The physics of poverty

Why are poor countries unable to make themselves richer by exporting to developed countries? What keeps ’em in this poverty trap?

Economists ain’t got a clue, otherwise they’d a told us, right? But this week a group of physicists have unveiled some ideas with the kinda insight that might just turn this field on its head. Ah don’t mind telling ya’ll, it looks exciting.

There ain’t no shortage of theories about poverty but most depend on economists’ a-spoutin and a-splutterin a whole loada hocus pocus.

The problem with economists is that to make their theories work, they have to guess what factors are the most important for economic success–p’raps it’s the cost of labour or the price of land or the level of technological sophistication that’ s important.

But who knows for sure? Certainly not them economists!

That’s why a new approach by C├ęsar “Pony” Hidalgo and pals at the University of Notre Dame, is important.

Ref: arxiv.org/abs/0708.2090: The Product Space Conditions the Development of Nations

More after the jump…

Hildalgo and his buddies don’t make no assumptions about the importance of economic factors. Instead they look at the “relatedness” of products–how easy it is to produce one product given that another is already being produced.

For example, it ain’t hard to start growing and selling pears if you already grow apples or to make trousers if you already make t-shirts. So these things are closely related. But it’s hard to make microchips if you start with a coal industry.

Then they looked at who exports what and created a network showing which products are linked to other products. They also looked at how this network evolves as countries develop–how the products they export change.

The work shows how easy it is to change from exporting one type of product to another–easy if the products are related but hard if they’re not.

Ya’ll can see this on the network maps they’ve created in their paper (published in Science as well as on the arXiv, by the way). It’s easy to jump small distances but hard to make long leaps.

But more significant is that developed countries sit near the centre of these networks and so a can make relatively small jumps to almost another product in the network. Developing countries sit on the periphery and find it hard to jump almost anywhere.

And that’s the nature of the trap–the most vulnerable are at the edge of the herd.

But what might make this work most valuable is that developing countries could use it to make better decisions about how to move towards the centre of this network and thereby become more prosperous.

And that could put some bread in some deserving bellies.

Ref: arxiv.org/abs/0708.2090: The Product Space Conditions the Development of Nations

Comments are closed.