Title: Leontief Meets Shannon - Measuring the Complexity of the Economic System,
Abstract: We develop a complexity measure for large-scale economic systems based on
Shannon's concept of entropy. By adopting Leontief's perspective of the
production process as a circular flow, we formulate the process as a Markov
chain. Then we derive a measure of economic complexity as the average number of
bits required to encode the flow of goods and services in the production
process. We illustrate this measure using data from seven national economies,
spanning several decades.