The Atlas of Economic Complexity

As complex as it looks.
(Click the graphic to enlarge or here for a key that explains each sector.)

The recently published the Atlas of Economic Complexity provides a new way to assess and predict future economic growth.  Existing measures, like GDP and PPP, ignore the true intricacies of entire economies and fail to capture essential externalities.  The Index of Economic Complexity on the other hand accounts for a wider understanding of the capitalist system by acknowledging that markets are aggregates of networks of millions of highly specialized individuals.  

Although I personally have yet to explore the specific formulas used to calculate the Index of Economic Complexity (they're as complex as the name suggests), the idea behind the new measure sounds extremely intriguing.  On first glance, the Atlas of Economic Complexity appears to be a Moneyball revolution, using advanced statistical data to extract value in areas where status quo measures are long overdue for an modernizing overhaul.

Some quotes:

"The wealth of nations is driven by productive knowledge," writes Ricardo Hausmann, one of the Atlas of Economic Complexity report's primary authors. "Individuals are limited in the things they can effectively know and use in production so the only way a society can hold more knowledge is by distributing different chunks of knowledge to different people. To use the knowledge, these chunks need to be re-aggregated by connecting people through organizations and markets...In fact, [the Index of Economic Complexity] beats measures of competitiveness such as the World Economic Forum's Global Competitiveness Index by a factor of 10 in predicting growth for the following decade. It also beats by similar margins measures of human capital and governance."

The Economist describes the Atlas's ability to explain previously inexplicable trends.  "Investment in education is a weaker predictor of economic growth than the complexity measure. The comparison of Ghana, which had invested heavily in education, and Thailand which hasn't, is interesting. Thailand does well in the complexity index and Ghana doesn't. Thailand 'has moved from producing jute and sugar to becoming a major manufacturing center.' Ghana hasn't....The research makes clear that a country can only shift into new more technical products and services along a ladder of existing products through the evolution its productive knowledge in a virtuous circle."

The Atlas of Economic Complexity