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Economic Complexity, Economic Inequality and Governance

Economic Complexity, Economic Inequality and Governance

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Published by Paul Schumann
The Economic Complexity Index (ECI) is a measure of the amount of productive knowledge that each country holds. It accounts for differences in national economies and is a driver of economic growth. It is an indirect measure of the amount of productive tacit and explicit knowledge and how the country can combine it into a larger variety of better products. The United States ranks 13th in ECI in 2008 and 72nd in ECI growth since 1964 among 128 countries.
Dealing with complex environments external to a country and its own complex economic system requires a new type of governance. A form of this new type is being developed in Singapore, which they call “a whole of nation” approach. It has some similarities to a military tactic “leading by mission”. Whole of government depends critically on people at all levels understanding how their roles fit in with the larger national aims and objectives. The economic system inside the country has to be at least as complex as the markets served by the country.
Economic inequality at the country level decreases the health and well being of its citizens (common weal), increases violent crime, decreases education equality, decreases social mobility, decreases economic complexity and can lead to political instability. Economic inequality is often measured using the Gini Coefficient, with a range of 0 (all incomes equal) to 1(all income in one person). The United States has a Gini Coefficient of 0.41 in 2007, the 44th highest in the world.
At the country level, counties with a lower Gini Coefficient (more income equality), generally have a higher ECI (economic complexity).
The Economic Complexity Index (ECI) is a measure of the amount of productive knowledge that each country holds. It accounts for differences in national economies and is a driver of economic growth. It is an indirect measure of the amount of productive tacit and explicit knowledge and how the country can combine it into a larger variety of better products. The United States ranks 13th in ECI in 2008 and 72nd in ECI growth since 1964 among 128 countries.
Dealing with complex environments external to a country and its own complex economic system requires a new type of governance. A form of this new type is being developed in Singapore, which they call “a whole of nation” approach. It has some similarities to a military tactic “leading by mission”. Whole of government depends critically on people at all levels understanding how their roles fit in with the larger national aims and objectives. The economic system inside the country has to be at least as complex as the markets served by the country.
Economic inequality at the country level decreases the health and well being of its citizens (common weal), increases violent crime, decreases education equality, decreases social mobility, decreases economic complexity and can lead to political instability. Economic inequality is often measured using the Gini Coefficient, with a range of 0 (all incomes equal) to 1(all income in one person). The United States has a Gini Coefficient of 0.41 in 2007, the 44th highest in the world.
At the country level, counties with a lower Gini Coefficient (more income equality), generally have a higher ECI (economic complexity).

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Categories:Types, Research
Published by: Paul Schumann on Oct 25, 2012
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10/24/12
 
EconomicComplexity,Economic Inequalityand Governance
 
Paul Schumann
 
2Paul Schumann,paschumann2009@gmail.com,http://insights-foresight.blogspot.com/ 
Economic Complexity, Economic Inequality and Governance
Summary: The Economic Complexity Index (ECI) is a measure of the amount of productive knowledgethat each country holds. It accounts for differences in national economies and is a driver of economicgrowth. It is an indirect measure of the amount of productive tacit and explicit knowledge and how thecountry can combine it into a larger variety of better products. The United States ranks 13
th
in ECI in2008 and 72
nd
in ECI growth since 1964 among 128 countries.Dealing with complex environments external to a country and its own complex economic systemrequires a new type of governance. A form of this new type is being developed in Singapore, which they
call “a whole of nation” approach. It has some similarities to a military tactic “leading by mission”.
Whole of government depends critically on people at all levels understanding how their roles fit in withthe larger national aims and objectives. The economic system inside the country has to be at least ascomplex as the markets served by the country.Economic inequality at the country level decreases the health and well being of its citizens (commonweal), increases violent crime, decreases education equality, decreases social mobility, decreaseseconomic complexity and can lead to political instability. Economic inequality is often measured usingthe Gini Coefficient, with a range of 0 (all incomes equal) to 1(all income in one person). The UnitedStates has a Gini Coefficient of 0.41 in 2007, the 44
th
highest in the world.At the country level, counties with a lower Gini Coefficient (more income equality), generally have ahigher ECI (economic complexity).This work is licensed under the Creative Commons Attribution-NoDerivs 3.0 Unported License. To view acopy of this license, visit http://creativecommons.org/licenses/by-nd/3.0/.
 
3Paul Schumann,paschumann2009@gmail.com,http://insights-foresight.blogspot.com/ 
Economic Complexity, EconomicInequality and Governance
Paul Schumann
Introduction
I’ve recently read
four documents about complexity, economics and governance that I think areimportant enough to warrant further study together:
The Atlas of Economic Complexity 
, “E
conomicInequality an
d Its Socioeconomic Impact”, “Governing for the Future”
, and
The Spirit Level 
. Althoughthe four documents are in no way directly related to each other, I think that they do share a deepconnection.
The Atlas of Economic Complexity
This book begins with some very important insights into the nature of innovation and economic growth
1
:
 
“Modern societies can amass large amounts of productive knowledge because they distribute
bits and pieces of it among its many members. But to make use of it, this knowledge has to beput back together through organizations and markets. Thus, individual specialization begets
diversity at the national and global level.”
 
 
“Our most prosperous modern societies are wiser, not because their citizens are individual
lybrilliant, but because these societies hold a diversity of knowhow and because they are able to
recombine it to create a larger variety of smarter and better products.”
 
 
“The social accumulation of productive knowledge has not been a universal
phenomenon. It hastaken place in some parts of the world, but not in others. Where it has happened, it hasunderpinned an incredible increase in living standards. Where it has not, living standards
resemble those of centuries past.”
 
 
“The enormous income g
aps between rich and poor nations are an expression of the vastdifferences in productive knowledge amassed by different nations. These differences are
expressed in the diversity and sophistication of the things that each of them makes…”
 
 
“Just as nations differ in the amount of productive knowledge they hold, so do products.”
 
“The amount of knowledge that is required to make a product can vary enormously from onegood to the next.”
1
And, these apply to organizations as well.

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