Appropriate theoretical framework for understanding and analyzing economic issues in knowledge-based economy

Identification of every phenomenon in the world implies the application of a proper theoretical framework. In doing so, the various approaches of analysis have been used in different fields of study. In the last two decades, with the rapid growth of scientific and technical knowledge, signs of the third wave of economic revolution have gradually come to view. Although the new economic pattern has its own challenges, having relevant documents in mind, yet new opportunities and solutions proposed by the emerging revolution, owing to the significant increase in growth rate and productivity, have had great potential to meet the economic problems of the contemporary world. The current study seeks to find a powerful and efficient theoretical pattern in order to specify the best relations that govern the economic factors of the new era. The theoretical framework has been based upon the institutional economics; also, a descriptive-analytical method has been applied to analyze the information. The purpose is to find an efficient theoretical pattern to achieve the aforementioned. Indeed, the most important findings of the current research are the following: (1) the knowledge-based economy is facing four major challenges: new waves of increasing uncertainty; increasing importance of human as well as factors affecting his motivation and selection process such as social capital; market failure due to the factors that are agreed upon, such as increasing return to scale and the severe increase in inequality; and the double importance of social changes owing to the institutional reforms. (2) The aforementioned challenges are all of the institutional nature. Hence, a doctrine, which lacks enough consideration toward institutional issues, would be unable to analyze and fully understand the knowledge-based economy. The findings of this paper show that the most apt theoretical framework to analyze the issues related to the knowledge-based economy is the one which is eligible and efficient enough to analyze and scrutinize the institutions and the causal relations between them.