The First Knowledge Economy State

One of my favorite lessons learned about U.S. democracy is the concept of states as methods of experimentation. We see it to a reasonable extent in the United States with different state’s approach to issues such as abortion, LGBTQ rights, education, and redistributive social programs.
What we don’t see is any significant variation in structural arrangements such as laws surrounding property and contract, education, and democratic practice. The first state to embrace the Knowledge Economy will be the one that dedicates the time and resources required to reshape these core institutions.

Whichever state chooses to be the first to embrace the Knowledge Economy’s potential will begin with a plan for consistent, piecemeal, and focused transformation. The structural changes that we need are a far cry from Capitalism as we know it, but no one could accurately label it Socialism. Knowing how intertwined our personal lives are with our chosen economic arrangements, the Knowledge Economy provides a model of exchange that raises the human experience in every direction it grows.

Law and Identity

Central to the American historical narrative is the private ownership of property. This concept has molded the American psyche for centuries, tying freedom to economics. It has also shaped our educational institutions, our definition of work, and our relationships with one another. Culminating into a system best illustrated by Reverand Martin Luther King’s Jr., “This country has socialism for the rich, rugged individualism for the poor.”

What happens to rugged individualism when entire industries become unemployed in rapid succession due to breakthroughs in artificial intelligence and automation? We can imagine the inevitable scenario where transit drivers of all kinds, fast food, retail, and data entry workers rapidly becoming unemployed would not be handled well in today’s economy. Our present economic arrangements rely on resource redistribution to lessen inequalities created by our structures and will have no viable solution to such extensive and widespread financial hardship.

The first Knowledge Economy state will understand that a proactive approach towards restructuring laws supporting our economic structures is necessary to avoid repeating crisis driven by increasingly fast economic disruption. Policy-wise this translates to reimagining laws surrounding property and contract. In addition, knowledge economy implementation requires us to reorganize laws surrounding patents.

Patent Law

The defining characteristic of a Knowledge Economy is that it ties innovation and production into the same process. Imagine the concept of change as a foundation that we build upon, all new creations growing out of the imagination of past ideas and efforts. The higher the floor, the more rapidly human creativity can flourish in more directions. A Knowledge Economy values innovation over profit and in doing so operates under arrangements that lessen the strength of individual organizations to maximize returns while promoting a significantly higher level of access and opportunity for outsiders to innovate within an established niche.

United States patents typically last about 20 years which given the present rate of exponential technological growth[1] is, by my estimate, about 15 years too long. In a state economy organized in such a way to maximize the total creative potential of its citizenry, the goal is to allow as many people as possible to have access to the most advanced technologies and practice as quickly as possible. Reducing patent durations will enable us to provide innovators with a higher floor to stand on, accelerating both the pace and variance of innovation within a society.

As the U.S. Constitution supports patent laws, states seeking to embrace the knowledge economy would be wise to create separate sets of market arrangements to avoid getting tangled up in legal disputes. According to professor Roberto Mangabeira Unger, the single greatest achievement in legal history has been to determine that there is no unique form of market economy required by law.

Innovation firms could be attracted to these new arrangements with incentives such as public investments, workspaces, and technology access. In exchange, we could design profit structures with deep social responsibilities built into them such as social profit distribution after certain profitability tiers, and the responsibility to develop and facilitate continuing education programs for state residents looking to change the direction of their life.

Giving more people access to the most advanced technologies, practice, and procedure available will spur more innovation. The first Knowledge Economy State will require a population that believes that profit is not the defining factor of the human experience.

Private Property and Access

Implementing a Knowledge Economy within a state will require the emergence of a new type of social and moral code for the majority of residents. A shift from a profit-driven ownership mentality to an access based use approach. My argument is not for the abolishment of private property, instead for the expansion of alternatives to the singular form of property ownership we have now.

We can begin with residential properties. It’s difficult to attract and maintain talent when people cannot afford to live in locations where specific niche verticals are concentrated. Simply put, if we want to draw talented people from different walks of life, we need to think of ways for them to have access to a permanent residence.

One solution proposed in Amsterdam is that all new housing units sold cannot be used as rental properties[2]. This suggestion would decrease overall housing costs and lessen rent-seeking, a financial activity that adds nothing to the real economy[3]. An alternative idea is to fine landlords who own properties that are not occupied, encouraging them to sell the properties or lower costs to find tenants. Rent-seeking on residential properties is damaging to entire generations who were unable to take part in the cheap land and housing grabs of previous decades.

Image Credit: Hasbro Games

Alternatively, we could stop thinking of housing as a profit center entirely. One idea to accomplish this would be to establish permanent access to residential locations for people free of cost. If the public desires durations and conditions the details can be decided democratically.

This same idea could serve to help uplift so many of our residents who are victims of systemic poverty. You have a permanent residence, free of charge until you are ready to move on. Occupants of these access-based housing units would be prohibited from owning other properties and would be required to keep them in good order or face expulsion and fines.

