The Political Economist

A few months back The Economist had a great text about economists and how they are, apparently, getting too big for their britches. Here's a few excerpts:  "...Despite their collective failure to predict the financial crisis ... economists are still very influential. They write newspaper columns, advise politicians and offer expensive consulting services to business-folk far more than other academics.    ...economists have come to believe that they are superior. A survey in 1985 found that just 9% of graduate students in economics at Harvard strongly believed that economics was “the most scientific of the social sciences”. But as economics became ever more mathematical, its practitioners grew in self-confidence. By 2003 54% of the graduate economists studying at Harvard strongly agreed with the statement...   ...economists demonstrate their self-belief in subtler ways too. Articles in the American Economic Review cite the top 25 political-science journal...

Well, well, well, it seems the Cold War era is back upon us. And I'm not just saying this as a consequence of a holiday season James Bond movie marathon that I watched. No, it's real, or to be more precise it's - Realpolitik ! It seems that diplomats are setting the stage once again, and that the debate over Russia vs the West is likely to overtake the debate on the economy next year. Which is good on one hand as it implies that the economy is recovering so it's no longer the main focus of attention, but on the other hand it's bad since foreign policy standoffs only build uncertainty and are not good for economic recoveries. But overall the economy actually is expected to perform quite well next year (well, apart from Russia, but more on that below). Low oil prices will be the key in prompting a stronger recovery. The IMF links a 10% change in oil prices to roughly 0.2% change in global GDP. Prices that have fallen by 50% in the last 6 months are likely to be a s...