General knowledge is the foundation of economic development
A long pedigree in economic theory argues for specialisation according to “comparative advantage”. The evidence, and new economic theory, does not agree. How to promote prosperity? Learn a little of everything. Learn science and mathematics and technology. But also learn art theory and history, music, literature and classics, history, linguistics, religion, and philosophy.
The core canon of economic theory argues that countries should specialise according to their comparative advantage in order to be prosperous. Compelling evidence provided by Cesar Hidalgo however suggests exactly the opposite. It is the diversity of a country’s exports, a direct measure of its knowledge base, which is strongly correlated with its prosperity. I’ve recently released the theory which explains why this is the case. And it is this:
Economic development is the growth of knowledge. General knowledge provides a base upon which knowledge may grow more rapidly and in more directions than specialised knowledge.
What is an economy? A system for the use of knowledge
The model which proves this proves the argument made by Friedrich Hayek in the single most important paper ever written on economics: the economy is a system by which we coordinate individual knowledge.
As I’ve written elsewhere, the economy is a complex evolving network of individuals acting on the basis of their psychology and social position. Thoughts within individual psychologies constitute our knowledge, our understanding of the environment we are in. It is our knowledge of how and why to engage in particular actions which govern our buying and selling behaviour, and thereby the connections which form in an economy.
The formation of connections in our economic systems is the process of economic development. The growth of knowledge therefore is economic development, and the path to prosperity.
How does knowledge grow best? On a base of general knowledge
Knowledge grows by individuals assenting to ideas (to use Newman’s wonderful term). I’ve written elsewhere (in the context of narrative economics, rhetoric, and political violence) about the “Made to Stick” theory of what makes ideas more or less likely to be assented to:
1. The simpler an idea, the less I have to get you to accept, the more likely it is you’ll accept this idea.
2. The more of an idea already in your mind, the less I have to get you to accept, the more likely it is you’ll accept the idea.
3. The more I express the idea in a way which connects objects with a powerful hold over your attention (for instance your emotions and your experiences), the more likely it is you’ll notice the idea, the more likely you’ll accept the idea.
4. Personality psychology tells us that there is resistance to change at the “core” of our personality. The more an idea would change the “core” of your personality, the less likely it is you’ll accept the idea.
5. Cognitive dissonance psychology tells us that there is resistance to accept things which contradict our existing worldview. The more an idea contradicts the ideas you subscribe to, the less likely it is you’ll accept the idea.
Having pre-existing knowledge which is generalised increases the likelihood of knowledge growth because generalised knowledge is substitutable. It underlies, and therefore can be substituted to form a basis for a range of different specialised forms of knowledge.
This makes it more likely that any new idea will be assented to because, ceteris paribus, more of that idea will already be within individuals’ minds (point 2.). This actually allows us to “complete” knowledge structures by expressing simpler ideas than if that knowledge were completely new (point 1.). Furthermore we will be building on a core knowledge rather than building core knowledge (point 4.) and with general knowledge we are likely better able to see how new ideas “fit” into an overall worldview rather than contradict it (point 5.).
General knowledge therefore promotes the growth of knowledge by assent to new ideas not only in a particular direction, but in many directions.
For instance, take the concept of “line” in art theory. A number of ideas in art theory (tension, proportion, movement) extend from this basic concept. But further, to appreciate a “line” in a work of art is to understand the aesthetics of lines. To appreciate the aesthetics of lines is to understand design, architecture, and product manufacture. Yet further, it allows us to better understand the construction of “lines” in music and what makes them beautiful.
Still further, appreciating the aesthetics of lines is also to appreciate the beauty of mathematics by grasping that which equations are describing. To appreciate the concept of lines in mathematics is to understand statistics and mechanical physics. By allowing a better appreciation of the concepts of “direction” and “motion” in space and in time the concept of lines in art even allows us to better appreciate the moral concepts of “path” and “progress”.
The path to prosperity: Learn a little of everything
We cannot do everything. We do need to specialise to an extent in our economic activity. But that economic activity is informed by knowledge, and knowledge grows more easily and in more directions from a base of general knowledge.
Not only does it become easier to learn new ways of doing things, it becomes easier to learn ways of doing new things. It is a mathematical fact that variety promotes strength, and general knowledge gives us greater capability to create variety.
How to promote economic development? Learn a little of everything. Learn science and mathematics and technology. But also learn art theory and history, learn music, learn literature and classics, learn history, learn linguistics, learn religion, learn philosophy. That is the path to prosperity.
