Atlas of Economic Complexity Essay

1715 Words 7 Pages
Introduction:
The book Atlas of Economic Complexity proposes an index that measures how complex an economy is. The index is based on the hypothesis that what a country produces and exports is a measure of its economic complexity. They argue that in order to produce certain products, specific knowledge is necessary and that knowledge has to be in that society and must be channeled efficiently (Hidalgo and Hausmann, The Atlas of Economic Complexity 2011). In their book they suggest that their complexity index is an accurate predictor of future GDP per capita. According to the book, an economy has to have a certain infrastructure, level of education, efficient markets and organizations that can take advantage of the accumulated knowledge of a
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To do this efficiently, that society or country needs effective organizations and markets that can distribute knowledge where it is most needed (Hidalgo and Hausmann, The Atlas of Economic Complexity 2011). According to Hidalgo and Hausmann “the complex web of products and markets is the other side of the coin of the accumulating productive knowledge”. For an economy to export unique products, products highly dependent on technology or complex processes, the country must have the appropriate environment in place . The basis behind the calculation of the index is to find out how complex an economy is depending on what they export. According to the book, how common a product is “reveals information about the volume of knowledge that is required for its production. Hence, the amount of knowledge that a country has is expressed in the diversity and ubiquity of the products that it makes”. They continue to differentiate products to determine if they are scarce, and that is what makes them less ubiquitous (as opposed to how complex they are). They compare that to how diverse the products that same country exports are. This allows them to determine if certain non-common products are in fact difficult to make (i.e. require a lot of knowledge) or if they are just found in fewer places in the world. For example, rare

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