1375.0 - Discussion Paper: Measuring a Knowledge-based Economy and Society - An Australian Framework, 2002  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 28/08/2002   
   Page tools: Print Print Page  
Contents >> Chapter 1: Introduction

The importance of knowledge to economies and societies has been much debated in recent years. In particular, many commentators have linked an increasing level of knowledge in society with economic growth.


There are a number of ways of viewing and defining knowledge. For instance, a number of authors distinguish knowledge from information (and information from data). Alan Burton-Jones (1999) defines knowledge as "the cumulative stock of information and skills derived from use of information by the recipient". He distinguishes knowledge from data (signals which can be sent by an originator to a recipient) and information (data which are intelligible to the recipient).

Most writers contrast codified and tacit knowledge. Stevens (1998) describes codified knowledge as being able to be reduced to information (the know-what) and tacit knowledge as including skills such as insight, creativity and judgement (the know-how).

Drucker (1998) describes historical and cultural views of knowledge. He contrasts the self-knowledge philosophy of Socrates with the Protagoras view of knowledge as the ability to know what to say and say it well. Drucker considers that the latter interpretation has, until recently, dominated Western learning. He regards our current concept of knowledge as being knowledge which "proves itself in action" and is focussed on results.

Dahlman (1999, cited in Asia-Pacific Economic Co-operation (APEC) 2000) described four phases of knowledge flow: acquisition, creation, dissemination and use of knowledge. Others, including the Organisation for Economic Co-operation and Development (OECD) (1996) have referred to the production, distribution and use of knowledge. Howitt (1998) talked about the production and exchange of knowledge. He also mentioned the depreciation and obsolescence of knowledge in the context of its use.

It is suggested that the different forms of knowledge and knowledge flows described above are all likely to be relevant to a knowledge-based economy or society (KBE/S) and are a useful way of viewing knowledge.


Previous work in this field has emphasised the knowledge-based economy, so the concept of a knowledge-based society has not been as well explored in a statistical sense. However, a number of commentators have discussed the impact of knowledge, such as use of information and communication technologies (ICTs), to society. Many of these are cited by Lee et al (2002) who also discuss the knowledge-based society in Australia. They argue that ICTs, particularly the Internet, are creating a knowledge-based society by breaking down barriers to knowledge and participation.

In contrast to a knowledge-based society, significant research has been done on the concept and measurement of a knowledge-based economy (KBE). The term "knowledge-based economy" was coined by the OECD and defined as an economy which is "directly based on the production, distribution and use of knowledge and information" (OECD 1996). The Asia-Pacific Economic Co-operation (APEC) Economic Committee extended this idea to state that in a KBE "the production, distribution and use of knowledge is the main driver of growth, wealth creation and employment across all industries" (APEC 2000). According to this definition, a KBE does not rely solely on a few high technology industries for growth and wealth production. Rather, all industries in the economy can be knowledge intensive, even so called 'old economy' industries like mining and agriculture. Further, the APEC Economic Committee states that "the knowledge required by a knowledge-based society is wider than purely technological knowledge; for example it includes cultural, social and managerial knowledge" (APEC 2000).

The following references provide overviews of the characteristics of a KBE: APEC Economic Committee 2000; Houghton and Sheehan 2000; Lamberton and Neutze 1999; OECD 1996 and Smith 2000.


There is a growing belief that knowledge can do more than increase economic growth; it can also lead to structural change in an economy and therefore society. Such change differs from the incremental changes to which all economies are constantly subjected. Neef (1998) states that the new products and services resulting from technology growth may bring about profound changes in the way we live and work. He argues that this economic transition is characterised by the changing nature of work from low skill to high skill. This is reflected in the rapid growth in the services sector since the 1960's and in more recent changes in the goods-producing sector towards employing higher-skilled employees. Landes (1998) distinguishes the ephemeral nature of windfall growth, for instance arising from a favourable change in prices, from growth derived from advances in technique and organisation. The OECD, in its final Growth Project report (OECD 2001a) stated "..evidence suggests that something new is taking place in the structure of OECD economies." It concluded that there was an uneven divergence of growth in several OECD economies and attributed this to ICT (particularly investment in ICT), increased use and quality of labour and multifactor productivity growth arising, in part, from increased business innovation. All these elements would be part of a knowledge-based economy and society.


There has been increasing focus on the degree to which Australia is a "knowledge-based" economy and society.In February 2000, the National Innovation Summit was held in Melbourne. It brought together government, academia and business representatives to discuss innovation in Australia and, in particular, how the level of innovative activity in Australia can be increased. The final report from the Summit, Innovation: Unlocking the Future, was released in August 2000 (Innovation Summit Implementation Group 2000). The report, also known as the Miles Report, made a number of recommendations about government and business funding for innovative activities, including a recommendation to increase the measurement of innovative activity.

In August 2000, the Government Chief Scientist released a report on Australia's Science, Engineering and Technology Base. The report, The Chance to Change, made a number of recommendations about general university funding and research grant funding within Australia (Batterham 2000). These recommendations were made with a view to encouraging the study of science and engineering subjects and increasing the commercialisation of Australian research activities.

The Federal Government released the strategy, Backing Australia's Ability, in January 2001. Backing Australia's Ability outlined the Government's strategy to further "encourage and support innovation and enhance Australia's international competitiveness, economic prosperity and social well-being" (Commonwealth of Australia 2001).


Chapter 2 of the paper considers theoretical and empirical work relating to the role of knowledge in the economy and, to a lesser extent, society. It briefly examines economic theories of growth and social perspectives then goes on to describe empirical work in the field.

Chapter 3 considers approaches to the measurement of a KBE/S. It discusses the need for a measurement framework, the type of framework and the appropriate approach. It lists examples of existing measurement frameworks and describes, in some detail, APEC and OECD work in this field.

Chapter 4 generally describes the proposed framework, discusses its limitations and outlines the proposed framework dimensions and characteristics.

Chapter 5 discusses the approach to choosing indicators then lists the statistical indicators included in the framework in their dimension-characteristic context.

Finally, Chapter 6 discusses the user consultation process, the Web release of this paper, options for disseminating statistical information from the framework and related ABS work.


Additional information about each of the indicators is shown in Chapter 5 in this web version of the paper.

Previous PageNext Page