Researchers find a country's wealth correlates with its collective knowledge

October 26, 2011 by Lisa Zyga, Phys.org report

This figure shows the relationship between economic complexity and income per capita for 128 countries after controlling for each country’s natural resource exports. Economic complexity and natural resources explain 73% of the variance in per capita income across countries. Image credit: The Atlas of Economic Complexity
(PhysOrg.com) -- What causes the large gap between rich and poor countries has been a long-debated question. Previous research has found some correlation between a nation’s economic prosperity and factors such as how the country is governed, the average amount of formal education each individual receives, and the country's overall competiveness. But now a team of researchers from Harvard and MIT has discovered that a new measure based on a country's collective knowledge can account for the enormous income differences between the nations of the world better than any other factor.

The researchers, led by Ricardo Hausmann, director of Harvard’s Center for International Development and former Minister of Planning for Venezuela, and Cesar A. Hidalgo, assistant professor at MIT’s Media Laboratory and faculty associate at Harvard’s Center for International Development, have published a book called The Atlas of Economic Complexity. Starting today, the book is free to download at http://atlas.media.mit.edu.

The authors plan to launch the book during an exclusive event at Harvard's Center for International Development on October 27th. Attendees will include chief economists of the World Bank and the Asian Development Bank, among other guests.

In the book, the authors show how the total amount of embedded in a country’s economy can be measured by a factor they call “economic complexity.” From this perspective, the more diverse and specialized jobs a country’s citizens have, the greater the country’s ability to produce complex products that few other countries can produce, making the country more prosperous.

“The total amount of knowledge embedded in a hunter-gatherer society is not very different from that which is embedded in each one of its members,” the researchers write in their book. “The secret of modern societies is not that each person holds much more productive knowledge than those in a more traditional society. The secret to modernity is that we collectively use large volumes of knowledge, while each one of us holds only a few bits of it. Society functions because its members form webs that allow them to specialize and share their knowledge with others.”

The researchers measured a nation’s collective knowledge in terms of the types of products it produces. Countries that produce lots of products that few other countries produce (such as medical imaging devices and jet engines) have more collective knowledge than countries that produce mainly ubiquitous products (such as cotton and soy).

This network shows the product space of the US. Image credit: The Atlas of Economic Complexity
“The amount of knowledge that is required to make a product can vary enormously from one good to the next,” the authors write. “Most modern products require more knowledge than what a single person can hold. Nobody in this world, not even the savviest geek nor the most knowledgeable entrepreneur, knows how to make a computer. He has to rely on others who know about battery technology, liquid crystals, microprocessor design, software development, metallurgy, milling, lean manufacturing and human resource management, among many other skills. That is why the average worker in a rich country works in a firm that is much larger and more connected than firms in poor countries.”

But getting poorer countries to begin producing more complex products is not as simple as offering individuals a formal education in which they learn facts and figures - what the authors refer to as “explicit” knowledge. Instead, the most productive knowledge is the “tacit” kind (for example, how to run a business), which is much harder to teach. For this reason, countries tend to expand their production capabilities by moving from the products they already produce to others that require a similar set of embedded knowledge capabilities.

After measuring the Economic Complexity Index (ECI) of 128 countries by analyzing their products, the researchers found a strong relationship between ECI and income per capita, at least for countries that have limited natural resource exports. (Countries with, for example, large oil reserves tend to be wealthier than expected, since mining oil reserves depends more on geology than large amounts of knowledge.) For the 75 countries for which natural resources account for less than 10% of exports, the researchers found that economic complexity accounts for 75% of the variance in income per capita. After controlling for natural resource exports, economic complexity and natural resources explain 73% of the variance in per capita income across all countries.

Using this data, the researchers generated a ranking of the 128 countries in which Japan had the highest ECI, followed by Germany and Switzerland. The US was 13th.

The authors then predicted each country’s future economic growth by comparing each country’s ECI with its level of income (GDP per capita). If a country had a lower level of income than was expected for its level of complexity, the researchers predicted that the country would experience more growth in order to “catch up.” In other countries, the level of income was higher than expected based on their level of complexity, suggesting that these countries would not experience strong future growth.

Based on this analysis, the top three countries with the highest expected growth were China, India, and Thailand. The US was 91st. As the researchers explained, complex economies tend to have few remaining opportunities because they already produce many complex products. Meanwhile, countries with an intermediate level of complexity differ largely in their potential for expanding to make more complex products.

