolution was formalized with the Meiji constitution of 1889 marking the transformation of the Japanese economy and society from one dedicated to Design rooted in the organic patterns of nature, i.e., works of aesthetic intelligence, to one rooted in the patterns of technology, i.e., works of technological intelligence.

3.            That the white dot always remains part of the black, even after such knowledge revolutions or changing epistemes (Foucault 1973), is suggested by the fact that Japan enjoys a comparative advantage in innovation (works of technological intelligence) but relatively poor performance in the pure sciences arguably due to the nature of the Japanese language itself (Kawasaki 2002).  Similarly, Italy enjoys a comparative advantage in works of aesthetic intelligence, but exhibits relatively poor performance with respect to organizational technology (Galbraith 1983). [D]


9.2.3 Triad

1.            Having split the Monad into two – Science and Design – and determined if a competitive national advantage exists then the next step is to consider national endowments of the knowledge Triad as form, input and output.  Knowledge does not exist in a vacuum.  As an input, it is fixed in material form.  Personal & tacit knowledge is embodied as neuronal bundles of memories and trained reflexes of nerve and muscle available on the market as personal & tacit labour.  Codified knowledge is fixed in a communications media while tooled knowledge is embodied in a functioning material matrix.  Together, as inputs, they are available on the market as codified & tooled capital, i.e., frozen knowledge.  Similarly, with the appropriate knowledge, environmental features become available on the market as toolable natural resources.

2.            The Person, however, is duplex, i.e., it is the ultimate input to and output of a knowledge-based economy.  Accordingly, a central pillar of any knowledge-based competitiveness strategy must be the Person.  Such centrality places education and training in the policy cross-hairs: what kind of education and training?  Should it stress Science or Design or what blend?  Furthermore, the Person carries the customs and traditions of his or her nation-state.  Such patterns of behaviour may or may not be supportive of a self-regulating market.  Accordingly, a break, at the individual level, with customary practice may be required if a nation-state is to become globally competitive. 

3.            Accepting the centrality of the Person, the next question is: Should a nation-state specialize in Code or Works?  Again, an assessment of national comparative advantage is required.  Does a nation have a comparative advantage in producing Code, e.g., copyrights, designs, patents and trademarks?  If so, the flow of IPR royalties should be a significant source of national income and export earnings.  This raises, in turn, questions about the adequacy of the System of National Accounts reporting IPR income streams (UN Statistics Office).  My reading is that decades-long down-sizing of government services has not spared national statistical bureaux.  As a result, the collection of data, especially regarding IPR income streams, is problematic at best, even in the most statistically advanced nations such as the United States.  This limits mathematical analysis and biases public and private policy towards that which can be counted, i.e., traditional outputs of the primary, secondary and tertiary sectors of the economy, and reliance on industry and trade association statistics.  What I call the ‘quaternary sector’ of the economy (Chartrand 1990) consisting of royalty payments for copyrights, industrial designs, know-how, patents, trademarks and trade secrets plus sui generis rights cannot currently be accounted for in the national accounts. 

4.            Alternatively, a nation may enjoy an advantage in the production of Works of technological intelligence.  This split increasingly defines the relationship between the First World concentrating on production of Code while Works are increasingly made in the Second and Third Worlds where labour costs are lower.  An important qualification is that off shore production generally involves, at least initially, standardized products, e.g., cars, hats, scarves, television sets and personal computers.  Experience in production of standardized goods, however, offers, the opportunity for learning and the generation of new knowledge that potentially can shift a nation from Second or Third status into the First World, e.g., South Korea became the 29th member country of the OECD in December 1996. 


9.2.4 Qubit

1.            Accepting the centrality of the Person, acknowledging distinct dyadic blends of Science and Design and national endowments of triadic knowledge as form, input and output, there remains the choices and opportunity costs associated with the content and context of knowledge expressed in the MDTQ model through Qubits.  I will treat each of the six identified – the WIT, PSI, EPI/PED, IPR & FLX - with respect to competitiveness from a disciplinary perspective: etymology, psychology, epistemology (inclusive of pedagogy), law and economics.

Index Etymology

1.            The WIT is a qubitic or four-fold measure of ways of knowing in the English language. There are four meanings of ‘to know’ – by the Senses, Mind, Doing, and/or Experience.  In other languages there may, and probably are, senses of ‘to know’ that can be expressed in English only with great difficulty, if at all.  The Logical Positivists attempted to overcome this problem by restricting themselves to the language of mathematics.  Mathematics, however, is a subset of language, not the other way around.  Similarly, English, and other Western European languages use Platonic idealized nouns not found in all major languages, e.g., Japanese (Kawasaki 2002).  These etymological differences appear to have competitiveness implications.  The most obvious is the comparative advantage of Anglosphere nation-states whose entire population operates primarily in the international language of science, commerce and computing – English.