By challenging residential rent-seeking, the first Knowledge Economy state begins to build a more comprehensive suite of protections for the individual. Giving every interested person the opportunity to attempt to experiment and innovate, to take risks, and to fail without fear of homelessness. An innovation economy protects its participants from decimation for trying something new. We know that 90% of startups do not succeed[4], but think of how many great ideas we’re missing by operating within a structure that both punishes people so immensely for failure and denies others entry entirely.

Consider the inherent structural classism proliferated by our present structure; it mainly empowers those with the safety net to fail to take risks. How much creative potential do we squander each year because our suite of social protections is inadequately prepared to deal with shifting advances in productivity?

A Knowledge Economy state recognizes that being poor isn’t a lack of character; it’s a lack of cash. Human ingenuity is our primary productive resource moving forward. The first state to recognize and organize around this concept will lead the rest in transitioning to a high-frequency innovation economy.

Education

The institutional arrangements in a Knowledge Economy state are designed to help shape each person in a way that provides them the capabilities to change the direction of their lives at will. We understand the disruptive impact technological innovation can have on entire industries, and we know that the rate of change is speeding up. Therefore it is logical to conclude that industry-wide disruption will occur more frequently soon. The first state to embrace education as a lifelong process supported by institutional arrangements will lay the foundation necessary to take full advantage of the Knowledge Economy.

Primary education will need to shift from traditional encyclopedic memorization methods used to prepare people for hierarchical work structures to a more dialogue-based way of learning. Beyond the fundamentals, school becomes less about memorizing facts and regurgitating them and more about exploration and selective depth. Whenever possible subjects learn from two perspectives and then a discussion is fostered between the students and guided by the professors. We can illustrate this point with an example of American history, teaching the colonization of North America from both the native inhabitants and the conquesting Europeans perspective.

Given that the students of today will have perpetual access to all of the world’s information at their fingertips the memorization of facts loses its value. Creative problem solving, cooperation, and communication, become driving objectives of primary education, preparing students to enter a world of collaborative competition built around maximizing the potential of every individual.

Specialized secondary educations opens up to all individuals at no cost. Democratic elections can determine the qualifications and requirements for program entry. A Knowledge Economy state rejects the practice of requiring people to subjugate themselves to for-profit banks to advance their skills and understanding of the world.

Given that the economy is shifting to a highly skilled, highly transferable workforce having more people with advanced experience and educational depth lays a foundation for more radical innovation and experimentation. The narrative that more highly educated people diminishes the value of the education is false and only perpetuated by our present economic arrangements which encourage firms to seek the lowest labor costs possible.

Beyond primary and secondary education the first Knowledge Economy state will proactively create numerous pathways for continuing adult education in a wide variety of fields. The state can cooperate with its best companies to facilitate and design these programs. Funding can be in the form of total corporate sponsorship, public investment, or a hybrid model. The decisions should be made democratically, giving the public credible and transparent sources of factual information available in multiple mediums comparing the alternatives.

Recognizing that large corporations have more social responsibility than presently required, the Knowledge Economy state designs programs where adults can enter and learn the most advanced practice and procedure from the state’s best talent. Our long term goal is to give every person the agency in the direction of their life. Companies benefit by getting direct access to highly specialized expertise in their verticals, trained and prepared to adapt to their standards and procedures upon graduation. It’s a win-win and a necessary step to create a transition into a new era of economics and labor.

No Alternatives

Stagnation of the economy is bad for organizations but even worse for families. If we continue to allow a handful of companies to isolate the best technologies and practice, then stagnation is almost certainly a given. Coupled with advances in automation and artificial intelligence we find ourselves on the verge of a market and economic disruption, unlike anything we have experienced. Unfortunately, under present arrangements, these innovations will only stand to benefit a tiny minority. States that are serious about being ahead of crisis should begin the foundational work for transitioning into a knowledge economy today.

The choice to embrace a state-wide Knowledge Economy directional shift seems on the surface to be a far off fantasy given the state of politics in the many states and nation as a whole. In reality, it is both feasible and achievable. Our struggle is not ones of means. It’s one of imagination. There is no future for the methods of the past, and if we’re going to prosper, we need to rethink the structure of our most core institutions. Only then will be able to reach our fullest potential in both progress and our humanity.

The first state to adopt a Knowledge Economy will be the first state to have the political leadership that can create the language to convey the need to transform accurately.



[1] The Law of Accelerating Returns by Ray Kurzweil http://www.kurzweilai.net/the-law-of-accelerating-returns
[2] Amsterdam’s Plan: If You Buy a Newly Built House, You Can’t Rent It Out by Feargus O’Sullivan City Lab https://www.citylab.com/equity/2019/03/amsterdam-rental-housing-prices-new-home-owner-occupied/585235/
[3] Finance, the Real Economy, and the Progressive by Ron Rivers OurSocietyhttps://www.oursociety.org/finance-the-real-economy-and-the-progressive/
[4] 298 Startup Failure Post-Mortems CBI Insights https://www.cbinsights.com/research/startup-failure-post-mortem