A political economist analyzes how the policies and activities of governments affect the distribution of resources. Those in this role typically use data and statistics to compile reports that may illustrate changes in economic productivity, value and the money supply. Another task performed by a political economist is forecasting, which is an attempt to determine how changes in tax laws, government spending and domestic aid policies impact the citizens of a particular country.
Someone who works as a political economist deals specifically with public policy. This includes laws and initiatives that come from the government. Rather than just examining how an economy allocates its resources through natural laws of supply and demand, a political economist will look for allocations that occur as a direct result of government influence. For example, when a government decides to cut taxes for a certain number of citizens based on income level, political economists track changes in spending, saving and investing within this population segment.
A big part of a political economist's job is research. He or she will spend a large amount of time gathering financial data and statistics, either through secondary sources or by conducting his or her own surveys and experiments. Forecasts may be developed as a result of new public policies, such as tax increases for small businesses. A political economist may survey a sample of small business owners to predict whether they will reduce expansion and institute hiring freezes.
The analysis of political economists may take a macro or micro approach. There are some economists who examine public policies made by national governments, while others may focus specifically on local governments. National public policy affects the country's macroeconomic environment, while local policies tend to have more of a direct impact on their own sub-economies.
Increases in national government spending may lead to higher inflation levels. The cost of goods and services is driven up, which may result in less disposable income for the average citizen. Political economists will usually make a prediction regarding consumer spending based on this change in public policy. The prediction may include a change in interest rates, the credit market, or a reduction in employment levels as businesses struggle to make their bottom lines.
Analyzing trends is another important part of a political economist's job. These analysts often look at key economic indicators to gauge the overall health of an economy and whether it is performing better or worse from a historical perspective. Economists typically write many reports based on research and trend analysis and may present summaries of those reports to television and print journalists.