The Political Economist

Talk about Black Swans , 2016 was full of them! From elections to markets, from hacking to terrorist attacks, it was one unexpected event after another. Each a complete shocker in its own way. Especially in sports and politics.  Portugal winning the Euro  football tournament, Leicester winning the Premier League , Britain coming in second at the Olympic game medal count , or the Chicago Cubs winning the World Series  were as big as Black Swans as Brexit or Trump.  It goes without saying that a year of Black Swans was a terrible year for forecasters. Even the biggest names of the 'industry' have stumbled and failed to predict the biggest disruptive events of the year: Brexit and Trump. Not my company . We got Trump spot on . Just to remind my readers, we called 47 states including the most important swing states like PA, FL, NC, and OH for Trump. Our unique prediction method , that was further perfected since Brexit, has hit bull's-eye! Our almost perfec...

In the previous text I presented several economic hypotheses explaining why the developed world has entered what could possibly be a prolonged period of economic stagnation. In today's text ( note: long read ) I will present my own opinion, arguing that what we are experiencing is a temporary slowdown which could last for several decades, but one that could also provide the greatest opportunity for the next huge boost in living standards. I hypothesize that the underlying factor behind both the current temporary stagnation (particularly in productivity and real wages) and the upcoming rise in living standards is - technology .  As I've emphasized several times on the blog before, I believe we are currently, for the past 30 years, in the period of the Third Industrial Revolution . And in our times, it's only heating up, with the potential to bring to some new disruptive innovations that could change our world as much as the previous two industrial revolutions had. The ...

Ever since the financial crisis of 2007-2009 and its subsequent (slow and modest) recovery  many have claimed the world has entered into a state of prolonged stagnation. In addition to economic growth being relatively low (and therefore not enough to close the potential GDP gap caused by the crisis), real wages are also stagnating, unemployment is still high (although in relative decline), inflation is close to zero, while productivity growth is sending troublesome signals for some time now. This is particularly true of Europe, as it bears the strongest resemblance to Japan , and is on a good course to repeat Japan's (still ongoing) two decades of stagnation (more on emulating Japan in my next text).  We all know the story. I, for one, have told it many times on the blog (see here ,  here , here , here , here , here or here ). After the financial crisis, which usually tends to cause prolonged and slow recoveries, many governments adopted stimulus and bailout program...

First of all apologies to my regular readers for not presenting our results here sooner. It's been overwhelming in the past two days - first with the prediction, then with the results, and then with the post-election frenzy.  Anyway, we gave an almost perfect prediction ! Not just a Trump victory, but also all the key swing states (PA, FL, NC, OH), and even that Hillary could get more votes but lose the electoral college vote. Here are our results as I presented them in a Facebook post on the eve of the election: For a more detailed explanation read our blog . The method is described there in greater detail, plus we call all the states. The story got covered first by the academic sources. My own University of Oxford published it as part of their main election coverage , as did my alma mater, LSE on their EUROPP blog . More news coverage soon to come! Details of our prediction  The results nevertheless came as an absolute shock to many, but it was...

My article got published today at the New Scientist ! One of the biggest science magazines in the world. See the text here ( there is no paywall, you just register and read it for free ). It was even on the front page: New Scientist website front page 03 Nov 2106 The text is about the scientific experiment behind our prediction survey . It starts by examining why the pollsters are getting it wrong lately and whether or not there is any science at all behind polling. Then it introduces our prediction survey idea and how we're doing an experiment on US elections to see whether or not science can actually improve polling.  For those who don't bother to register in order to read it on the New Scientist webpage, I have copied the text here (enjoy!): As US election looms, time is ripe for a new science of polling "Growing scepticism about traditional methods for predicting election outcomes is fuelling a search for a more scientific approach to polling, says Vuk ...

Is it possible to have a more accurate prediction by asking people how confident they are that their preferred choice will win? One consequence of this hectic election season has been that people have stopped trusting the polls as much as they did before. Which is surprising given that in the US, unlike the rest of Europe, pollsters and particularly polling aggregation sites (like FiveThirtyEight ) have on aggregate been quite accurate in their predictions thus far. Still, one cannot escape the overall feeling that pollsters are losing their reputation, as they are often being accused of complacency, sampling errors, and even deliberate manipulations. There are legitimate reasons for this however. With the rise of online polls , proper sampling can be extremely difficult. Online polls are based on self-selection of the respondents, making them non-random and hence biased towards a particular voter group (young, better educated, urban population, etc.), despite the efforts of ...

After having read and reviewed Stiglitz's book  earlier this week , and after having written the following paragraph... "I too have long considered the relationship between equality and efficiency to be non-linear, instead of just a simple trade-off. Too much equality isn’t good since it reduces incentives, but neither is too much inequality. I would say the relationship is of an inverted-U type where moving to both extremes – too much and too little equality is bad for the economy. The trick is to find an optimal point which reduces the level of inequality where it offers more opportunities for everyone, but also just enough for it to continue to drive incentives. More on that in my next blog post." ...I just had to dig deeper into the whole equality-efficiency trade-off . So I picked up a seminal book from a man who specialized in economic trade-offs, none other than -  Arthur Okun ! Okun is more famous for his "law" stipulating the linear relationsh...