The researchers hope that this ability to measure a country’s prosperity and predict its future economic growth reveals some key areas that might be addressed and used to accelerate the process of development.

Explore further: Researchers Map Building Blocks of Economic Complexity

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Nerdyguy
4.1 / 5 (32) Oct 26, 2011
As a free-market conservative thinker with three children in public school, I disagree with the content of your rhetoric. My kids get straight A's, I have met and volunteered alongside all of their teachers, and have yet to meet a socialist or a radical. Most of these men and women are interested in one thing: presenting math, science, chemistry, etc. and I've yet to run into a situation where a teacher's personal values were forced on one of my children.

Methinks you have perhaps been watching a bit too much of Fox News. Might want to expand your horizons.
ryggesogn2
1.6 / 5 (21) Oct 26, 2011
Is that 'collective' knowledge about how and who to bribe to get things done in a corrupt socialist state?
Maybe next time they should measure how freely that knowledge is communicated and how free individuals are to act upon that knowledge without significant govt interference: taxes, regulation and corruption.
antialias_physorg
5 / 5 (7) Oct 26, 2011
My kids get straight A's

Though to be fair: Straight A students in the US would barely be average students anywhere else (I have been to US highschool 2 years when I was young and the standards are laughably low - even taking all honors/AP classes. By all accounts the demands on students haven't risen much since then (if at all).)
tadchem
3.7 / 5 (3) Oct 26, 2011
We should export teachers to these intellectually disadvantaged countries. It would be best for them and for us.
krundoloss
3.3 / 5 (7) Oct 26, 2011
Yup. America is only #1 in Military might! It is sad that our country is so dumbed down. They should make school harder and cover more material that is relevant to modern life. Why dont they teach you how to purchase a house, or pay your taxes, or to file a patent? Useful information, not just math, science, etc, but information that will help a person in an adult life! Also I think anyone that is on welfare should be required to take atleast two college courses a year, or they lose thier welfare!

You know why other countries are surpassing us? Because thier citizens do things for the greatness of thier WHOLE COUNTRY, not just themselves! Also, change for the better is stifled by greedy corporations!
ryggesogn2
1.6 / 5 (19) Oct 26, 2011
hier citizens do things for the greatness of thier WHOLE COUNTRY,

What country does that and how has that worked out for them?
After all, those greedy Americans saved millions from German, Japanese and Soviet tyranny.
When there is a natural disaster, to whom does the world look to save them?
DNJ
3 / 5 (2) Oct 26, 2011
@nerdyguy

As someone who attended primary and secondary schools in US and abroad, I can attest with certainty that the US education problem is not teachers, per se, but the lack of concise and integrated textbooks, low teacher pay and low regard for the young people by the establishment. You stop exploitation of public schools by the eye-candy textbook publishers, you introduce male teacher presence to focus the mind of young people, and you stop undermining the self-esteem of public school attendees and performance will take care of itself.
Nerdyguy
3.9 / 5 (16) Oct 26, 2011
My kids get straight A's

Though to be fair: Straight A students in the US would barely be average students anywhere else (I have been to US highschool 2 years when I was young and the standards are laughably low - even taking all honors/AP classes. By all accounts the demands on students haven't risen much since then (if at all).)


I've heard this opinion stated before. To be honest, I know little about it. How it's measured, is it apples-to-apples, etc.

I've always been a bit surprised when I hear that, though. I went to grade school and college (through a master's) in the U.S. My kids are in school now. So, I've been able to compare/contrast public school curriculum within my own lifetime. I find that my children are very adequately challenged (I do include extra-curricular academic-type work as well) and that the workload is even higher than I had.
Nerdyguy
3.8 / 5 (17) Oct 26, 2011
My kids get straight A's, I have met and volunteered alongside all of their teachers, and have yet to meet a socialist or a radical.
Garrison Keeler sang of Lake Woebegone, where all the kidz are above average, the women are handsome and the men beautiful. A straight A student is not being challenged to learn more, they're just approved for the norm.


