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Physicists make 'weather forecasts' for economies in EU-funded project GROWTHCOM

What will be the growth of the Gross Domestic Product (GDP) or the competitiveness of China, United States, and Vietnam in the next 3, 5 or 10 years? While this kind of questions has a large societal impact and an extreme value for economic policy making, providing a scientific basis for economic predictability is still a very challenging problem.

On 11 February, the GROWTHCOM consortium published a paper on The Heterogeneous Dynamics of Economic Complexity that argues that a recently introduced non-monetary metrics for country competitiveness (fitness) allows for quantifying the hidden growth potential of countries by the means of the comparison of this measure for intangible assets with monetary figures, such as GDP per capita.

Economists traditionally measure the performance with monetary figures such as the gross domestic product (GDP) reflecting, at most, the actual status of a country. The assessment of the development, evolution and growth of countries is instead highly controversial. Many intangible elements are therefore invoked such as good education, financial status, labour cost, high tech industry, energy availability, quality of life, etc. However, these concepts are usually discussed in a qualitative way.

The theory developed by the GROWTHCOM consortium in that non-monetary metrics, able to assess the competitiveness of countries by measuring intangible assets of the economic system strength (fitness) and recently introduced in Refs. can provide a fundamental analysis of the hidden potential of growth for countries. This metrics carries a non-monetary information content on the level of development and competitiveness of economic systems. It captures features of the observed nestedness of the country-product network, which are common in competitive environments, in economics as in biology. This approach is based on the idea that the productive basket of a country is able to discount and reflect (almost) all the information encoded in the intangible assets, usually hardly modelable.

The theory has been presented  in Nature Magazine of 23 February 2015.

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