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WHERE IS THE KNOWLEDGE ECONOMY? A State-by-State Analysis What is it? What are we looking for? How the U.S. Economy has Changed. Knowledgeable Workers Mapping and Modeling the Search

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Key Concept/Questions Knowledge economy: What is it? Why is the KE important? What has happened to industrial economy? How does the emerging knowledge economy show up across the U.S.? What explains mobility choice?

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But wait a minute. What is the Knowledge Economy? A situation where value lies increasingly in new ideas, software, services and relationships. An economy characterized by the recognition of knowledge as the source of competitiveness, the increasing importance of science, research, technology and innovation in knowledge creation, and the use of computers and the internet to generate, share and apply knowledge. oOo For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far towards the former that knowledge has become perhaps the most important factor determining the standard of livingmore than land, than tools, than labor. Todays most technologically advanced economies are truly knowledge-based.

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The Knowledge Problem The KNOWLEDGE PROBLEM is the fundamental economic problem faced by all human communities, from the earliest origins to global community life today. The problem is not only about ignorance. Its about the challenge of finding and organizing existing knowledge. Knowledge is dispersed. Yet human challenges are concentrated in time and place. How do we get all those brains connected?

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When they are not naturally connected! But still insure Spontaneity, which means creativity

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Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. [B]y directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Adam Smith. Inquiry into the Nature and Causes of the Wealth of Nations. 1776. Book IV, Ch. 8. [G]uiding any invisible hand there must be an invisible brain. Its neurons are people. The more neurons there are in regular and easy contact, the better the brain worksthe more finely it can divide economic labor, the more diverse the resulting products. And, not incidentally, the more rapidly technological innovations take shape and spread. Robert Wright. Nonzero: The Logic of Human Destiny. 2000. Ch. 4, 48.

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The World is Spiky: Light Emissions Map by Tim Gulden, University of Maryland. From Richard Florida, The World is Spiky, The Atlantic Monthly, October 2005

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The World is Spiky: Patents Map by Tim Gulden, University of Maryland. From Richard Florida, The World is Spiky, The Atlantic Monthly, October 2005

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World Knowledge IndicatorsNowThen College degree holders, total212 million82 million1980 Share of population, ages 25+9.1%5.3%1980 Bachelor's degree graduates9.1 million4.3 million1981 Doctoral degree graduates293,085114,8081983 Science and engineering doctorates154,71057,2171983 Science and engineering doctorates in China10,0961251985 College professors worldwide8.5 million3.8 million1980 Think tanks3181601980 R&D researchers5.1 million1.9 million1985 Research and development spending$667 billion$276 billion1981 Scientific articles published698,726466,4191988 Human genome base pairs decodedall 3.1 billion01990 Wikipedia articles5.3 million02001 Patent applications1.1 million701,1511985 Licensing revenue$109.8 billion$10.8 billion1980

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Lessons from the U.S. Economy

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Source: Bureau of Labor Statistics Percent Distribution of US Nonfarm Employment by Industry December 2006

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Since 1940 U.S. Population has doubled. Real per capita Income has quadrupled.

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HUMAN CONNECTIVITY CREATIVITY TOTEM OF HUMAN TALENTS Source: Michael Cox. Federal Reserve Bank of Dallas

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GROWTH IN MANUFACTURING GDP: 2000-2005

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INDUSTRY SPECIALIZATION INDEX: 2005 (100 is same as nation. Greater than 100 Is more specialized.)

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Capitalism in Stages Industrial Financial Knowledge

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Mr. Fords Contribution A Detroit newspaper as late as 1909 suggested that former coachmen made the best chauffeurs because of their ingrained habits of obsequious obedience; they would always know exactly what is expected of them by their masters. It will be to Henry Fords undying glory that he ended all that, that he made the automobile perhaps the most powerful instrument of classlessness, of egalitarian American democracy. Any man who owned a car was on equal terms with any other. And virtually anyone could afford to own a car. The Model T could perform as well as any. As Ford said in one of his moments of raw wisdom, unadorned by his hovering ghost writers: Everybody wants to be someplace he aint. As soon as he gets there he wants to go right back. Jonathan Hughes. The Vital Few. New York: Oxford University Press, 1986, 294.

