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When Winston Churchill became British prime minister in May 1940, he ended the appeasement policy toward Germany and, in the face of opposition in his own cabinet, imposed an uncompromising stance aimed at military victory over Nazi Germany. It is not known that he consulted economists for this decision, who would have used their models to calculate the costs of the war for Great Britain and by how many percentage points British economic output would fall. The decision on a raw materials embargo against Russia is also a genuinely political one today: It is ultimately a question of what effect we expect such an embargo to have on the Russian position, whether we are prepared to accept economic and social costs for this ourselves, and whether we consider such a measure necessary to defend our own freedom. Economists may be able to contribute to decision-making by assessing the economic consequences of an embargo. The debate of the past few days, however, impressively illustrates above all the limits that a social science such as economics still faces in this regard.
Three factors stand out in particular: First, the predictive power of models depends to a large extent on the fact that a comparable situation has already occurred in the past, so that the experience gained from it can be applied - in modified form - to the present. This is not the case here: There is no suitable historical model for a massive and probably prolonged disruption of the energy supply that would force the shutdown of industrial plants and result in far-reaching disruptions along the value chains. Even the oil price crisis of the 1970s unfolded its negative impact on the overall economy not primarily via the generation side, but via the demand side.
Second, models are by their very nature a simplified reflection of reality. This is not a problem as long as the essential aspects can be captured and abstracted from the more insignificant aspects. In the present case, however, there are a number of essential aspects that are very difficult, if not impossible, to include in economic models. First and foremost, there are the logistical problems that would be triggered by a raw material embargo: In order to estimate the consequential effects, it is not sufficient to look at averages. Instead, it is essential to know which companies at which locations can substitute Russian gas with other raw materials, what costs this would entail and where this will not be possible - at least for the time being. Third, dynamic consequences have always been a major problem in modeling: In a market system, an exogenous shock triggers reactions that can often, but by no means always, be reasonably estimated, because the knowledge required for this is generated in the first place in the market processes taking place. In the present case, this relates above all to the important question of the extent to which industrial goods that can no longer be produced in Germany because of the raw materials embargo can be sourced from other regions and - even more important in the long term - the extent to which industrial value creation is lost forever as a result.
The authors of the DIW, the German Council of Economic Experts, the IMK and others who have now examined the consequences of an embargo in studies are well aware of the limitations to which their models are subject. It would do society's debate good to draw the right conclusions from this: This can only be that each model in itself leaves essential questions unanswered, that a sufficiently precise assessment of the consequences is therefore hardly possible, and that it must therefore be a political decision. The core of the debate would then not be whether our economic output declines by 2, 3 or 6 percent, but whether we want to see this as a decision of fundamental importance. Churchill, by the way, was of exactly this opinion at the time and therefore swore his citizens in to defend their island (today: our freedom) "whatever the cost" and promised "never to surrender".