Archives of Economic History Apxeion Oikonomikh™ I™Topia™

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Archives of Economic History Apxeion Oikonomikh™ I™Topia™ ARCHIVES OF ECONOMIC HISTORY Volume ÃVII No 2 July–December 2005 APXEION OIKONOMIKH™ I™TOPIA™ TfiÌÔ˜ XVπI T‡¯Ô˜ 2 πÔ‡ÏÈÔ˜–¢ÂΤ̂ÚÈÔ˜ 2005 CONTENTS - ¶EPIEXOMENA A.R. LEEN–B. MELNIKAS: The knowledge–based economy: Market–based development strategies for the EU . 5 R.P. ZUIDEMA: A new millennium currency as International Yardstick . 19 A.D. KARAYIANNIS: Economic Effects of Technological Progress in the early Classical period (1800–1840): A synoptic review . 29 G.E. HALKOS–N.C. KYRIAZIS: A game theory approach to institutional change . 63 A. PAPADASKALOPOULOS–M. CHRISTOFAKIS–A. KARAGANIS– J. KONSOLAS: Trans–European Transport Networks: The developmental contribution of Via Egnatia motorway in Northern Greece . 91 V. PATSOURATIS: The determinants of intergovernmental grants . 123 N. PAPASYRIOPOULOS: The ex–dividend price behavior of dually listed international stocks . 139 BOOKS, MAGAZINES AND ARTICLES RECEIVED . 169 BOOK REVIEWS . 171 ATHENS - A£HNAI, 2005 Archives of Economic History / Aگ›ÔÓ OÈÎÔÓÔÌÈ΋˜ IÛÙÔÚ›·˜, XVIπ/2/2005 5 THE KNOWLEDGE–BASED ECONOMY: MARKET–BASED DEVELOPMENT STRATEGIES FOR THE EU A.R. LEEN* B. MELNIKAS** Abstract Possibilities for the development of new forms of economic, social and technological headway designed to create and further improve economies based on knowledge are analyzed here. The ideas are imbedded in the idea of the market as a discovery procedure. The main emphasis is put on national and regional economic specialization in the situation of the development of the European Union. Clusterization oriented towards the increase of efficiency of various national and regional economies is a critical precondition –as is proved by historical examples– for the successful creation of a modern economy based on knowledge. The proposal creates a framework for freedom and underpins the conditions for a prosperous society, it does not generate them. JEL classification: B25, D02, D85, O33, R11. Keywords: Market economy, knowledge–based society, European Union. 1. Introduction A market economy makes use of much more knowledge then ever possible will be used in a centrally planned economy. This for the reason that not only it makes use of scientific knowledge, which in principle can be centralized, but also of the unique knowledge in the possession of individuals. This last form of knowledge is impossible to centralize. Often just for the reason that individual do not know they possess it, before the problem arises to use it. By the price system, the system of profit and loss (competition), individuals are stimulated to use their knowledge. The whole organization of the market serves mainly the need of spreading the * Professor of Leiden University. ** Professor of Vilnius Gediminas Technical University (Lithuania). 6 A.R. Leen–B. Melnikas information on which buyers act (Hayek, 1982, Vol. I, pp. 15-17). What is the role of the government in the market process, as far as the dissemination of knowledge is concerned? How, in particular, should the assistance of the government look in the multi-cultural environment of the European Union (EU)? The future of the EU lies in the recognition of the correct role of the EU in this process of creating possibilities for the development of new forms of economic, social and technological headway designed to create and further improve economies based on knowledge. This means that key issues are to be considered as issues of sustaining the knowledge based society. Striving to find answers determines the necessity of elaboration and implementation of appropriate strategies. An approach towards the way how long term strategies designed to create it should be prepared. The objective of the research is the proof that a priority is the urge of technological advancement and enhancement of compatibility and productivity using such opportunities as specialization of national and regional economies, creation of clusters and their networks, as well as the development of so called economic “oases” and hyper-clusters. The main result is the concept of strategies oriented towards integration and synthesis. The basis for which is the universal principle of creation of a new quality. 