From Information to Communication: Generative Interaction in the Production of Knowledge

Economic analysis of information explains how existing knowledge is distributed, revealed, and used, while the economics of innovation treats new ideas as outcomes of search and recombination. This paper examines a distinct role of communication in knowledge production: interaction can change the course of search itself. We define the mechanism as adaptive feedback, in which one participant responds to the current state of another participant's reasoning and thereby alters the directions subsequently explored. The resulting idea need not be contained in the feedback or previously possessed by either participant. In stronger cases, interaction can change the representation of the problem and make previously unavailable hypotheses accessible. The paper distinguishes this generative role of interaction from information transmission and access to others' knowledge. It argues that institutions shape knowledge production through both information structure and interaction structure, including the timing of interaction and the balance between independent search and mutual influence.