The Financial Express

From Praxis to idea economy

Evaly and Fianancial Express Evaly and Fianancial Express
From Praxis to idea economy

In the philosophical writings of Plato, Aristotle, Karl Max, and many others, Praxis referring to the act of engaging, applying, exercising, realising, and practicing ideas has been a recurrent topic. Marx refers  to Praxis as the free, universal, creative, and self-creative activity through which human beings create and change the historical world and themselves appear to be highly relevant to the trend of formation of ideas for creating better alternatives to existing ways of doing things. This is often termed as creative destruction in modern economic theories. This attribute appears to be unique to human beings, which distinguishes them and makes them superior to all other creatures. Unlike other beings, humans are in a relentless race in finding ideas of getting jobs done better at less cost. Application of some of the ideas leads to getting our ends met better by consuming fewer resources and our time and effort. Such reality places ideas as an important input in addition to labour, capital, and natural resource to the production of economic outputs. The ability to produce and applying ideas is the core capacity for uplifting our quality of living standards. The role of ideas in producing economic outputs appears to be the main underlying cause of increasing inequality in economic prosperity enjoyed by individuals, firms, and countries. How to benefit from ideas in creating an idea economy has become a burning issue. But unfortunately, most of the countries are falling behind, while only a few succeed-which is creating the demand for knowing why don't all human beings, firms, and countries equally benefit from humans' natural capability of producing ideas?   

Ideas and their applications in producing economic outputs have multiple dimensions, such as (i) knowledge and ideas, (ii) ideas and innovation, (iii) supply as well as demand of ideas, (iv) regulatory, infrastructure, and political economy issues, (v) role of the market, and (vi) complementary and system capacities, among others. 

KNOWLEDGE: knowledge appears in different forms. Notable ones are art, tacit, and codified forms. By observation, thinking, and imagination, we develop knowledge, often in the art form. Through experience, human beings earn tacit knowledge, which remains a personal intuitive understanding. Codified knowledge is earned by processing data gathered through experimentation, which establishes quantitative relations between underlying variables, termed as scientific knowledge. All these three forms of knowledge are vital to developing meaningful ideas for meeting our ends better in a more convenient manner. Ideas produced with the support of art and tacit forms of knowledge require further work for developing codified or scientific knowledge, often termed as theorization. This theorisation is vital for turning ideas into useful means and keep updating it for creating the scale effect. In the absence of such theorisation, the implementation of ideas supported by art and tacit knowledge saturates very quickly, limiting the economic value creation. To mastering the capacity of theorisation, and making good utilisation of it has been the core competence of keep deriving benefits from ideas, expanding the demand and developing growing firms and industries. For example, Wright Brothers' came up with the idea of a flying machine. This was the outcome of creative outburst powered by tacit and art forms of knowledge. But the success of creating the large aerospace industry was powered by the theorisation in the form of scientific knowledge.

IDEAS AND INNOVATION: Not all ideas are innovative. Innovative ideas are those which have the potential of contributing to the means of getting our jobs done better at less cost. Innovative ideas are themselves not innovation. Once ideas are developed further, and they succeed to cross barriers like regulation, vested interest, needed infrastructure, standardisation, alternative products, and customer preferences-among others-to diffuse in the market, creating a surplus, then they succeed to grow as innovation. In the competitive market economy, solutions around innovative ideas should reach target customers through the pulling effect of the market-creating both consumer and producer surpluses.

SUPPLY AND DEMAND OF IDEAS: Apparently, we have a very rich stock of ideas, as we are all creative. For example, India's Innovation Foundation (IFI) has listed more than 300,000 grassroots level ideas. In any major idea competition, we also receive numerous ideas. A growing number of startups is also an indication that we are not running short of ideas. But all ideas do not have the equal potential of creating economic value. For example, each of the ideas like a flying machine, or automobile has created more than a trillion-dollar industry. In order to increase the supply of high potential ideas, we need to focus on research and foster the culture of asking questions about status-quo. On the other hand, we need to create the demand to profit from ideas by making a further investment for theorising, developing complementary ideas, and risking investment to roll them out in the market. It appears that developing countries do have significant weaknesses in the supply of high-value ideas, and most importantly in demand. In the absence of demand for profiting from ideas by risking investment and strong management capability, supply alone cannot empower developing countries to benefit from ideas.

REGULATORY, INFRASTRUCTURE, AND POLITICAL ECONOMY ISSUES: Often, regulation, infrastructure, and vested interest pose barriers to benefit from ideas. For example, to benefit from electric vehicle (EV) idea, regulation should be made conducive, and infrastructure should be rolled out. The emergence of EVs also hurts the business interest of oil-based economy. Similarly, large installations of oil, natural gas, and coal-based power plants are a barrier to benefit from the idea of renewable energy sources like solar and wind. To address such barriers, there is a need for forecasting unfolding technology potentials and opening the path to embracing them. Unfortunately, many developing countries are caught in the trap of impeding the unfolding of better ideas.   

 ROLE OF THE MARKET: Irrespective of the greatness of ideas, invariably innovative products emerge in the primitive form. Competition among profit-making firms is vital to keep making R&D investment for producing knowledge for fine-tuning innovative products making the successive versions better as well as cheaper. This is a vital requirement for leveraging ideas for driving economic growth. Particularly in developing countries, often, protection is exercised to support the startup babies to grow. Unfortunately, handholding is not a remedy. On the other hand, a predatory pricing-based monopolisation strategy exercised by venture capital firms for winning with ideas does not also help ideas to grow to create economic prosperity for the society. 

COMPLEMENTARY AND SYSTEM CAPACITIES: To roll out an idea as innovative product, there is a need for complementary capacities for serving diverse purposes like prototyping, testing, manufacturing, distribution, quality assurance, and many more. Moreover, once rolled out innovative products show profitable opportunities, competition responds with the forces of replication, imitation, and also substitution. To succeed to profit from ideas, the innovator needs to respond with better versions, costing less to produce. Such a response requires a flow of ideas. Such reality demands the system capacity to profit from ideas.  

 It happens to be that over the last couple of centuries, advanced countries have become rich by exploiting ideas in creating economic outputs. In doing so, they have also created complementary and system capacities. On the other hand, by being busy with labour and natural resource-based economic activities, developing countries not only failed to develop those capacities, but most importantly, they have created a barrier to benefit from ideas. It's time for developing countries to go back to the basics of Praxis and figure out how to create an idea economy by leveraging the inherent human capacity of generating ideas--which makes humans superior to other living things. 


M. Rokonuzzaman, Ph.D is academic and researcher on technology, innovation and policy. [email protected]

Share if you like