24 February 2011

Economists: Riddle Me This

Writing in yesterday's Financial Times, James Mackintosh says that,
The rough rule of thumb economists use is that a 10 per cent rise in the oil price equals half a percentage point off global growth.
I'm no economist, so I'm hoping that one will show up and explain to me how to reconcile this statement with oft-made claims that increasing the costs of energy (e.g., through a high carbon tax) will boost GDP, or less optimistically, reduce it imperceptibly.  I am particularly interested in pointers to the academic literature.  Thanks all!

And a note to the FT:  How about enabling video embed to your excellent videos like this one?