THE CENTRAL ROLE OF EDUCATION IN CREATING KNOWLEDGE AS A KEY ECONOMIC GROWTH FACTOR

Abstract

Endogenous growth theory stands for the basis of a new economic growth paradigm, which has in this century become the dominant theoretical starting point in defining the development policies of countries and regions. The point is to embed the imperative of continuous technological changes into the institutional structure of the overall socio-economic system, and thus create a business environment conducive to generation, implementation, and commercial valorization of knowledge through innovation. This implies the acceptance of conceptual premises of evolutionary and institutional economics, which stresses the interdependence of technological and social changes. In such circumstances, the central role of education in creating knowledge as a key factor of economic growth comes to the fore. In short, education is an increasingly important factor in the creation of newly added value, but also vice versa, as the demand for educated workers increases when the economy grows and the population gets richer. Training of people to work in such conditions, however, requires a radically new model of education, compared to the previous. The new model of education stresses the importance of creation of individuals’ abilities, such as teamwork, problem solving, motivation for lifelong learning. In this process, teachers do not convey dominant facts to students, whose main task is to learn them and repeat, but become a kind of guide to the source of new knowledge.
The essence of the knowledge economy is capitalization of knowledge through innovation and value creation on this basis. In this regard, science and education are becoming a source of new knowledge. Education is a central generator of knowledge. Since knowledge production is practically not subject to any limitation criteria, the conclusion is that economic growth based on knowledge is de facto unlimited. This logic is in full contrast to messages coming from neoclassical growth theory, which, for its part, does not take into account effects of externalities in the form of technological spillover. Education, as undoubtedly a key source of new knowledge, is not an abstract source of innovation, since technological solutions are not free goods always available to everyone. On the contrary, plenty of applied knowledge is subject to exclusion criteria. In short, growth of investment in education, development, and fundamental research fills a unique national basin of knowledge and represents conditio sine qua non of the knowledge economy. In this regard, one should keep in mind that economic growth is driven by innovation, whose basis is, as a rule, made of knowledge. Education, as a generator of knowledge that drives innovation, is a factor of production par excellence, and, in this context, investment in education activities must be subject to criteria of efficiency evaluation, similar to those used for evaluating efficiency of investment in other production factors. The state, viewed in this light, must create conditions conducive to efficient use of investment in knowledge, i.e. education.