2. Theoretical background: the Austrian market-based vision on the role of knowledge For the government it is impossible to know how to act in order to stimulate the knowledge economy. Indeed, the government can use scientific knowledge in its decision making, but never the decentralized knowledge every individual does possess of. The lack of knowledge is essential. A fact recognized and further expanded on in economic science, and especially Austrian economics. In 1871 Carl Menger's value theory turned the value theory of the classical economists upside down. The classi-cal (Ricardian) theory held that cost of production determines the normal value of consump- tion goods. In contrast, Menger's the-ory held that the value of consumption goods ultimately determines the cost of production. Value is an expression of judgements concern-ing future usefulness in meeting consumer wants. Prices are never determined by costs of production; the reverse is true. Think of it. The knowledge–based economy: Market–based development strategies for the EU 7 There is no reason to expect the producer to wait on, e.g., a general sales tax to increase his prices if he could have done so before. Since the selling price is already set at a “maximum”; a rise in costs, ic. an imposed general sales tax, cannot raise the price any further. Israel Kirzner describes modern Austrianism as an authen-tic extension of Menger's older static subjectivism: a consequent dynamic subjectivism. Its, the two central figures are Ludwig von Mises and Friedrich Hayek. Both authors focus on market adjustment processes. Kirzner, building his theory as Mises and Hayek did, believes that one of the greatest failures of neoclassical (equilibrium) analysis is that it assumes equilibrium is actually brought about. The real problem for modern Austrians is to describe the possible realization of an equi-li-brium as the result of “the systematic way in which plan revisions are made as a consequence of the disappointment of earlier plans” (Kirzner, 1962, p. 381). For Mises and Hayek adjustment is a sys- tematic sequence of decisions. The individual decision unit is not only maximizing, but is also finding out the relevant ends-means relation-ship. This opened the way for incorporating learning into our understanding of market pro-cesses. Hayek's extension of sub-jectivism was to describe the process as one of learning by discovery. Endogenous change in the ends- means relationship –says Kirzner– is possible with the entrepreneurial element in each individual market participant: alertness. Alertness is the propensity toward fresh goals and the discovery of hitherto unknown resources. A disequilibrium situation points to market ignorance. From it emerge profitable opportunities that are exploited by alertness. Alertness gives a more realistic image of human action (and hence real choice) and makes possible the description of the market as a unified discovery process. “[The] ‘alertness’ view of the entrepreneurial role rejects the thesis that if we attribute genuine novelty to the entrepreneur, we must neces-sarily treat entreprene-urially generated market events as not related to earlier market events in any systematic way. The genuine novelty [...] attribute[d] to the entrepreneur consists in his spontaneous discovery of the opportunities marked out by earlier market conditions (or by future market conditions as they would be in the absence of his own actions)” […] “[These] entrepreneurial discoveries are the steps through which any possible tendency toward market equilib-rium must proceed” (Kirzner, 1985, pp. 11-12). 8 A.R. Leen–B. Melnikas 3. Theoretical background: universal principle of “creation of the new quality” The role of the government is spreading scientific knowledge: the knowledge infrastructure of the society. The concepts of the knowledge- based society and economy can be defined in a number of ways. (Boldrin and Canova, 2001; Cohendet and Stojak, 2005; David and Foray, 2002; Goeransson and Soederberg, 2005; Grace and Butler, 2005; Huseman and Godman, 1999). We suggest one of the most relevant versions. It is the society where social, economic and cultural progress is determined by the ability to create and efficiently apply new knowledge, and where creation of knowledge and promotion of innovations become priority. It is the economy where development is determined by creation of knowledge and technologies, implementation of high technologies in all spheres, along with the priority orientation towards the use of products created by the means of high technologies. Creation of the knowledge based economy as a key priority of the further enlargement of the EU could be defined as an especially complex process towards formation of the brand new society and the qualitatively new life style. (Melnikas and Reichelt, 2004). What is more, this process is of “double” complexity. First, compared to the “traditional” economy it is considered as qualitatively new. Second, it is completed in the situation of the enlargement of the EU, which means that qualitative changes have been happening in the EU. Examining possibilities and prospects we apply the “universal principle of the creation of new quality. New quality always develops by amalgamation when elements of different origin that never had belonged to the same system collide. The principle develops and
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