This amounts to zero fact, lots of bad opinion. You know literally nothing about my children, their iq, their schools, the curriculum, etc. So, to spout out this nonsensical claptrap above as if it were somehow scientifically valid is a bit like saying "U.S. teachers are socialists".
Nerdyguy
1.7 / 5 (6) Oct 26, 2011
"America is only #1 in Military might!" - krundoloss

Factually incorrect ridiculousness.
gareth_Ph
4.6 / 5 (10) Oct 26, 2011
Despite some concerning stats (40% of Americans think the world is 10,000 years old; some apparently think Stalin's hiding in their closet) America has done and will continue to give us some of the best and brightest.

A sexual ed programme is usually delivered as part of P.E (Physical Education, maybe 'Gym' in U.S) and will comprise only a small part of curriculum i.e if students are taught to put a condom on a banana/cucumber they will probably only spend one lesson - big laugh for the kids but they'll remember the lesson (which, being contraception, is rather important).

Ignorance, prejudice and religion distort education programmes, not socialism.
ryggesogn2
1.4 / 5 (20) Oct 26, 2011
Socialism distorts the teachers.
Fortunately US schools are trending towards charters and home schools bypassing the socialist teacher unions. Even Sweden is using competition by using vouchers.
gareth_Ph
3 / 5 (4) Oct 26, 2011
Surely U.S schools teach facts (a proton is a proton is a proton...), which are the same to socialists or capitalists? Home (unqualified) schooling tends to yield poor results and is more the norm in 3rd world / primitive tribes.
Nerdyguy
2.1 / 5 (7) Oct 26, 2011
Did Joseph McCarthy come back from the grave? What is with this utterly baseless, irrational hate-mongering about teachers and their unions being socialists? Rush Limbaugh have a clearance sale where you guys stocked up?

Clearly, there are problems in U.S. schools. Certainly there could be improvements. True, teachers unions have made some utterly baffling decisions, tend to have a liberal bent, and play politics with many issues for their own gain (vs. the students). But, the same could be said of many large institutions.

All problems with public schools in the U.S. are not caused by unions. And not all teachers are even liberals, let alone socialists.

As gareth put it, eloquently, "Surely U.S. schools teach facts..." And I say, he's right on the money.
HealingMindN
3 / 5 (4) Oct 26, 2011
Mandatory neuroleptic & anti-depressant druggings and vaccinations in the U.S. Public Schools are NOT helping us either. If a kid feels nothing, then he wants nothing, ergo he adds nothing to the collective knowledge of the nation. Of course, that kid will get an "A" for paw parroting the same sputum as his teachers and being a "good citizen." And what about the effects of mercury amalgam silver fillings in the heads of young children?
ryggesogn2
1.6 / 5 (19) Oct 26, 2011
What is with this utterly baseless, irrational hate-mongering about teachers and their unions being socialists?

What is baseless? Who occupied the WI state house a few months ago? Teachers from teacher unions. They even lied about skipping classes.
What politicians are supported by the NEA dues? Socialist ones.
"Socialism is not too far to the left for the Chicago Teachers Union."
kaasinees
2.3 / 5 (6) Oct 26, 2011
After all, those greedy Americans saved millions from German, Japanese and Soviet tyranny." - RyggTard

And the Russians saved tens of millions from German, Japanese and American Tyranny.

Without Russia Americans would be speaking German today.



If it wasnt for the british america would be speaking dutch.

pointless arguments about alternate realities.
Beerbarian
3.9 / 5 (16) Oct 26, 2011
Wow. Leave it to pirouette and others to make this about politics.
The great challenges facing our nation and our planet cannot be solved by such petty and narrow minded arguments.
Using this study as fodder for an intellectually dishonest campaign against your political rivals only serves to lower the bar even further.
MarkyMark
3.9 / 5 (15) Oct 27, 2011
In european countries such as Scandinavia the far right Nazi style parties are on the rise. Sounds like your 'Scandinavian Friends' have certain sympathies in that direction. Perhaps you should talk to more than just far right nationalists before you decide how things are in Europe right now hmmm! Also just to comfort you i can assure you Stalin really is dead and not hiding under your bed, and the earth is older than 10,000 years.
antialias_physorg
5 / 5 (4) Oct 27, 2011
I went to grade school and college (through a master's) in the U.S. My kids are in school now. So, I've been able to compare/contrast public school curriculum within my own lifetime. I find that my children are very adequately challenged (I do include extra-curricular academic-type work as well) and that the workload is even higher than I had.

Just to give you an idea: The amount I learned in those 2 years of high school with straight 'A's was the equivalent of one year back home (germany). I had to be reinserted one year below my age level.

