Why information grows and the atlas of economic complexity.
While traditional economists perceive the absence of growth as irregularity, César Hidalgo as a statistical physicist who is familiar with the laws of thermodynamics turns the perspective the other way round and seeks for an explanation for the surprising presence of persistent economic growth. Hidalgo interprets information as the technological knowledge that is embodied in the structure that makes out of a set of inputs a final product and argues that information can grow through the linking of capabilities of individuals in social and economic networks.
This reasoning forms the underlying theory of the Economic Complexity Index (ECI). The ECI is a recursive measure for technological capabilities that is derived from the topological structure of the network that links countries through the flow of traded products and provides a new interpretation for economic development and competitiveness. The ECI received much attention in the recent literature on complexity, trade and economic development and is a nice application of complexity methods in economics.
Comment from our editors
It is a very relevant material as it shows the application of complexity and network methods to the study of trade, development and economic evolution. It is also scientifically relevant as a theoretical underpinning of the rather mechanical (statistical physics) measure of ECI. Lastly, this video is rather short and a longer version can be found here!