2.            While all Western European cultures inherited an epistemological hierarchy from the ancient Greeks placing the Liberal Arts (knowing by the mind) above the Mechanical Arts (knowing by the doing and senses), the etymological economy of English has, arguably, produced an extreme expression in the aphorism: ‘Gentlemen don’t work with their hands’.  In 1970s Britain this became a cause célèbre known as the ‘British disease’ that was arguably cured by Margaret Thatcher (Wiener 1981).  By contrast, in Germany, a nation noted for its manufacturing acumen, the distinction between knowing by the senses and knowing by the mind is represented by two separate verbs kennen and wissen.  As previously observed this has, arguably, led to a striking contrast between the apprenticeship training systems of Canada and Germany (Economic Council 1992) as well as separate and distinct traditions of academic and technical university in the German system while these have been collapsed or truncated in the Anglosphere.

3.            The WIT policy question is: what is the preferred national mix or balance of ‘to know’ - by the senses, mind, doing or experience?  Should policy heighten sensual awareness to increase competitiveness in the pleasure industries and, if so, which ones – sports, sex, gambling, food, drugs?  Alternatively, should policy cultivate knowing by the mind or foster hands-on knowing by doing?  Should the State attempt to diversify and broaden the skill set of the population?  Should it capture and codify the experience of the older generation, e.g., expert systems?  Should retiring employees be rewarded for formalizing experiential or personal & tacit knowledge and encouraged to transmit it to younger workers by demonstration or other means?  Is this what is meant by ‘mentoring’?  How much can, or should, be codified and/or communicated by demonstration?    Each question involves a choice; each choice is an opportunity cost relative to relevant rivals.

Index Psychology

1.            The PSI is a qubitic measure of psychological ways of knowing including Reason, Revelation, Sentiment and Sensation.  In each individual, all four function.  Like quarks, they do not exist alone.  There are no free faculties.  They exist together uniquely entangled as the ‘self-awareness’, ‘consciousness’, ‘knowing’, ‘mind’ or ‘wit’ of the individual human being. This uniqueness colours use and interaction of each faculty as a power of the mind. 

2.            Invoking circular causality, if there is a human want, need or desire ‘to know’ through Reason, Revelation, Sentiment or Sensation then there will be industries producing goods and services to satisfy such needs.  Such industries will exist in every nation-state but some countries will enjoy a comparative advantage in one or another.  I will review each and offer examples.

3.            The human want, need or desire for Reason, i.e., ‘reasoned’, ‘calculated’ or ‘reductive’ knowledge, finds satisfaction through the Science Industry inclusive of the natural and engineering as well as the social sciences to the degree that they rely on calculatory rationalism.  In the 20th century the United States established preeminence in the science industries and in computing.  This is reflected in its ‘ivy league’ graduate school system that attracts the best and the brightest scientific minds from around the world (personal & tacit knowledge); as world leader in publication of scientific research papers (codified knowledge); and, in scientific instruments (tooled knowledge) (Baird 2004).  With respect to codified scientific knowledge, however, its preeminence may be slipping as the European Union is accelerating its output, threatening U.S. dominance (Pistoi 2002). [E]

4.            The human want, need or desire for Revelation is satisfied through the Spiritual Industry inclusive of religion and myriad psychic movements and communities as well as ‘self-help’ groups.  To put it another way, from an economic perspective God is real and means very big business.  Globally, Saudi Arabia, as custodian of the two holiest Islamic sites – Mecca and Medina, is an example of a nation with a comparative advantage in Revelation, as is Italy and Israel.

5.            The human want, need or desire for Sentiment defined as “an opinion or view as to what is right or agreeable” is satisfied through the Arts Industry inclusive of the amateur, applied, entertainment, fine and heritage arts in all media of expression, i.e., the literary, media, performing and visual arts (Chartrand 2000).  Art provides the technology of the heart; it manages and manipulates Sentiments.  Italy is an example of a nation with an established comparative advantage in the Arts.  Arguably, Milan is the design capital of the world.  France and Japan also rely heavily on aesthetic design.  Similarly, England has successfully branded itself as a cultural power.  Thus the former Arts Council of Great Britain once ran a marketing campaign that read: “What sunshine is to Florida, theatre is to London!”  U.S. dominance of the media arts – motion pictures, television, music, etc. – is well known and, after defense, arguably the largest American export (The Economist., March 11, 1989: 65-66).  Arguably, the arts & entertainment industry is the largest sector of final consumer demand for knowledge outputs.  Education is arguably the largest user of intermediate or producer demand for knowledge outputs.

