“Challenge people on their own ground”

Luciano Pietronero

“With fewer parameters, new methodologies get accepted easier”

Luciano Pietronero, a professor of physics at the Sapienza University of Rome, has developed a methodology for determining economic fitness of a country that is fully accepted by the World Bank. He uses his talk to explain how to present new methodologies to major institutions to increase the chances of acceptance, and so make a real impact.

First of all, he says, research must focus on a clear problem, like determining economic fitness. Economists have been predicting that China’s GDP will start to fall ever since 1990, based on data showing that rapidly growing economies can only grow for ten years before collapse. Which did not happen so far.

“So how do we work out why China keeps growing?” Luciano asks. Get more data? Actually, he says, you want less: reduce the noise, decrease the number of parameters. For economic fitness, rather than 100 parameters, he and his group use only Comtrade data on products, for instance. For technological fitness, they use only Paysat data on patents. “What you don’t want,” according to Luciano, “is a ‘big soup’ of data.”

Fewer parameters also make it easier to have an influence on politicians and policymakers. “If there are fewer parameters, they are less likely to just pick the most politically expedient one,” Luciano explains.

He took his methodology to the International Monetary Fund and challenged them on their own ground, i.e. which method had the most accurate forecasts of economic fitness. Luciano’s method proved to be much better—and was accepted.

“You can see a pattern. The pattern is: address a clear problem, try to challenge the people on their ground, and accept their own evaluation. This may give you a higher chance that they take you seriously,” says Luciano.

Click for Luciano’s slides.

See the video in full lenght here: