This paper addresses the problem of knowledge and the far-reaching implications it bears upon innovation and the functioning of economic systems. It develops a stylised analysis of the micro-dynamics of knowledge generation, exchange and absorption. It discusses the properties of knowledge accumulation as a complex process: adaptive, path-dependent, context-dependent, open-ended and creative in
... [Show full abstract] the sense that it always entails the potential to endogenously generate radical novelty, in line with theory and evidence from the economics of innovation, but fundamentally at odds with a number of important tenets of equilibrium economics.