6.            The human want, need or desire to know Sensation is satisfied through the Pleasure Industry inclusive of ‘sex, drugs and rock’n roll’ as well as gaming, leisure spas, sports, food and tourism.  At present, the Netherlands, with its relatively permissive sex and drug laws compared to the Anglosphere, arguably, enjoys a comparative advantage as does Thailand with its Buddhist tolerance of sex and Monaco with respect to gambling.

7.            From an economics perspective what is important is whether a given faculty of knowing generates human wants, needs and desires that producers can satisfy for a profit.  Again, unlike aesthetics, epistemology and science, economics admits no a priori moral limitations.  All the human senses – near and far – are admitted in a global knowledge-based economy. 

Index Epistemology & Pedagogy

1.            The EPI is a qubitic measure of a nation’s pragmatic epistemology.  These include the Natural & Engineering Sciences (NES), the Humanities & Social Sciences (HSS), the Arts (literary, media, performing and visual), and the Practices or self-regulating professions.  In brief, the NES generate knowledge about the physical world.  In application, they produce physical technology to manipulate matter and energy to satisfy human want, needs and desires.  The HSS generate knowledge about being human – individual and collective in families, communities, firms and nation-states. When applied, they produce organizational technology, i.e., the ability to shape and mold human institutions and societies. The Arts generate knowledge about the human heart and emotion.  In application, they produce aesthetic or design technology, i.e., the ability to manipulate emotion providing a ‘technology of the heart’.  The Practices apply knowledge to answer practical and pressing problems of daily human life, e.g., death and taxes. 

2.            From a competitiveness perspective, a critical factor is that each nation-state has culturally and historically differentiated pedagogic and licensing practices for the Domains and Practices.  Globally, national pedagogic complexes tend to be patterned after models developed in influential countries such as France, Germany, Great Britain, and the United States.  In some cases, such as France and Germany, these complexes are directly administered by State agencies.  In others, such as Britain, Canada and the United States, they are legally, if not financially, independent of the State.  Such national differences exist in all knowledge domains and practices at all levels of education – primary, secondary and tertiary.  These differences are relevant not just with respect to domestic performance but also in the growing and increasingly competitive field of international higher education.  Foreign students represent an increasingly important revenue source for educational institutions in many First World countries including Canada (Chartrand October 1992; May 1993).

3.            Beyond the export competitiveness of the pedagogic system, i.e., attracting foreign students, each country may or may not enjoy a comparative advantage vis-à-vis relevant rivals at one or more levels of domain/practice, discipline, sub-discipline and specialty.  This quartet constitutes the knowledge qubit PED.  The United States, for example, has a comparative advantage at the graduate and post-graduate levels. In effect, a National Innovation System is constructed by selecting specific knowledge domains and practices (EPI) to be preferentially encouraged at a specific level of concentration, i.e., disciplinary, sub-disciplinary and specialty (PED).  In effect, each nation-state identifies its comparative advantage and networks educational institutions, private enterprise and government agencies to commercially exploit new knowledge.  To date, the NIS has been restricted to the NES.  There is, however, no reason why it cannot be extended to other knowledge domains and practices.  Informally, national cultural policy in the Arts corresponds to NIS in the Sciences.  The Practices, with the notable exceptions of medicine and related engineering, have not, however, been the subject of NIS.  Accounting and legal praxis are applied to develop NIS development. They have not, however, been subjected to comparative advantage analysis, nor networked into NIS nor held accountable for their contributions – positive and negative – to competitiveness. 

Index Law

1.            The IPR is a qubitic measure of the privatization of knowledge as legal property.  Intellectual property rights are granted to new knowledge fixed in a material matrix for a limited time.  The matrix may be utilitarian as with patents & designs; it may be non-utilitarian as with copyrights & trademarks; or it may be a person – natural or legal – as with trade secrets and know-how.  All other knowledge (new and old) eventually falls into the public domain that constitutes the bulk of the national knowledge-base. 

