Adam Smith, Specialization, Economic Complexity, and Entrepreneurship

Adam Smith was born 299 years ago.  Still, his theories are taught in business schools and universities, and their actual application by businesses and governments is still poor.  He wanted to understand the money system because his underlying ambition was to make nations and people happier.  He wrote about “consumer capitalism,” “how to treat the wealthy,” “consumer education,” and the “specialization.”  I will write about this last topic, which Adam Smith studied and understood – Specialization.  With industrialization and specialization, Adam Smith noticed that as modern economies produce unprecedented wealth, many ordinary people find work rather dull and meaningless.  The two phenomena are intimately related, as Adam Smith was the first to understand them through his theory of specialization.

He predicted that national economies would become hugely prosperous the more specialized their workforces became.  The fact is that more specialization has appeared as technology progresses.  A proxy of its complexity is the Economic Complexity Index (ECI) which explains the knowledge accumulated in a region.  There are tools that help us to understand how a region is more specialized and more complex in the products and services they provide.  DataMexico ( provides tools for analysis to understand how diverse and complex the businesses, technology, and local capabilities are in the region.  For example, Cd. Juárez had, in 2021, an ECI of 2.34, Monterrey 2.1, and Querétaro 2.04, the top three cities with the highest ECIs in México.

What new businesses are emerging with the highest ECI cities?  Is there a relationship between the hi-tech industries and new business creation?  The ECI explains the knowledge accumulated in a population, and it is expressed in the economic activities in that region.  It conglomerates the knowledge created by their universities and the final goods and services offered by their businesses.  Then, are entrepreneurs in a region determined by their ECI in that region?  Do entrepreneurs migrate if the needed capabilities are not found in the original region?  Do entrepreneurs create more specialized businesses AND more fulfilling jobs for their employees?

These are questions with no clear answer but are worth discussing.  What do you think?