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The Wonderful World of Work

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Agriculture in 20 th Century Farm Workers As % of Total YearUS Employment 191932.8% 193029.8% 194025.3% 195018.0% 196011.5% 1970 6.0% 1980 3.9% 1990 2.6% 1999 1.3%

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U.S. LEADING INDUSTRIES 1860 1899 1920 1. Cotton Crude Iron Motor Car 2. Lumber Packing Iron 3. Boots Foundry, Mchy. Packing 4. Flour Lumber Printing 5. Mens Clothing Flour Petroleum 6. Iron Mens Clothing Electrical Mchy. 7. Machinery Printing Bread

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The Agriculture Miracle: An Example of Knowledge at Work

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Number of U.S. Farms: 1910-2000

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Real Product Prices Received by Farmers

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Farm Income as Percent of Non-Farm Income

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Creative Destruction The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutationif I may use that biological termthat incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. Joseph A. Schumpeter. Capitalism, Socialism and Democracy. 1942

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The Changing Industrial Scene

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PRODUCTION-BASED INDUSTRY RANKINGS Whats Hot and Whats Not 1972 1980 1990 2000 2004 2006 Iron/Steel Iron/Steel Printing Comp/El Comp/El Comp/El Apparel Apparel Apparel Autos Autos Machinery Machinery Paper Plast/Rubber Food Food Aircraft Food Fab. Metal Food Fab. Metal Chemicals Petro/Coal Paper Paper Chemicals Machinery Iron/Steel Food Fab Metal Food Iron/Steel Food Plast/Rubber Chemical Chemicals Chemicals Fab. Metal Chemicals Machinery Fab. Metal Autos Printing Machinery Printing Fab. Metal Minerals Printing Autos Plast/Rubb Paper Paper Elec. Eqt. Plast/Rubb Plast/Rubb Autos Iron/Steel Printing Iron/Steel Source: Economic Report of the President, 2005, and Federal Reserve Board.

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U.S. Manufacturers are Disintegrating From doing it all to doing one thing And bringing down costs While maintaining world leadership

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Looking for the New Economy

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Source: Bureau of Labor Statistics US Unemployment Rate by Educational Attainment December 2005 Employment status of the civilian population 25 years and older by educational attainment Education is the key to labor market success The unemployment rate for persons with a bachelors degree or higher held steady at 2.2%.

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AVERAGE STATE GDP GROWTH: 2000-2005 Nominal Chained Dollars

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STATE GDP FROM PROFESSIONAL & TECHNICAL SERVICES: 2005

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GDP GROWTH FROM PROFESSIONAL & TECHNICAL SERVICES: 2000-2005

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PERCENT OF POPULATION 25 AND OVER WITH A COLLEGE OR PROFESSIONAL DEGREE IN 2000

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Voting with their Feet

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Source: Atlantic Monthly Oct. 2006

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Modeling Migration SHARE MOVING = F(CREATIVTY, FREEDOM, PBS, INCOME) MODELING MIGRATION

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Migration = F(Creativity, Freedom, PBS, Income)

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CREATIVITY INDEX 2003 RANKINGS

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What did we learn? Go Getters are: Highly attracted by larger PBS sector. Repelled by state taxes. Attracted by cool locations. Are not sensitive to high versus low income locations.

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Key Concept/Questions Knowledge economy: What is it? Why is the KE important? What has happened to industrial economy? How does the emerging knowledge economy show up across the U.S.? What explains mobility choice?

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Questions for Discussion 1.Information technology people argued that it did not matter where we are located. We can be linked technically to the world. Knowledge economy people say it does matter. Discuss. 2.Develop recommendations for your country that will encourage rapid development of a knowledge economy.

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