2.            Sui generis or ‘one-off’ rights may be fixed in any matrix and are usually created by selecting from and mixing the bundle of rights collectively constituting traditional IPRs. In reality, however, each national intellectual property regime is sui generis in that it is the unique cultural product of the distinctive legal history of a nation-state.  This is one reason why intellectual property rights are subject only to ‘national treatment’ rather than harmonization under the TRIPS Agreement of the WTO.  Such differences serve not only to distinguish one nation-state from another but also provide an opportunity for competitive advantage in a global knowledge-based economy (Paquet 1990).

3.            International competitiveness, since the time of Adam Smith, has involved the division and specialization of labour married to comparative advantage, a concept introduced by Smith’s successor David Ricardo (Blaug 1968, 131).  Market forces direct entrepreneurial activity, and, ideally, there is no government involvement in the economy.  Given that knowledge as a marketable product can only exist through government action, this traditional strategy is inadequate in a global knowledge-based economy.  An appropriate strategy can, however, be developed from the policy paradigm of Smith’s contemporaries – the French Physiocrats.

4.            Behind the Gallic façade of laissez faire and laissez passer, there were deeper policy implications, implications never realized because of the French Revolution.  First, unlike classical economists such as Smith and Ricardo, the Physiocrats accepted government as an active and productive agent in the economy.  Like Polanyi’s self-regulating market, Smith’s market was spontaneous and autonomous; that of the Physiocrats became so, however, only after having been carefully and institutionally designed by government to direct productive resources towards attainment of national objectives (Samuels 1962, 159). [F]

5.            The nature of Physiocratic public intervention was radically different from Marxian ownership of the means of production and Keynesian management of aggregate demand.  Accepting that private property and self-interest were the drivers of economic growth and development, the Physiocrats reached beneath the surface of the laissez faire, laissez passer marketplace.  They reached down to the legal foundations of capitalism (Commons 1924) to manipulate the nature of property rights themselves.  For the Physiocrats, “the public interest is manifest in the continuing modification or reconstitution of the bundle of rights that comprise private property at any given time (Samuels 1962, 161).

6.            In effect, the Physiocrats wanted to load the dice to raise the commanding heights of the national economy.  They wanted to consciously manipulate capitalist self-interest – accumulation of marketable property – to foster and promote the economic growth and development of the nation.  The Physiocrats thus viewed property rights as instruments of economic policy.  They also saw them as providing the foundation of the economy itself defining what is bought and sold, how and where.  Accordingly, the Physiocrats:

implicitly recognize that the basic economic institutions (the organization of economy) are legal in character; that law is an instrument for the attainment of economic objectives and that economy is an object of legal control (Samuels 1962, 162).

7.            In summary, the Physiocratic policy paradigm is made up of an objective, strategy, tactics and logistics including:

(a) the objective being the competitiveness of the nation, absolutely and relatively, to relevant rival states;

(b) the strategic choice of a core sector which contributes most to attainment of that objective;

(c) development of tactical instruments in the form of property rights and manipulation of the legal structure of institutions to direct individual and collective action in favour of the core sector; and,

(d) logistical deployment of these instruments into a free wheeling, private property, laissez faire, laissez passer marketplace.

8.            Given the degrees of freedom under national treatment, the Physiocratic policy paradigm offers a succinct national competitiveness strategy for a global knowledge-based economy.  It begins with the strategic choice of knowledge then tactical development of an IPR regime that directs individual and collective action to favour development of the national knowledge-base and finally logistical deployment of the resulting legal regime into a laissez faire, laissez passer marketplace.  This policy paradigm accommodates: (i) coherent development of a national IPR regime rather than the piecemeal process that has characterized copyright and patent reform in most nation-states over the last twenty years; and, (ii) the institution-building and networking required by a NIS.  Both, however, require change embracing the physical, organizational and design technology of the nation.

Index Economics

1.            The FLX (pronounced ‘flex’) is a qubitic measure of economic knowing, specifically of technological change. In the Standard Model, technological change refers to the impact of new knowledge on the production function of a firm or nation.  Such new knowledge may be: disembodied or systemic to the economy such as general improvements in communications or transportation; embodied in a specific piece of equipment such as the transistor in a transistor radio; endogenous i.e., developed internally to a firm or nation; and/or, exogenous, i.e., developed externally to the firm or nation. 

2.            From a competitiveness perspective, technological change has two dimensions: invention and innovation.  Roughly speaking invention involves creation of new knowledge and innovation involves its application.  The first step is to determine if a nation-state enjoys a comparative advantage in invention or innovation.  Once determined, then the strategic decision must be made to pursue and enhance this advantage, try to balance it, or engage in an epistemological revolution. 

