The Knowledge-Based Economy

by Peter Gunther


The new theory of demand presents the micro-foundations for establishing the complex dimensions of growth as they reflect on the ability of individuals to exercise their freedom in the market places. What GDP, and even disposable income measure as growth is quite different and only partially reflects growth in individual freedom or, in Canada, its possible decline during the 1990s. Inadequate though the measurements are, Canadians have experienced a decline in personal disposable income per capita relative to Americans from $2,885 in 1992 to close to $9,555 per capita in 1998. A recent survey of high-tech workers underscores this point. In four of five of Canada's largest centres, married high-tech workers were deficit financing their households before making any discretionary purchases (income after taxes and purchases of basics including health care), whereas in five cities in the United States, discretionary income was 3.1 to 40 per cent of total income. The resulting pressures of emigration to the United States are growing and emphatic. Measurement issues with respect to capital productivity are compounded because measurements of real growth in computers and peripherals take elements of the new theory of demand into account while the output measures of the industries adopting these new technologies do not encompass those same considerations. Growth measures need to be revisited and the widening gap in real disposable income redressed if Canada is to continue to participate viably in the knowledge economy.


I was struck by Andrew Ignative's comments that the Tony Blair Government is trying to intertwine the often divergent utilitarian and social-liberal philosophies into the comprehensive strategic approach of the current British Government. Those who perceive the current paradigm shift as one of several in a fairly regular series, may be missing the fundamental and virtually irriversible nature of accelerated dynamics. As a world society we have not only quickened change, we are continuing headlong into the future with our foot on the accelerator as we fuel-up, on the fly, with higher-powered unembodied and embodied intellectual capacity to perpetuate that acceleration. This presentation delineates the forces for accelerated change and the entrenched nature of those forces. It uses this backdrop to place these forces for acceleration into modern day utilitarianism as embodied in modern demand theory, and to explore the future role of government in that framework.


Updated January 25, 2001

Last updated: November 2009