Monday, September 10, 2007

Economic Development and Interdependence

I recently stumbled across an interesting tool that I think can be used in economics classes when discussing either of the two concepts that make up the title of this post. The tool (which I will get to) first got my attention in a post over at The Big Picture, which linked to an article at by Tim Harford, also known as The Undercover Economist.

Tim's article talks about one of the most fundamental questions in economics (at least at the macro level), "why are poor countries poor?" He cites research done by the NBER that links a nation's economy to clusters of relationships between industries and industry groups. I think this idea ties in nicely to some of the "new growth" economic research described in David Warsh's Knoweldge and the Wealth of Nations. It seems to me that this relates to the idea of "spillovers" wherein new technology, methods, etc. in one industry get adapted by related firms. Sometimes those ideas can even transfer to other industries, but the idea of knowledge as capital is important.

Now down to the link. Harford links to a site that borrows from physics to describe these relationships. The Product Space and the Wealth of Nations site allows you see the resource map of any of a number of nations. (Note: for some reason, some of the recent data maps are not displaying.) It will take me some time studying these (there are usually two maps - 1975 and 2000 - available for each country), but the idea of borrowing from physics to display graphically how an economy is structured is interesting. I'm also not sure how one could use this in the classroom. But I invite your ideas and comments.

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