Across the OECD we can see an almost universal shift towards a higher share of national income produced by knowledge based industries, a higher share of the workforce employed in knowledge based jobs, and a higher share of firms using technology to innovate.
On some definitions we are fast approaching the point where the majority of economic activity and employment in many of the most advanced economies will be generated within the knowledge economy.
The ability to use, analyse and share knowledge is supposedly becoming one of the key drivers of economic growth and wealth creation across all the advanced industrialised economies.
Knowledge has unique economic properties — not least the fact that use does not diminish its value. Indeed, sharing knowledge can enhance its value. But this quality is not new. Knowledge and knowledge diffusion has been a key driver of economic development for centuries.
What is new is that we have very powerful information and communication technologies that allow knowledge to be processed, analysed, shared and used on a unprecedented scale and speed. Knowledge based firms gain competitive advantage through their ability to use the new information and communication technologies to exploit global scientific, technical and creative knowledge bases to generate new products, processes and services.
But this alone would not be sufficient to create a knowledge economy. The opening up of higher education to provide knowledge workers with the basics to develop the vital expert thinking and complex communication skills has been just as important.
The final vital ingredient is a strong and growing demand for the goods and services associated with the knowledge economy both within industry and from increasingly affluent and well-informed consumers.
Put more prosaically, the knowledge economy is what you get when you bring together powerful computers and well-educated minds to meet an expanding demand for knowledge based goods and services.
This combination of computers and minds looked so powerful that some have argued the knowledge economy constituted a "new economy" offering unlimited potential for non-inflationary economic growth. But it may be more realistic — and more consistent with the evidence we have - to think of the knowledge economy as an underlying sea change or "soft discontinuity" in our economic structures.
The Work Foundation’s more formal definition of the knowledge economy is:
The share of national income and employment produced by innovating organisations combining ICT and highly skilled labour to exploit global scientific, technological, and creative knowledge networks.
This is a working definition — as the programme evolves we will constantly test and refine our definition.