Utrecht complexity research: The Principle of Relatedness

Pierre-Alexandre Balland

Complex systems are the driving force behind many of the events we encounter in daily life, and they play an important role in the social challenges we face today. Pierre-Alexandre Balland provides some food for thought on complex systems in his research. Balland is Professor of Economic Geography at the Department of Human Geography and Planning, and Visiting Professor at the Collective Learning Group at the MIT Media Lab. 

The economy is a complex evolving system in which new economic activities constantly form, combine, and disappear. Grand social challenges, such as climate change, inclusive growth, or the rise of Artificial Intelligence, are pushing the economy to adapt. This creates the need to understand what governs the evolution of this increasingly complex system. Over the past decade, interdisciplinary research has led to the development of new tools to map the structure of the economy and predict where a new product, industry, job, or technology will appear as a function of the number of related activities present in a given location. This empirical regularity is known as the “Principle of Relatedness”.

Mapping the Structure of the Economy
The global economic system can be represented as a network in which economic activities (such as industries or technologies) are connected to specific locations (such as countries or cities) where the economic activities occur. Airplanes, for instance, would be strongly connected to the United States, France, Germany, and Brazil. Our research has shown that the structure of this network contains information that allows us to accurately predict its evolution, but also economic growth, and inequality.

Measuring Relatedness
Two products, industries, technologies, or jobs are related when they require similar knowledge or inputs. By analysing products or technologies that tend to be produced by the same countries or cities, it is possible to infer their degree of relatedness and predict which location they will enter next. Furthermore, a robust and reproducible relationship has been documented between the probability that a location will develop expertise in a new industry, technology, research area, product, or occupation, and the number of related activities that are already present in that location.

Evidence-based policy making
With a 7-year budget of 80 billion Euros, the European Commission has launched an ambitious programme to support the development of new economic activities. The key idea is that regions should do so by building on related, pre-existing capabilities. In practice, this often proves to be a challenging task. Our team used the “Principle of Relatedness” to develop a framework that systematically maps technological and research capabilities for all EU regions. We are now exploring possibilities to use this framework for evidence-based policy making for other challenges such as sustainability and inclusive growth.

Joining forces
Understanding the complexity of the global economic system is an ambitious task and it is no surprise that researchers from the fields of economics, geography, network science, complexity theory, public policy, and scientometrics had to join forces. This global discussion allowed cross-pollination between fields and generated important spillovers in terms of data and methods. More importantly, it confirmed that when researchers share a similar scientific framework, it is possible to generalize findings in social sciences.