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Indicators of Political Unrest

Jun 12, 2011 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Government, International Trade and Finance, Labor, Macroeconomic Measurement, Thinking Economically • 138 Views    No Comments

Is political upheaval fueled by corruption? Low GDP per person? Less democracy?

This Economist interactive indicator lists 9 variables. Together they add up to 100%. But the question for readers is how to weight the variables. Which ones could create a revolution? 

Then, based on your data, the Economist ranks 17 nations, most from the Middle East and North Africa, as your “index of unrest.” Would you select corruption as a major cause of unrest? Iraq, Yemen, and Mauritania are most likely to experience upheaval. If, instead, you say that countries with a large population under 25 are most vulnerable, then Egypt tops the list while Yemen is second.

Looking at the Economist’s unrest indicator, you can see why the Saudis, Oman, and Bahrain all are increasing state spending. Saudi Arabia’s plans include $36 billion for “interest-free home loans, unemployment assistance and debt forgiveness.”

The Economic Lesson

Because land, labor, and capital are scarce, every nation has to answer the 3 basic economic questions: What will be produced? How will goods and services be produced? To whom will income go?

Political upheaval changes the answers to the 3 basic economic questions.

An Economic Question: How might political upheaval, during unrest and after, change the answers to the 3 basic economic questions?

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