When I talked to friends from asian countries then the discrepancy there is even more extreme (to them the european school systems are barely challenging)

The 'challenge' in US school systems as oposed to other systems is non-existent. If you feel your kids are being challenged adequately then maybe you should arrange for them to spend some time abroad and see what the real world is like.
krundoloss
3.5 / 5 (4) Oct 27, 2011
Maybe Im smart, but the only time any class has been challenging is when they pack too much material in a short amount of time. When this happens, I will just memorize everything and forget it later. Isnt that what everyone does anyway? Whats the point?
Nerdyguy
4 / 5 (12) Oct 27, 2011
"Also just to comfort you i can assure you Stalin really is dead and not hiding under your bed, and the earth is older than 10,000 years." - MarkyMark in response to Pirouette

lmfao. Thank you. Made my day.
Nerdyguy
3.9 / 5 (14) Oct 27, 2011
In response to Antialias, et al, re: Europeans schools vs. American schools.

There may be some truth to what you say, and I do believe there is adequate room for improvement in our school system. However, I maintain that simply by stating the case from a couple of personal experiences, you are not in reality making an apples-to-apples comparison.

For example, I have been fortunate enough to have a high enough standard of living that the schools my children attend are in safe, comfortable suburban areas. So, on the one hand, you have schools like my son's elementary where his Odyssey of the Mind team competed internationally against schools from around the world and won a second place award. This is a public school.

On the other hand, you have schools in this same city which are in very poor, inner city neighborhoods. Huge dropout rates. Guns, drugs, etc.

The problem with this kind of study is, we are simply lumping both of these types of schools together.
Nerdyguy
4 / 5 (16) Oct 27, 2011
"MANY OR MOST of the nation's teachers and professors have been teaching their Socialist values" -Pirouette

How in the world could you possibly know this? Answer: you don't, so you simply make it up.

Pirouette, I suspect that you are having trouble understanding the difference between wild, paranoid speculation and actual fact. Meds and counseling can help you my friend.
CHollman82
1.8 / 5 (12) Oct 27, 2011
We should export teachers to these intellectually disadvantaged countries. It would be best for them and for us.


We need other countries to export teachers (and decent parents) to our country... we are the impoverished nation in terms of education...

(I'm assuming you are American)
CHollman82
1 / 5 (13) Oct 27, 2011
Just to give you an idea: The amount I learned in those 2 years of high school with straight 'A's was the equivalent of one year back home (germany). I had to be reinserted one year below my age level.

When I talked to friends from asian countries then the discrepancy there is even more extreme (to them the european school systems are barely challenging)

The 'challenge' in US school systems as oposed to other systems is non-existent. If you feel your kids are being challenged adequately then maybe you should arrange for them to spend some time abroad and see what the real world is like.


Would you expect any better from a country where 40% of the population believe that humans rode dinosaurs 5000 years ago?
antialias_physorg
2.5 / 5 (4) Oct 27, 2011
Would you expect any better from a country where 40% of the population believe that humans rode dinosaurs 5000 years ago?

When I was there that sort of 'belief' wasn't as wide spread (or at least it wasn't in any kind of evidence at the school I was at.)

From experience and correspondence with fellow researchers on the subject of education I'd say anything up to and including college (and also most non-internationally known universities) is a laugh.

There are some extremely good universities, though (MIT, Cal-Tech, Stanford ...) so all is not lost. Anyone who has attended any of those will attest to the fact that the level of difficulty jumps orders of magnitude from college/high school.

But if you believe that having a US highschool diploma or a college degree is worth anything outside the US then you're just kidding yourself.
Nerdyguy
3.5 / 5 (16) Oct 27, 2011
"Would you expect any better from a country where 40% of the population believe that humans rode dinosaurs 5000 years ago?" - chollman82

First, they were called "Jesus Chariots" and second, it was closer to 5500 years ago. It took 500 or so years for Adam and Eve to get the whole civilization thing going.
ryggesogn2
2.6 / 5 (5) Oct 28, 2011
I notice some here are equating education with knowledge.
That is a mistake.
My grandfather had an 8th grade education and knew FDR was a socialist and knew much more about life than the 'educated' of today.
Nerdyguy
2.1 / 5 (7) Oct 28, 2011
Food for thought: what information, exactly, would suffice to convince the massive egos on here who are so certain of their own infallibility?

