Over the last decade it has been accepted by many commentators that the economy is moving into a new phase of development based particularly on knowledge production and consumption. And although the ‘knowledge-based economy (KBE) thesis’ may have been overstated, it is difficult to deny that important changes have been occurring in the ways that economies work, and that these changes do indeed revolve in part around the creation, transfer and use of knowledge. Since the 1980s we have, for example, witnessed the expansion of ICT and the internet, and the emergence of knowledge-intensive business services, as well as a significant deepening of R&D inputs into manufacturing industry. Unfortunately, however, the KBE thesis is also associated with an excessive emphasis on the last of these changes – on the role of science and technology in manufacturing – an emphasis that has led to the neglect of other economically relevant forms of knowledge. Here we examine this emphasis and its consequences, and we suggest that policy research should be rebalanced to produce a more interesting and realistic assessment of the ways in which knowledge now contributes to economic development.