Wealth to Knowledge…
Yesterday was a busy and interesting day. I met with a PhD student on campus and we discussed the idea of shifting from a wealth or money-based economy to a knowledge-based economy. In a nutshell, money is a scarce resource that only a few of us in the world claim a majority stake.
Let’s take a look at an oversimplified example. If one man has, for example, $100 and another man has $0, then the poor man will do what he can to get some of that money, whether that involves work, begging, or stealing. The rich man will do everything he can to prevent giving up any of his money to the poor person. This creates a dichotomy and the rich man will only get richer and the poor man will either gain a small amount of money by means of working, begging, or stealing or else die and be forgotten. There exists a highly accepted theory that amount of education one attains is highly correlated to amount of wealth and thus the more education one has, the higher the wages one receives. Therein lies the conundrum; in order to make money, one must be educated and in order to be educated, one must have money. This nearly inescapable loop makes it impossible for the poor to rise to the level of education of the rich. Wealth accumulation is simply unsustainable.
Knowledge, on the other hand, is not a scarce resource if it is defined as a good. In other words, it is certainly possible for more than one person to know Einstein’s Theory of Relativity. The transfer of knowledge, unlike the transfer of money, does not reduce the holder’s wealth. A teacher does not lose knowledge when his or her student learns it. In fact the opposite occurs, in most cases, and that new knowledge is spread throughout a society when the students become teachers themselves. The only thing that happens is that teacher has given up some time to transmit that knowledge to others.
If the poor man in the example cannot afford an education he will always be poor and the rich man will always have the edge. If knowledge were the basis of the economy rather than money there would be a greater balance of wealth and power in the world. This is obviously a very simple example in a two person economy but the central idea is important.
Shifting away from money and toward knowledge may be a just a pipe dream, but it is certainly worth striving to achieve. This discussion was brought about by the One Laptop Per Child (OLPC) project by MIT that I have written about many times before. It is a simple idea perhaps inspired by the old adage: “If you give a man a fish, he will eat for a day and if you teach him how to fish, he will eat forever.” The project seeks to produce laptops for children in developing nations with poor education for $100 each. The laptop, it is believed, will be a lifetime learning tool, especially when connected to the Internet. A few books costing a similar amount will only teach a few subjects, while networked laptop will give a child unlimited learning opportunities.
The OLPC project is exactly the kind of idea that is necessary for the poor and developing nations in the world need in order to be able to succeed. Short term welfare such as food and medical supplies are still important, but for long term growth, knowledge is the answer.
Please refer to Paul Romer or David Warsh’s book for more information. Please leave your thoughts in the comments section.
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Wednesday, 21 February 2007 at 11:48 pm
[...] has been a busy day for blogging, in case you haven’t read the other post yet. It must be ...
Monday, 5 March 2007 at 4:33 am
[...] Wealth to Knowledge Deep thoughts on money and education [...]