A look at the OECD report on Knowledge-Based Capital – new Athena paper

Last fall OECD (the Organization for Economic Cooperation and Development) published Supporting Investment in Knowledge Capital, Growth and Innovation. This book-length report is the culmination of the first phase of its flagship project on New Sources of Growth: Knowledge-Based Capital. In a new Athena Alliance working paper, Knowledge about Knowledge: The OECD Project on Knowledge-Based Capital, Dr. Brian Kahin describes the report and explores the difficulties facing the U.S. government in addressing the issues raise in the report.
As Kahin notes:

The report exemplifies what makes OECD unique: the ability to cast a wide net and marshal diverse intellectual insights, across the OECD and within a large community of experts in government and academia. For national governments, OECD’s analysis can be useful for overcoming path dependent, stovepiped, or politically constrained thinking. But in many cases, including the U.S. government, there is no logical port of entry for a report of this scope–for particular chapters, yes, but not the report as a whole.
. . .
OECD’s vision of knowledge-based capital (KBC) covers investments in categories with diverse economic characteristics, some of which are difficult to measure. The kind of knowledge represented varies, as does the degree and nature of ownership and control. This diversity enables interaction with a wide range of policies that may ultimately enable or constrain investment in intangibles, but the linkages are less straightforward, more tangled, and decidedly less tangible than the familiar terrain of commodities, real property, and currency. The report is ambitious, connecting what can be quantified with what is emerging or unknown, gathering and developing insights that governments might not make on their own, and providing reference points and benchmarks for sophisticated policymaking.

The task is one of governance:

In a compartmentalized crisis-driven government, how do policymakers engage with subject matter this complex, heterogeneous, and, indeed, intangible? Issues that sprawl across multiple departments, jurisdictions, and policy domains are easier to ignore than those firmly within the remit of an established bureaucracy and chain of command.

He goes on to points out (and explore in some detail) four underlying factors that make it difficult for policymakers (and analysts) to get a handle on the issues:
   • the changing nature of assets and the relationship between sharing and control;
   • the increasing diversity, complexity, and context-dependence of knowledge;
   • accelerated change and growing tension between innovation and the cycles and timeframes of established institutions; and,
   • the latent differences within knowledge-based capital and the effects of availability bias on public policy.
Each of these discussions should be read in full.
In the end, Kahin is both hopeful and skeptical about the report’s impact:

In many respects, Supporting Investment in Knowledge Capital, Growth and Innovation is OECD at its top of its form, probing economic frontiers for the benefit of its members and, increasingly, the global public. While it contains few new conclusions, it leaves governments better informed to develop their own in very murky territory. It invites further interaction with the secretariat and OECD peers.
Yet there are many in the U.S. who are skeptical of anything out of Paris and are convinced that the U.S. has little to learn from the rest of the world, let alone others in the OECD. While it has a small, ably staffed office in Washington, OECD lacks an enduring intellectual presence in the U.S. This is unfortunate in that the U.S. experience with new knowledge, innovation, economic competencies, and intellectual property often informs the experience and reactions of other countries–and the shaping of global consensus where that may be possible. It means that venturesome reports like this one do not get the traction they deserve.

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Note that the OECD project kicked off at a 2011 conference organized by Athena Alliance. As the result of that conference, we produced two reports. The first, Intangibles Conference Report September 2011 is our official report on the conference to OECD. The second, New Building Blocks for Jobs and Economic Growth: Intangible Assets as Sources of Increased Productivity and Enterprise Value — Conference Observations, is my observations and synthesis. For more on the conference, including background papers and reports from the sessions is available at the conference archives.
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Brian Kahin is a Fellow at the MIT Sloan School Center for Digital Business/Initiative on the Digital Economy. He is also a Senior Fellow at the Computer & Communications Industry Association. He was Innovation Policy Fellow in residence at OECD’s Science, Technology and Industry Directorate in 2012. The views expressed here are his own.

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