Ülo Ennuste Economics

papers and articles in wordpress

Letter to the Editor of the Economist

 An irresponsible simplification of predictions that may reduce the probability of the Estonian socio-economic sustainability: “Estonia rockets ahead” (economist.com Oct 30th 2010, 19:52 by E.L.)

Sir, The selected macro-economic indicators that may be satisfactorily adequate for the analyses and predictions in the growth face (e.g. GDP growth, budget deficit, governmental debt, unemployment and inflation), are certainly not that in the hard times (e.g. in the stagflation). In the last conditions the most significant indicators for the analysis of the rationality/quality of macro-economic polity and real structural policies, and for the credible forecasts and projections are in the mainstream heterodox economics first of all evolutionary aspects of: macro-economic potential, GDP gap, employment, gross foreign debt, domestic investments, outflow of real and human capital and profits without taxation, economic inequality and poverty risks, economic mechanisms reforms, GNI/GDP rate, and last but not least – the public socio-economic knowledge structure  (see e.g. –  https://uloennuste.wordpress.com/2010/09/15/selected-estonian-key-heterodox-macro-economic-retrospectiveprospective-indicators-sept-2010/).

And most importantly, even making convenient simplifications e.g. for political cycles reasons, in the selections of the clusters of the indicators – the more honestly must be these sparse indicators statistics and predictions used in the public disseminations, considering the possible misinterpretations. And there must be rational limits for politically fabricated simplifications and selections.

In that respect I am really sorry indeed to say that in the following statement of the E.L. absolutely I couldn’t discover not a grain of truth or economic responsibility, at least based on view of the Morden heterodox mainstream political economics:

“IN JANUARY, there will (I think) be just one country that is not just a member of a) euro zone and b) NATO but also meets those clubs’ rules (spending 2% of GDP on defence, and meeting the common currency zone’s budget deficit, debt and inflation criteria). It’s Estonia (I have tried to check this but the Economist’s brilliant research department does not work at weekends so I am not completely certain).”

 a)     as widely known – The Economist’s really brilliant research department is not producing inflation predictions for the next year, including January, and blessed they should be for that

b)    Estonia has absolutely not fulfilled the inflation criteria in complexity: in May the soft/political so called price stability sub-criteria was not met according to any economic (sic!) theory, and in the latest months, sorry to say, the hard inflation criterion component was also not met any more (was about 3%), and according to the latest governmental projections this component will not be meeting euro-zone criteria (according Trichet close to 2%+ price stability)  in the next years or so, staying constantly around 3-4% and still destroying competitiveness.

c)     And, budget deficit in the next year will much depend of the EU policy future about CO2 trade regulations, and so will public debt.

Morale: on bases on the E.L.’s kind on indicators cluster and completely irresponsible interpretation of respective statistical indices, out of the real euro-zone new regulation/coordinating context of the European Semester – to speak about Estonian “rocketing ahead” – is just dangerous contamination and poisoning of public socio-economic knowledge space to fuzzy real staglfation situation – and may be disastrous for the future developments probabilities (in the case of the continuation of the existent economic polity and policy).

Ülo Ennuste,

Tallinn, Nõmme, Estonia


—– Original Message —–
From: “Edward Lucas” To: “Ülo Ennuste” Sent: Wednesday, November 03, 2010 5:29 PM
Subject: Re: Fw: käepitsitusega, üe


> thanks for this. The piece in question is a mere blog post, not an
> Economist article. These blog posts are quick takes on topical subjects
> aimed at prompting discussion rather than giving our definitive
> viewpoint. You are welcome to post your interesting response in the
> comment box at the end of the posting
> regards
> Edward Lucas


November 3, 2010 - Posted by | Uncategorized

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