
 The Computational Engine of Economic Development - avyfain
https://medium.com/@cesifoti/under-the-hood-the-computational-engine-of-economic-development-49bce1a7b151
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JackFr
I realize its not a technical publication, but this piece is real hand wavy.

Yes, a modern economy consumes energy reduces local entropy of atoms though
agriculture, transportation and manufacture. This can be considered
computation.

But then: "Late in the last decade, I developed a mathematical technique that
can be used to characterize an economy’s ability to produce products. This
measure of economic complexity, which makes use of information about the
diversity of countries and the ubiquity of products, explains a substantial
fraction of a country’s level of income, but it also explains future economic
growth."

There is no substantial explanation of this measure and how it is constructed.
If it can't be stated simply one suspects it is subject to manipulation and
its predictive power might just be an artifact of its construction.

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fdovila
As you wish, a substantial explanation:
[http://www.pnas.org/content/106/26/10570.abstract](http://www.pnas.org/content/106/26/10570.abstract)
It's referred at the bottom of the "piece"

~~~
JackFr
Nice.

I take it back - the construction of the measure is pretty immune to
tampering.

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jamespitts
I appreciate this perspective on understanding national economies. After the
big meltdown in 2008-9 I started thinking that major economic events could
also be seen as information processing events.

Some Tofflerian quotes from the article:

"under the hood, products are made of order — or information"

"the actions we use to make products are acts of computation"

"just as objects are a more fundamental form of economic value than currency,
the ability to create objects is a more fundamental form of economic value
than the objects themselves"

~~~
porFavor
In the name of all that is holy. No.

Run this pass a trader on Wall Street and they will either laugh you out the
door or play to your naiveté while trying to sell you some ocean front
property in Arizona.

The "economy" is an abstract concept that people _refer_ to. It is not an
actual thing. It is not a computer that has been programmed to do anything,
like process events within the framework of information theory.

These "events" are simply the confluence of a bunch of smaller events that
happen to be bad across the board. Every day there are just as many events
occurring, but because they are not generally bad but are instead a mixed bag,
well, we don't call it an "event". Yet, using your terms, "information" is
continuously being processed.

God is not a watchmaker and the economy is not a information processing
computer. From the article:

"The economy is made of people, networks of people and the things that people
make. People and networks of people accumulate knowledge and knowhow, both
individually and collectively, and they use that knowledge and knowhow to
produce a variety of products that, in turn, augments people’s capacity to
produce new products."

The economy is made up of people... Dangerous. So Dangerous. What about the
animals. What about weather. What about solar flares. These things all impact
the GDP, the macro economic landscape, and market cycles. Hurricanes have been
called a shot in the arm for our economy, because they trigger so much
rebuilding. What then is something that does not impact the GDP? Is it not
information? Is it part of a different information processing computational
process?

If you want to go whole hog on the reductionist angle, well,look to quantum
physics and chaos theory. Or, just watch the weather channel. Look, there is
always info between the data points. And sometimes it ends up influencing the
big picture. This is a fact. So, would you say then that the economy is an
imprecise machine? I would say that it is simply a shared concept we humans
all agree on when discussing these things amongst ourselves. I would say what
is really driving it is, well, reality, the arrow of time, entropy (well ish,
now we're back to information; but at least this time it's the physicists
fault, not the economists).

The reason this sorta framework is dangerous is that it relinquishes
responsibility. Any responsibility that we hand off to some abstraction (be it
"god", "the gods", "luck", or "the economy") is responsibility we are
shirking.

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jamespitts
Looking at the economy as a decentralized mechanism for processing information
is just that, a way of looking at it. I am not saying that the model is the
thing. But I do think that something like the economy can be talked about and
modeled usefully, even though it does consist of something quite messy (as
does the weather, etc).

Without lenses, what we see simply won't cohere.

Also I think that talking about the economy abstractly does not absolve people
of responsibility. The abstraction is merely a tool to understand and model
what you know. It may even help us hold people and organizations responsible
when they cause damage.

For example, in the aftermath of the crisis we know that complex financial
derivatives contracts created overlooked interdependency, and caused a load of
unexpected information processing during the crisis. This has induced
lawmakers and regulators to enforce clarity and disclosure.

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darawk
This is very interesting indeed. But I wonder...why is Chile importing so many
_centrifuges_ from South Korea? 1.9% of their exports?

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rdtsc
Chile does a lot of agriculture, fish farming, mining. It is probably a mining
thing. Can't imagine putting fish in centrifuges leads to anything useful ;-)

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2sk21
Related to this: are there any good approaches to economic simulations of
economies at the individual and organizational level? In other words,
literally simulate groups of people and the economic organizations that they
belong to.

~~~
elcapitan
Isn't that what a lot of games do? They probably even have more fine-tuned
models of economic behavior with more variables than actual microeconomic
simulations.

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amelius
This rephrases why education is important.

Also, they fail to explain that Europe has lots of computational power in IT,
while the real monetization seems to be happening mostly in the US.

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xyzzy4
This doesn't seem to account for things like bureaucracy or regulations that
slow economic growth.

