ABSTRACT
This chapter shows that a substantive theory of political economy can be developed by introducing strong interactions and knowledge flows in a complex of interrelationships concerning economy; society, science and ecology. This approach to a systemic understanding of interactions and knowledge in the political economy becomes a powerful methodology. In the neoclassical approach to human capital theory, education is treated as an efficiency-generating capital good that could exist either in the form of investment or consumer good. The bulk of Economics of Education hinged on the valuation of decisions undertaken by rational agents on the basis of their perception of the kind of good embodying education. Knowledge formation can take two forms in the strongly and extensively interactive domains. The first kind of knowledge formation is governed by rationalism. The second kind of knowledge formation is based on interactions that derive convergence from systemic complexity conveyed by interacting processes.
