Looking at a Hidalgo-Hausmann Network as a Channel

 “A network view of development does not require a unique definition of a link: rather, it requires accepting as a reasonable assumption the fact that there are links connecting some products and not others; links through which knowledge, inputs and workers can flow; links that may be traversed by endeavor or serendipity.” From a review of the Hidalgo Haussman research.

Ths hidden assumption they can ignore is the minimum redundancy assumption, sort of built in like the rational expectations assumptions. So they look at the likeness between multiple products, given one product produced, what is the likelyhood that the other is also produced.

The product space is represented in network form using Maximum Spanning Trees (MSTs)

These minimum spanning trees are the dual of the actual spanning trees in the economy, much the same way channel theorists use the Huffman encoding tree as the dual of the real economic encoding tree. Similar products in the Hidalgo nets are similarly quantized inthe Huffman encoder, they use the same technique channel theorists use.

The MSTs are generated by “considering the strongest non-diagonal value of the proximity matrix and then considering the strongest link connected to that dyad”

Thet are doing maximum entropy encoding. Does this sound familiar?

Some are born connected, others achieve connection, still others have connectedness thrust upon them. Everyone is networked. Everyone is either a node or a hub in someone else's network. Much as the quality of life is influenced by the quality of our networks, our standard of living is increasingly determined by network standards. To paraphrase Marshall McLuhan, we shape our networks and then our networks shape us.

The notion of networks as a dominant organizing principle to explain how the world really works has attracted enormous interdisciplinary interest. Physicists are talking to mathematicians who are talking to sociologists and economists who are talking to physicists. In barely a decade, networks of researchers have sprung up to research networks. Executives are beginning to turn to these experts for usable insights into the network dynamics shaping both threats and opportunities in business.CNET

Remember the research on cities. This was Geoffrey West, studying cities. He finds that if you give him the complexity of the sewer system, he can just about tell you total production. He gets this with a hidden maximum entropy assumption