Physical Economy vs. Knowledge Economy

There are many different economies to be studied. There are two in particular that are similar but also different. These two economies would be considered physical and knowledge.

In physical economies the goods and services wear out. After long use of a car tire the tire will then exhibit normal wear and tear. On the other hand knowledge economy doesn’t wear out but does become obsolete or untrue. For instance a theory in science might be proven true and then untrue according to experiments and tests.

Physical economies are replicated at the expense of the manufacturer. If the demand of speakers increase then the manufacturer will make more as they see fit. Contrarily knowledge economics are replicated at almost zero cost without limit. Knowledge is spread freely by word of mouth. The recipe for a cake can be verbally transferred at no cost to numerous cooks.

Physical economies can only exist in tangible places. An example is that a sofa must be on the ground for it to be properly utilized. Knowledge economy doesn’t physically exist. Basically you cannot see the information in someone’s thoughts.

With physical economies when sold, possession changes owners but with knowledge economies the seller may still have possession and sell again.  You lose the possession when you sell a basketball to a buyer. When you sell stock information you will still have that information to yourself to use again.

Price is based on production costs when dealing with physical economies. For instance when the price of engines increases the price of cars increase as well. Knowledge economies are based on the value to the consumer. A person interested in jailbreaking an iPhone will pay more than a person who knows how to jailbreak it themselves.

Business professionals really have to pay attention to whether they will be utilizing physical or knowledge economy. They will also have to be aware of the effect the economy will have on different consumers.  The professionals need to be mindful that these two are somewhat related in that they can be sold, used, and replicated.