Economic Complexity
The more diversity in a country or region’s economy and the greater the range of skills and experience, the more able the place is to find new pathways of growth. The modern-day emphasis on specialization, while beneficial when this specialization is in demand, seems misguided at the times when it is not.
The New Physiocrats believe that too much emphasis on specialization can result in more intense boom and bust cycles, with too little protection against downside risks. Where there are a diverse range of skills and industries, an economy can reorient itself to other areas where there may be a higher payoff, meaning more stability, and higher capacity for continued advancement. We refer to this potential for a wider range of growth pathways as Economic Capacity. After observing these patterns independently, the New Physiocrats discovered the Economic Complexity Index, developed by economists at MIT. While their model may have different roots, they too use economic complexity (diversity) as predictive indicator for economic growth, and founded The Observatory of Economic Complexity.
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