3.            The fax machine is a case in point.  Arguably the modern fax machine was invented in the U.S.  It was, however, successfully innovated and brought it to mass market first in Japan and then the rest of the world.  To paraphrase the 1992 World Competitiveness Report: most inventions do not fail because they are ill conceived but because they are badly innovated. Competitive organizations have correctly mastered innovation and the management processes linked to it (WEF 1992). 

4.            Arguably it was the Japanese language that led to mass market innovation. Before the 1980s, business communication relied on (other than telephone and ‘snail’ mail) the ‘telex’ machine to electronically transmit information using an alphanumeric keyboard.  In Japan, however, kanji script is pictographic and some 500 characters are required for basic written communication.  Alphanumeric keyboards could not accommodate (at the time) the Japanese alphabet.  The fax machine, however, allowed handwritten pictographic messages to be sent with relative ease.  In the phonetic United States, by contrast, telex was an efficient communications medium and the fax machine was reserved only for occasions when sending pictures quickly was required for business or other purposes, e.g., pictures of wanted criminals.  There was no apparent need for mass market fax machines in the U.S.  Thus a Japanese linguistic disadvantage turned into a marketing triumph.

5.            Development of a national FLX competitiveness strategy begins with a national comparative advantage assessment of the sources and types of technological change.  Does the nation endogenously generate a significant share of new knowledge relative to relevant rivals?  If yes, then a relatively restrictive IPR regime is in order to protect national knowledge assets.  If not, then a relatively lax IPR regime will allow easier access to exogenously developed knowledge.  A lax intellectual property regime is also appropriate if a nation is comparatively adept at embodying or innovating new knowledge.  Conversely, if it is not adept, then a tighter intellectual property regime is in order.  In the case of a lax IPR regime the public domain will grow more rapidly; a more restrictive regime will slow its growth.

6.            A national FLX competitiveness strategy must, however, not only address knowledge as a factor of production or input but also as a final good and service.  Just as branding has been achieved by some nation-states with respect to cultural or environmental factors, it can also be achieved with respect to knowledge.  Under GATT, nation-states can and do deny access to knowledge considered immoral or threatening to the cultural sovereignty of the nation.  Other nation-states, however, may consider the exact same knowledge as acceptable – legally if not morally – and permit or even facilitate access.  Such differences, in effect, create knowledge havens where access to forbidden knowledge is available just across the border.  Thus internet cafes in a foreign country may offer the ‘knowledge tourist’ satisfaction of his or her knowledge wants, needs and desires that cannot be satisfied at home.


9.2.5 Quintessence

1.            Ideally, Government is the institutional incarnation of ‘We, the People’ or, in my terms, of ‘We, the Person’ as the ultimate input and output of a knowledge-based economy.  Only the natural person can know and therefore all knowledge is ultimately personal & tacit.  In this sense, the Person is a Monad acting as “a centre of force” containing knowledge (Catholic Encyclopedia, Monad, 1911).  The natural person is, however, also a Dyad, a social solitaire (Bronowski 1973).  It is the ability of the Person to share and exchange knowledge with others that permits social organization up to its institutional apex – Government. As such, Government is the quintessence of the knowledge-based economy.  And, in this sense, the knowledge-based is a political economy, i.e., political decisions play a central role in the satisfaction of the human want, need and desire to know, subject to limited means. Put another way, no Government, no knowledge-based economy.

2.            At every stage of the MDTQ model Government plays a defining role, e.g., with respect to the Monad, what is considered forbidden knowledge.  Government plays five roles in the knowledge-based economy – as custodian, facilitator, patron, architect and/or engineer of the national knowledge-base.  Each Government determines its own particular blending of these roles.   Choice, at each level of the MDTQ model, entails opportunity costs.

3.            I will now sketch out the principle choices associated with each role of Government.  It is only a sketch.  It is, again, illustrative, not a detailed evaluation.  It does, however, provide examples and additional tools of thought that will thicken debate and discussion.

4. As custodian of the national knowledge-base, Government is concerned with its preservation and transmission to future generations, i.e., it is concerned with patrimony.  The continuity of knowledge is in fact one function of any human community.  This function is generally performed by national archives, libraries and museums and involves opportunity costs.  Faced with limited means, Government must decide what is and what is not worthy of preservation.  This is a pressing issue for national archives and libraries faced with acidic-based paper.  Books, newspapers, periodicals and other written records fixed in this matrix are literally disintegrating in libraries and archives around the world (The Economist, February 27, 1987: B-1).   Government as custodian is also, however, concerned with prohibiting the growth and development of forbidden knowledge.  Over time, however, what is forbidden often changes.  Accordingly, prohibition may leave future generations without what they may then consider acceptable, desirable or even essential knowledge, e.g., fetal tissue technology.

