Thoughts on Murray's law of bad economic forecasts

But just how frequent are the acts of war that totally destroy them?

In an interview last week with Simon Murray, he cast doubts on the validity of economic forecasts because he said everything was dependent on political events, and cited acts of war as chief among them - ie if Bush declares war on Iraq tomorrow, all forecasts have to be recast.

Murray's point is an interesting one, and given current circumstances with the "War on Terror", led me to do some research about war and its frequency. We are accustomed nowadays to think wars are rare events, and this is possibly why financial markets react so strongly to them.

Actually, if you closely analyse a historical sample, you see that wars are not rare events at all. In fact, they are common.

Between 1819 and 1949 there were 289 wars according to LF Richardson, and according to another historian, Luard there were 410 wars between 1815 and 1984. Luard reckons there were 1000 wars between 1400 and 1984, while another historian, Levy counts 119 wars between so called Great Powers in the period 1495 to 1975.

Levy states, "The Great Powers have been involved in interstate wars for nearly 75% of the 481 years from 1495 to 1975 and on average a new war begins every fours years and a Great Power war every seven or eight years. In the typical median year slightly over one war involving the Great Powers is under way."

This average bears true today, with the US having been involved in two wars hardly more than eight years apart (the Gulf war and the War on Terror).

Indeed, the most interesting statistic I leave till last. No 25 year period since 1495 has been entirely without war. Anyone interested in reading more about this subject should pick up Niall Ferguson's The Cash Nexus, from which the above statistics were sourced.

Oh, and which major nation has been the most belligerent since 1495? The answer is France, which has participated in 50 of the 125 major wars in the period.