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January 07, 2013

Multi-decade delays in advancing complex products is costing the developed countries

Countries trying to understand what’s next for their export industries often call Ricardo Hausmann. The Harvard economist and onetime planning minister for Venezuela has developed a kind of economic aptitude test for nations. Using complexity theory and trade data, Hausmann looks at what a country is good at making and predicts what types of more valuable items it could produce next.

That sounds plain enough, but the results of Hausmann’s analyses are often surprising. A country with a competitive garment industry might want to move into electronics assembly—both need an industrial zone with quality electrical power and good logistics. A country that exports flowers may find it has the expertise in cold-storage logistics necessary to spark an export boom in fresh produce.

The fundamental reason is that productivity in manufacturing has been rising rapidly and demand for manufactured products has been growing more slowly. To supply the stuff that people want requires fewer jobs.



The Net Manufacturing Revolution

Developments around information technology, 3-D printing, and networks will allow for a redesign of manufacturing. The world will be massively investing in it. The U.S. is well positioned to be the source of those machines. It can only be rivaled by Germany and Japan.

Economies as “product space.”

The product space is the space of all possible products. The metaphor is of a forest. Each product is a tree, and companies are monkeys that are organizing and taking over the forest. Empirically, we’ve shown monkeys don’t fly. They move to nearby trees, or to industries for which they have many of the required productive capabilities.

So if you have the capability to make a regional jet, you may be able to make a long-haul aircraft. But if you are making only garments, figuring out how to make any kind of jet will be very hard. Countries that grow find a “stairway to heaven”—a sequence of short jumps that gets them far.


NBF - The developed countries have been hurt by failing to develop the next level of complex products. New planes, trains, superconductors, modular factory mass produced nuclear reactors, etc...

Spacex is developing reusable rockets. This should have happened in the 1970s and 1980s.

Factory produced skyscrapers are being developed but they are being developed in China.

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