I am deeply curious to know, as it seems to me that the vast majority of you have staked out an opinion and spend most of your time ridiculing anyone who challenges it. It's obvious that neither side of this debate is learning a damn thing from the other.

I'm clearly on the fence with this and would like to see more definitive information and whole lot less name-calling. Am I the only one?

So, again, what information would suffice? Is there such a beast?
Nerdyguy
2.6 / 5 (5) Oct 28, 2011
"It's apparent that MM and Nerdyguy don't believe that that Socialist system is also being championed here in the USA." - Pirouette

LMAO! How did I get into your crazy rants this time? You know nothing of me, my motives, my interests, or my beliefs, so hush. If you're interested, let's have a conversation, but don't quote an individual unknown to you in regards to their personal views.

If you stick to the facts, and what I actually said, you would clearly understand that what bothers me is not your opinion, when stated as such, but your use of a broad brush to paint all people in a specific group.
Nerdyguy
1.7 / 5 (3) Oct 28, 2011
FYI: I mistakenly posted the comments above re: food for thought in the wrong page! My apologies. I had two windows open, and the other one was an article on climate change, where the post was meant to be directed. Too bad PhysOrg won't let you delete or edit a post after only a few minutes.

"Food for thought: what information, exactly, would suffice to convince the massive egos on here who are so certain of their own infallibility? ........."

Nerdyguy
1.8 / 5 (5) Oct 28, 2011
"and they will be taught that American Conservatives are racists, homophobes, sexist, and all other kinds of descriptive lies to turn people against one another" - Pirouette

Naw, you're just making things up again. Could there be individuals out there who do such things? Sure. Is what you describe here ALL that exists within American education. NO.
Nerdyguy
2.7 / 5 (7) Oct 28, 2011
"You have said in an earlier comment that you didn't like or approve of my comments on Socialist teachers and professors because YOUR kids get straight A's and that you have never met a Socialist or radical teacher." - Pirouette

Nope. Wrong again. Don't like to see a science-based site perverted by radical comments based on zero evidence. Your opinion, stated as a political rant, does not equate with proof of anything. Logic, my friend, logic. Try it.
Skultch
5 / 5 (3) Oct 29, 2011
My kids get straight A's

Though to be fair: Straight A students in the US would barely be average students anywhere else (I have been to US highschool 2 years when I was young and the standards are laughably low - even taking all honors/AP classes. By all accounts the demands on students haven't risen much since then (if at all).)


Agreed. Here's my anecdote: I struggled through the boredom that is the US honors/AP system for 8 years. Everyone I've ever talked to that went through the same (100s of individuals) have identified this problem. Some of them have or are starting private schools or are on school boards. The US is figuring out the problem. I have no doubts that it will improve.

That said, the US is still near the top-right of the graph. The article is saying this is the case because we are specialized. This article tries to explain the economic advantage of NOT stressing well-rounded education. Let's find the most valuable balance, shall we?
Skultch
5 / 5 (2) Oct 29, 2011
I agree with the other comments that claim a lack of integration between subjects and too much focus on memorization, whether that be implicit or a product of testing for too many loosely related facts at once.

There are very good reasons why I remember most of my HS chemistry class. Continuation is the big one, but a close second is that my teacher stressed understanding how it all fits together rather than just memorizing facts on their own.

I don't know about other countries, but this is well understood in the US. It's a recent revelation on the national level, however, so it's going to take half a generation for the improvements to manifest themselves into greater productivity and higher aggregate knowledge in the population.
kochevnik
2.6 / 5 (5) Oct 29, 2011
@Pirouette Have you ever flushed a toilet? Utilized technology? If so, your guilty of conspiring with the socialists.
Moebius
2 / 5 (2) Oct 30, 2011
So if we took all the stupid people in the world and put them in one country (it would have to be a big one) it wouldn't be too wealthy? Who'd a thunk?
kochevnik
2.3 / 5 (3) Oct 30, 2011
kochevnik. .. .both you and Vendicar don't make sense. Please elucidate.
Quite right. I should have typed "you're."
ryggesogn2
2.3 / 5 (3) Oct 30, 2011
P, one common cultural experience shared by Jews and Chinese is having their wealth forcibly taken by the state.
The only wealth that could not be stolen is their education.

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