Over at the Skeptical Optimist Steve Conover is at it again, doing some interesting analysis. After reading a number of very gloomy articles about the debt burden/economy our grandchildren could inherit, he noted:
All scenarios were bad news, and were, of course, our fault for not being “fiscally responsible” today. Some were written by people with economic perspectives I highly respect; others by analysts with skills I highly respect; others by journalists or politicians with economic knowledge that commands little to none of my respect. But the common thread was the terrible scenario that “could” come about.
He then did his own analysis, a sensitivity analysis, and guess what he found:
The key word is “could.” The use of that word in all those articles implied that maybe, just maybe, there might be some other scenarios, not so gloomy, that also “could” come about. So I decided to spend a few evenings testing the possibilities.
Sure enough: It turns out that in many plausible scenarios, the future’s so bright I gotta wear shades.
It’s immediately obvious that productivity growth (input #4), the key driver behind GDP growth, is of overwhelming importance.
3 comments:
It’s immediately obvious that productivity growth [...] is of overwhelming importance.
Just so.
The amount of debt accumulated isn't necessarily a critical factor, as long as a person, organization, or society's ability to generate wealth continues to expand.
If it STOPS expanding, or even declines, then the amount of debt is of paramount importance, and you get GM today and tomorrow's Italy.
Fortunately for Americans, the "doom & gloom" scenarios are ALWAYS straight-line projections of current trends, ignoring that humans are adaptable and innovative creatures.
For instance, if we consider the advances and increases in capability that we KNOW are occuring and will occur in fields such as computer chips, data storage, telecommunications, robotics, and nanotechnology, it doesn't take counting on a lucky breakthrough or postulating a huge increase in R & D to see that we're going to have another productivity explosion, higher than the one-time shot from allowing women to fully integrate into all areas of the workforce.
Due to the vastly quicker rate of innovation and social adaptation, the world of 2050 will have changed as much from 2005, as 2005 has changed from 1900.
Just as the expansion of electricity, telephones, television, automobiles, heavier-than-air craft, spaceflight and satellite commo, robotics, and computers shaped the 20th century, so too will newer forms of transportation, communication, and materials manipulation shape the 21st century, and QUADRUPLE America's GNP by 2050, in real terms, Boomer retirement and all.
Barring nuclear war or the Yellowstone supervolcano erupting, it's guaranteed.
oroborous wrote: "... so too will newer forms of transportation, communication, and materials ... QUADRUPLE America's GNP by 2050, in real terms ... it's guaranteed"
Really? Wouldn't that imply that France, Germany, Japan, etc. will also quadruple their GNP? After all, the same innovations will be available to them.
I'm quite optimistic myself but I think it's far from guaranteed.
Yes, all nations and societies will become more efficient, to the extent that they can construct and integrate the new technologies into their cultures and economies.
The U.S. GNP will quadruple because we're among the best at doing the above, and we will continue to experience growth in our labor force over the next 45 years.
Some nations will adopt the technology, but won't be able to utilize it to the same extent that America will, and other nations won't adopt the technology, for cultural or financial reasons.
After all, every nation has access to all of today's important commercial technology, but there're still great differences between economic performances even among the developed nations.
There is no objective reason why France should not now have as dynamic an economy as does America, but the subjective reasons why they don't will continue to be true even after they begin using the future's tools.
Thus, I fully expect the major Eurozone economies to double in size, in real terms, by 2050, along with Japan, and places like India and China might quintuple the size of their economies.
Many South and Central American nations might match North American economic growth, being tied by free trade agreements to the U.S. economy.
However, what that means is that the economies currently most close in size to America's will fall much further behind America, and the economies that might outperform America's are starting from a MUCH smaller base.
Therefore, I expect that in 2050 the U.S. economy will still be vastly larger than any other nation's, and may in fact comprise a larger portion of the world's total production than it does now.
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