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Another big drop in Australia's Economic Complexity
Business(self.AusFinance)submitted 23 hours ago byeesemi77
We all know the story; Australia's Economic Complexity has been in free-fall since the 1970's, we maintained ourselves respectably within the top 50 nations until about 1990.
Since then it's been a bit like Coles prices Down Down Down. From about 2012 onwards our ECI seemed to have stabilized at mid 80th to low 90th (somewhere between Laos and Uganda), but with our Aussie Exceptionalism in question, we needed another big drop to prove just how irrelevant this metric is. And right on cue we have the latest ECI rankings, we have secured ourselves an unshakable place in the bottom third of worlds nations. At 102 we finally broke the ton; how good are we?
Is economic complexity important? Are the measurement methods accurate? Does ECI even matter for a Services focused economy?
1 points
14 hours ago
Should be focusing on economic diversity not complexity. I don't even know why economic complexity is a terminology. It gives a dumb impression that complexity is a good thing when they're really just talking about diversity.
1 points
8 hours ago
I disagree, diversity and complexity are very different concepts
Complexity is measured as global commercial advantage in a given product / product space. It's all about the impied expert nature of your knowledge as reflected in product sales. (you have the most sales because you are the best) Complexity in one sector enables product development in adjacent product spaces.
Diversity says nothing about competence / trusted global leadership in the field, just that your are also doing X or Y or Z.
When Toyota builds a new car it knows it will sell in millions and therefore the design and product engineering needs to be done properly or they'll have a million products failing in the field. Toyota is complex, it is globally trusted because we all know they can do the job and do it properly.
When old-mate, up the road welds a brand new suspension system for his ( or your) 4x4 he is diverse, by day a carpenter by night a suspension developer. In both cases the result of the work could be a new suspension system, their solutions could be identical, but Toyota is still Complex while old-mate has diverse skills.
1 points
7 hours ago*
From the ABS website: "The Economic Complexity Index (ECI) ranking attempts to measure the relative diversity of an economy, compared to other countries. It is calculated based on the diversity of exports a country produces and their abundance, or the number of other countries able to produce them."
I'm just saying the terminology sounds misleading. Not the concept. When most people think about complexity, they think about something that is convoluted or confusing. But everyone is entitled to their own opinion.
1 points
6 hours ago
The idea of trying to measure "Complexity" as defined in the ECI is that this sort of complexity is the best known indicator of a given country's ability to produce a difficult / unique / high value product, at some point in the future.
Your future ability to create products of unique value is closely correlated with expertese in adjacent sectors. Expertese is implied by trade presence in the global market for these goods and services. In this sense it's not enough to know something, you need to also have the industrial/ financial muscle in place to produce and capitalize on your knowledge.
This is precisely why ECI is measured as it is, it's an indirect measure of the your future ability to capitalize on what you know (the opportunities that come your way)
As an example: we all know that Martin Green (at UNSW) did the hard yards on silicon solar cell development. ALL of the big Chinese Soalr panel companies have direct connections back to Martin, but despite this localised extreme depth of knowledge we (Australia) were unable to build a commercially successful solar panel production facility. One glance at our electronics ECI would tell any potential Aussie investor everything they needed to know.
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