For immediate release: April 13, 2007
Dallas Fed: Transfer of Knowledge Reshaping World Economy
DALLAS—As knowledge and information cross borders with unprecedented ease, it unleashes powerful economic forces that reduce costs and boost productivity, according to the Federal Reserve Bank of Dallas’ 2006 annual report essay.
The essay is part of the Dallas Fed’s mission to understand how globalization is affecting the economic landscape and monetary policy.
This regearing of the world economy creates far-reaching implications for Federal Reserve policymakers, Dallas Fed President and CEO Richard W. Fisher states in an opening letter.
“The Fed’s mandate calls for keeping inflation low while maintaining maximum sustainable economic progress, a charge we cannot fulfill without understanding and weighing the forces driving productivity,” Fisher writes.
He asserts that policymakers must develop better measures of the global services economy.
“Data that do not reflect the world in which we live increase the chances for errors in decisionmaking,” he says.
“The Best of All Worlds: Globalizing the Knowledge Economy”—the 2006 annual report essay—contends that a technology revolution that makes access to information cheaper and more democratic has sped up globalization and touched nearly every part of the world.
According to the essay’s authors, Senior Vice President and Chief Economist W. Michael Cox and economics writer Richard Alm, this democratizing of knowledge is increasing productivity around the world, lowering costs and raising living standards “in ways unimaginable just a few years ago.”
“Knowledge is the ultimate source of wealth,” they write.
The essay examines 10 ways a more integrated knowledge economy is impacting productivity and costs—for example, raising foreign investment, creating new competition, extending economies of scale and broadening markets.
“The combination of knowledge and globalization provides the U.S. with the best of all worlds—the benefits of not only our nation’s intelligence but the entire planet’s,” the authors conclude.
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