Lets go (note, these are my rough picks – they aren’t associated with anyone else, and they definitely don’t exist in a professional capacity) :

• NZ GDP growth will near 4%pa by the end of the year.  Inventory accumulation will be a major contributor.
• Consumption growth will be weaker than economic growth – but will accelerate during the second half of the year.
• NZ unemployment will hold above 5% – but will be in the lower 5’s.
• The housing market will remain weak.
• The Reserve Bank will remain dovish on rates over the first half of the year – but then start hiking in June.
• Farmers paying down debt on the back of high commodity prices, combined with increasing risk taking/confidence by investors, will see interest rates fall over the first half of the year.
• National and Labour will compete over “savings plans” which will involve far too much in the way of distortions, compulsion, and poor “incentive” programs for my liking.  As a result I will post on them constantly.
• National will win the election with effectively the same coalition government as we have now.
• Aggregate commodity prices will peak in March, but will not decline significantly.
• Oil prices will rise 10-15%.
• Australian growth will fall slightly below trend.
• The US recovery will be lower than expectations in the early stages of 2011 on the back of a slight run down in inventories – however, underlying activity will pick up sharply from the middle of the year.
• The Fed will not lift rates or cut back on QE.
• Israel will attack Iran to destroy any nuclear capabilities – and nothing will come from it (have put an entire dollar on this on iPredict – with an order to buy another 100 stocks)
• Chinese growth will slow to 8%.
• Portugal will teeter, but the essence of the debt crisis will be forgotten again over the year.
• Japan will tighten policy too early.
• Subsidies for solar power will become a more common policy around the world.
• An international mission to Mars will be announced.
• Update: India will win the Cricket World Cup.
• Update:  France will win the Rugby World Cup after disappointing in group play.
• Update:  Gold price will fall – say it will be lower on December 31 2011 than it was in December 31 2010 in US dollar terms
• Update:  The NZ TWI will be volatile, but on average unchanged!
• Update 2: Arsenal will win the PL in 2010/11
• Update 2: LFC will be top of the PL in 2011/12 at Christmas (but will end up coming 4th)
• Update 2: Wellington Phoenix will come in sixth in the regular season – but will make a semi final.  They will be in fourth place by the end of December 2011.

I aim to sketch out a few thoughts I have based on the study of economics. If there is a political scientist out there (or anyone else for that matter), I would be more than happy to hear about the multitude of logic flaws in my description

To start with I should describe the general international relations (market ) failure involved in a relationship like the Israel-Palestine relationship (therefore, I am not saying that the following this ARE happening – I am saying that they are indicative of the type of situation).

The way I see it there is a prisoner’s dilemma going on. Both countries would prefer it if Israel was not closing off its borders, and if Palestine did not support people who were shelling areas in Israel. However, it is a “dominant strategy” for Israel and Palestine to do each of these things. Fundamentally, if one side tried to lighten things up, the other side would take advantage of the situation – so they both end up worse off.

Now this is no good – and it suggests that there could be scope for an independent third party to come in and enforce the “pareto superior” equilibrium with no closed borders and no shelling (Note: I realise that this is a HUGE simplification – Palestine does not necessarily fully control the shelling, and Israel cannot be forced to just “open its borders”. However, it is a useful EXERCISE to get an idea of the issues – I do not expect to be able to solve anything from this).

So here we have assumed that the goal of an objective third party is to get “pareto optimal” outcomes, given current allocations of “resources”. Given this view, there could be scope to broker an agreement. However, this view misses a very important element – the drivers of the allocation of resources, and the payoff associated with each nations actions.

Think of it this way. If the third party stuck to the view that they would try and come up with a “pareto optimal” solution, the stronger party could take advantage of the situation by declaring war, taking land, and then asking the impartial body to mediate. In this case, the solution may be pareto optimal relative to the current allocation – but it may be construed as “unfair” relative to the initial resource allocation.

As a result, the third party has to take this into account when stating action – or else their rule of “static pareto optimality” will lead to suboptimal outcomes overtime. This makes the issue a whole lot more difficult.

In this case, there is a “rights based” element to the negotiations. The different nations believe that they have a justifiable claim over the same territory.

Fundamentally, as long as the third party believes that there is a justifiable rights based claim on land – it would be more difficult for them to define a pareto optimal outcome.

Now, in this case so much depends on the value judgments implicit in our third parties view. How long can the historical claim on land be? Is there some intrinsic right to this land beyond the third parties aim to avoid the “strong attack weak” scenario – fundamentally here I am asking whether prior ownership of the land creates some value over it. If it does – then the situation we are in is even fishier.

Conclusion

Fundamentally, we have decided that the long-term conflict between these two countries (not just the war) is the result of a prisoner’s dilemma.

Our third body (the UN) is unable to mediate effectively because dynamic considerations, and because the joint claim over land makes pareto improvements more difficult to come by.

If the general situation wasn’t difficult enough to solve we have the added complication that the UN is actually a set of varying value judgments – not an objective social maximiser. In this case, the whole idea of policy actually being put in place to improve outcomes for both parties in this type of situation seems slight.

However, we will see in the current case.