A Critical Assessment of Neoclassical Economics in the Problem of Transition to the Knowledge-based Economy: an Institutional Approach

The occurrence of the knowledge revolution and introducing the knowledge-based economy model have attracted societies and policy maker's attention, due to their striking achievements. Although during recent decades, most of the countries have found the necessity of transition to a knowledge economy, but they have had different success in this case. This essay with taking into account of this point and by assessing the neoclassical and institutional economics tries to find a proper approach to analyzing transition to the knowledge economy. To this purpose, first, no matter of the knowledgebased economy, we explore the neoclassical and institutional economics in the problem of "transition", with a descriptive-analytical method and based on the institutional theoretical foundations; and second, providing an institutional analysis of the economy resulted from the knowledge revolution. The results show that neoclassical approach, in the first part, has flaws such as staticity and crisis-producing assumptions, and in the second part, It suffers from market failures and basic transformation of some its fundamental assumptions like scarcity. Moreover, institutional discontinuity resulted from the knowledge revolution necessitates adopting an institutional approach for analyzing the problem of transition to the knowledge-based economy.