6.            As facilitator of the national knowledge-base, Government is concerned with fostering knowledge production through taxation, or rather tax expenditures or tax forgiveness.  Government relies on the preferences and tastes of corporate, foundation and individual donors.  The policy dynamic is random reflecting the changing tastes of private donors.  The facilitator is also potentially subject to abuse, e.g., research & development tax credits (Auditor-General 1984, 3.34-3.49).  Nonetheless, the facilitator role offers Government the opportunity to promote a ‘creativity haven’, i.e., a jurisdiction in which knowledge workers want to live.  Exemption from income tax of copyright income earned by resident artists (not legal persons) in the Republic of Ireland (Eire) is an example relevant in all knowledge domains.

7.            As patron of the national knowledge-base, Government is concerned with promoting production of knowledge through endowing arm’s length institutions.  Such institutions generally direct funding according to peer evaluation.  In Canada, for example, during the last decade the federal government of Canada has endowed a number of quasi-public foundations to support knowledge production, e.g., “Canada Health Infoway Inc., received $500 million from the federal government; others have received multiple payments amounting to, for example, $300 million to Genome Canada and $250 million for the Green Municipal Funds” (Auditor-General of Canada 2002, 1.9).  In the past foundations, endowments or grant-giving councils were essentially involved in the production of knowledge for knowledge sake.  Today, however, as part of the national innovation strategy many of the new foundations are concerned with ‘knowledge for profit’.  This means that commercial confidentiality veils many of their activities from public scrutiny.  This, in turn, raises serious questions about the accountability of private interests serving the public purpose, i.e., Government by Moonlight: The Hybrid Parts of the State (Birkinshaw, Harden and Lewis 1990)

8.            As facilitator and patron Government, in effect, transfers its spending to others allowing them to decide what knowledge to promote and develop. As architect, however, Government is concerned with the direct application of its spending power as well as its legislative authority to achieve specific objectives.  It funds knowledge production and conservation through ministries, departments and specialized agencies such as national statistics bureaux.  Bureaucrats, in effect, make decisions on behalf of their political masters. 

9.            The most recent example of the Architect is design and development of national innovation systems (NIS).  In these systems nonprofit academic institutions partner with government and private for-profit actors to create networks of specialized research centres in priority domains, disciplines, sub-disciplines and specialties (OECD 1997).  Such centres are intended to facilitate commercial exploitation of new knowledge and enhance the competitiveness of the nation.  As always, there are opportunity costs.  Thus almost since their inception, certain costs and strains with respect to NIS have become apparent.  In many knowledge sectors, e.g., electronics (Patel & Pavitt 1998), such partnerships necessarily involve multinational or transnational corporations whose attachment to any nation-state is secondary to profit.   Accordingly, whether or not new knowledge can be commercially exploited to the benefit of a nation-state is problematic.   It is here that ‘tacit’ versus ‘codified’ knowledge question enters the public policy debate (Cowan, David & Foray 2000).  If new knowledge is embodied as the trained reflexes of a Person it cannot be easily appropriated.  If it is codified, however, then it can be much more easily exploited by others.  For example, if Agriculture Canada in collaboration with its NIS partners successfully fosters new knowledge about canola that is tacit in nature then Canada can internalize virtually all benefits.  On the other hand, if it is codified then participating multinationals with access to the knowledge can apply it where and when it serves their purposes which are not necessarily those of Canada.  To prevent the escape of NIS generated knowledge becomes a serious enforcement problem for Government.

10.          While as custodian, facilitator, patron and architect Government relies principally on fiscal policy, i.e., tax and spend, as engineer Government acts as owner.  It exercises its power through many different forms and types of legal frameworks, e.g., broadcast licensing, copyright and patent deposit requirements, security & exchange legislation, IPRs, spectrum allocation, taxation and international trade agreements including any health, safety and morals clauses contained therein.  With respect to the trade agreements, it is important to note that only the nation-state can sign internationally binding treaties and that they are the only institutions that, according to at least some observers, “can curb the inherent excesses of global capitalism” (Gwyn 1995, 266).   In effect, Government sets the rules of the game for all other actors in the knowledge-based economy.


Table of Contents

10.0 Conclusions

The Competitiveness of Nations

in a Global Knowledge-Based Economy