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Keith Rankin: Demanding A Knowledge Economy

Demanding A Knowledge Economy

Keith Rankin, 7 March 2001

The Tertiary Education Advisory Committee (TEAC), set up to advise the government how to achieve its vision of a complementary rather than a competition-oriented tertiary sector, presented its second of three reports yesterday. The focus, as expected, is on how tertiary education can serve the needs - or at least the perceived needs - of the national economy.

Despite the Minister of Tertiary Education's vision of a "knowledge society", the reality is that fashionable thinking assumes that a society has only one pillar - its economy. The irony is that, in an age of globalisation, the master that we are asked to submit to - the national economy - may not even exist any more.

One particular recommendation of TEAC is that we put more resources into subjects such as applied science, mathematics and engineering; and fewer resources into accounting, law and humanities.

Ironically, the report follows the kerfuffle over the cessation of the teaching of Indonesian language and culture at the Universities of Auckland and Wellington. It is hard to see how total ignorance about the nature of our biggest neighbour's biggest neighbour serves either the geopolitical or economic interests of New Zealand.

One of the axioms of economics is that "the customer is always right". Hence, the education system should be 'demand-driven' rather than 'supply- driven'. A policy of producing an increase of science graduates despite an absence of domestic demand for them is unlikely to generate much of a return to New Zealand.

By demand-driven, I do not simply mean that we should just teach the subjects that students are most willing to pay to learn. Demand also comes from society as a collective whole, and from the state (which I differentiate from society).

If we want more science and engineering graduates, the state - the promoters of the new vision - must one way or another generate the demand for these graduates. That may mean that the government itself sets up sufficient research institutes to employ them. Or it may mean that the government will facilitate the formation of entrepreneurial research-oriented firms in New Zealand; businesses in the mould of the biotechnology firm Genesis.

The latter scenario seems more in tune with the times. It means that we must be producing scientists and engineers who are also innovative businesspersons. The irony here - at least with respect to my employer Unitec - is that the faculty that teaches commercial law and accountancy is also the nation's leader in the teaching of entrepreneurship, through its Masters of Innovation and Entrepreneurship programme.

One particular problem for New Zealand is that there is considerable foreign demand for science, engineering, mathematics and computer science graduates. If we simply supply more of these graduates without expanding demand, they are far more likely to becomes employees overseas than entrepreneurs in New Zealand. While the gift economy is an important and growing reality (eg the impulse to give continues to drive the Internet), it makes no real sense for a relatively poor country like New Zealand to simply gift graduates to rich countries like the USA and the European Union.

For the government's strategy to succeed - meaning the creation of an economic locus in New Zealand that is driven by scientists who are happy to live and work here and who identify with New Zealand as a unique society - we first have to demand people who can and will teach science and mathematics in New Zealand. Such teachers must be resourced to teach to the highest international standards, and not just at tertiary level. In practice, the first wave of new science graduates will be needed more as teachers than as entrepreneurs.

There is an economic model that is useful in helping us to understand how we should go about achieving science-led economic development. It can be called the "import substitution" model, and is perhaps better understood by economic historians (as "staple theory") than by straight economists (who link import substitution to protective policies such as import licensing).

The idea is that demand (eg demand for scientists) must come first, and that much of that demand will be initially satisfied by imports (eg by attracting foreign scientists to live and work here). We would be "buying" foreign scientists and science teachers in an international "sellers' market". The next step is that local secondary school students (and older kiwis seeking a career change) would observe these imported knowledge workers and, adopting them as role models, seek the skills that will enable them to pursue similar careers.

Local production of the scientists we want (meaning New Zealand scientists practising in New Zealand) will only take place if the market (which reflects to a large extent the government's preferences) both demands scientists and is seen to be demanding scientists.

It follows from this that teachers of these subjects would need to be paid more than those who teach subjects we want fewer graduates in. And be paid more than teachers in subjects (like history) that are socially important but which offer fewer careers outside of teaching.

It is thus unfortunate that the concept of a "University of Technology" has been rejected by TEAC.

What we really need is universities of technology (alias "universities of the economy") that "produce" the human resources that the market demands. That then enables the other universities to be "universities of society", serving the cultural and pure intellectual needs of society. Universities - ie universities of society - are a part of the (public-oriented) gift economy that has always complemented the (private-oriented) market economy.

Our present universities try to be, simultaneously, two completely different institutions: universities of society and universities of technology. If we are to achieve the very worthy vision of a knowledge society that Steve Maharey and his colleagues in the present centre-left government share, we have to allow each type of university to flourish independently from the other.

Universities of society should not be driven by market forces. They should be offering courses in Indonesian language and literature - and researching Indonesia - even if there are no students currently demanding such courses.

Universities of technology should be responding to demand; ie should be sensitive to market forces. A modern knowledge society does depends in large part on the creation of an entrepreneurial economy that values innovation and makes intensive use of applied scientific knowledge. The New Zealand government must therefore act to generate a critical mass of domestic demand for applied scientific knowledge and a fortiori for applied scientific knowledge workers.

As with any other commodity, demand for knowledge workers can be satisfied by imports, domestic production, or a mixture of the two. We start by importing, at world market prices, those graduates we cannot supply ourselves. With signs that Australia, the USA and Britain are entering recession, we might even be able to import a number of expatriate New Zealanders who have become knowledge workers.

In the meantime, if we continue to demand more lawyers than scientists, we will get more lawyers than scientists.

©2001 Keith Rankin

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