Economic complexity index

The Economic Complexity Index (ECI) is closely related with the concept of product space developed by Ricardo Hausmann, Cesar Hidalgo and their team at The Observatory of Economic Complexity of the Harvard Kennedy School and the MIT Media Lab. As Haussman and Hidalgo formulate it, their definition of Economic Complexity (to see other refer to complexity economics) tries to capture the notion of knowledge contained by every product that, according to them, is not fully explained by the traditional economic description based on capital and labor. As most of the measurements used in complexity science, the goal of this index is to explain the economic system of a country as a whole rather than the sum of its parts, based on the overall knowledge accumulated through production; Thus, the ECI is an attempt to synthesize the collective knowledge of a society. In its strict mathematical definition, the ECI shows the probability of certain products to be developed by certain countries, or said in other terms, how "exclusive" would be a determined product for a given country. For example, Japan or Germany, with high ECI's, produce goods that are highly unlikely to be produced by several countries, while countries whith low ECI's, are more likely to have as a productive base products that many countries around the globe produce (such as most of the raw materials). The ECI index was built with data from countries exports, thus counting only goods and leaving aside services. Hausmann and Hidalgo propose the concept of ECI not only as a descriptive measure, but also as a predictive tool for Economic growth. According to their models, compiled in the Atlas of Economic Complexity<ref>http://atlas.media.mit.edu/book//ref>, the ECI is far more accurate in predicting GDP growth than the traditional governance measures such as those provided by the International Monetary Fund or the World Bank.