Predicting economic growth is a lot like playing scrabble
Ricardo Hausmann explains how complexity economics can steer businesses and governments toward smarter investments
Economics is, by its very nature, a complex field of study. But every once in a while you find a tool that cuts through that complexity by making the process of sifting through economic data as easy as searching Google Maps.
The Atlas of Economic Complexity is exactly that kind of tool.
The Atlas, which recently underwent a complete overhaul by the Kennedy School’s Center for International Development (CID,) is at its core a database of decades worth of economic data from every country on earth. But far from an index of spreadsheets, the Atlas brings the data to life through interactive visualizations that allow you to easily dig into any country, industry or product space on the planet.
“The economy is like a game of Scrabble. If you have very few letters, you can make very few words. The more letters you have, the bigger variety of words you can cook up, and the longer those words.” — Prof. Ricardo Hausmann
Of course, the visualizations aren’t just a novelty. They’re illustrations of economic complexity, a field pioneered in part by HKS Professor and CID Director Ricardo Hausmann, that has proven a reliable predictor of future economic development.
“It’s easier to move from making pants to making shirts, than going from making pants to making airplanes.” — Prof. Ricardo Hausmann
Prof. Hausmann explains the concept using the metaphor of a forest, where products are trees and firms are monkeys. The closer the trees are to each other, the easier it is for a monkey to swing from tree to tree. “Economic development,” he says, “is the process of the monkeys colonizing the forest.”
This week on PolicyCast, we feature an interview with Prof. Hausmann from 2013 in which he explains what economic complexity is, and how it can be leveraged by entrepreneurs and policy makers to make smarter investments in the future.
Each week on PolicyCast, Host Matt Cadwallader (@mattcad) explores the ways individuals make democracy work by speaking with the world’s leading experts in public policy, media, and international affairs about their experiences confronting our most pressing public problems.
