2023 FUTURE OBSERVATORY
2023 FUTURE OBSERVATORY
5004 GLOBAL ECONOMICS
Most of those taking part in our research tended - to our surprise - to downgrade the importance of economics, in whatever form, as a primary driver. They, indeed, indicated that - as a discipline - it had become too far removed from the real events. The only groups which did discuss it at some length were the expert ones, which - in view of their 'professional' involvement in the subject - was not surprising. Thus, although, almost all the groups mentioned economic forces, apart from the experts they had little to say about them; at least not in the terms traditionally employed in economic theory. Indeed, their comments (even of the experts) were largely limited to three issues; economic collapse, mentioned as a possibility by half the groups, tariffs and taxes, again mentioned by half, and economic imbalance between the trading blocks (especially between those in the West versus those in the Far East, when Japan was still in the ascendent at the time of the earlier surveys), mentioned by two thirds.
Perhaps this is not just a matter of perception. Perhaps it is a reflection of the dramatic degree to which economists themselves have now downgraded the power which they claim to hold over the future of even economic developments. When Keynesianism dominated economic theory, it was generally accepted that governments (advised by wise economists) could intervene to control their national economies - and, indeed, did so successfully for several decades. Since the demise of Keynesianism, the main economic argument has thus been to the effect that governments could not intervene successfully. As governments became mere bystanders at the economic events which determined their destiny, their economists, paradoxically (since they had initiated the process), also descended from power! On the other hand, although the IMF and OECD still adhere to the by now orthodox view that the best way to cut unemployment in the industrial world is to free job markets, the ILO (International Labour Organisation), in its report 'World Employment in 1995', argued that there has been inadequate demand, particularly in the European economy, for the last 20 years. Perhaps Keynes was right after all! Certainly, the actual programmes of most western governments - most recently overtly obsessed with inflation and convinced of any government's inability to solve the problem of unemployment - were highly deflationary. It is no accident that there has been a major recession, of one form or another, in each of the past three decades.
Whatever the reasons, it is certainly true that economics is now often seen - in my view (as a trained economist myself) accurately - as a theoretical discipline rather than a practical one. It is, indeed, arguable that at least some of the problems have been caused by government economists - around the world - recently focusing on the rate of inflation, to the exclusion of almost all other economic measures. It is not obvious why economic health and low rates of inflation be linked. From 1950 to 1973, consumer prices rose by an average of 4.1 per cent a year in the sixteen leading OECD nations; and yet this was the most successful period, in economic terms, since the second world war. From 1973 to 1979 they unfortunately averaged 9.5% - setting the scene for the subsequent obsession with inflation.
Economics has declined, markedly, in importance as a major practical force determining the future of humankind - to be replaced, perhaps in the short term only, by market forces which are not susceptible to government intervention.
Needless to say, those futurologists who come from the economics discipline do focus in economic forces; though, even then, often to highlight the failures of modern economics. Other futurologists - like our own groups - now tend to denigrate the importance of such economic forces.
The practical emphasis will, however, soon move to the economics of deficits; as the dollar and Wall Street crash follwing the wider adoption of the Euro - and the question is asked how could the US sustain such a massive deficit for so long.
Dominique Turcq suggests a global picture "...around this core [ Kenici Ohmae’s ‘Triad’] will be a second group of countries, of which Non-Japan Asia, and especially China and India is a dominant sub-group, with relatively few links to each other but with many such links to the Triad."
Karen Gold reported - before the end of the 1980s - that "...the vast majority of economists work inside higher education. The moves in the white heat of the 1960s for every firm to have its own economist never really took off. Industry closed many of its economic divisions in the 1970s and now even the banks are getting rid of them..." She explains the lack of excitement, even in university economics departments "The really big arguments in economics 10 years ago were theoretical ones: did economies work in this way or in that? Ten years later, so much empirical work has been done to underpin or undermine these theories, that there is little room for argument any more...the differences are ones of detail." The date of her article, May 1989, is significant though. Very soon after, these academic economists rushed east, to once more practice the their craft - from which they were now barred in the West - on the unsuspecting ex-communists trying to come to terms with what market forces were all about. Funded, in particular, by the US government - they caused as much chaos on a national scale as they had previously done within organisations in the West! John Gray puts the position into a wider context when he says "Hayekian theory [named after the leader of the Chicago school of economics] was able to deny the necessity, even the meaningfulness, of social justice, in part because it imagined that the sheer productivity of unfettered markets would preclude any crisis of legitimacy of capitalist institutions. " He adds that "A dynamic market economy can be politically legitimated, in a democratic regime, only in so far as it is complemented by institutions and policies which counteract these hazards, and which remove market competition from some social contexts altogether."
The Economist says "Most contemporary economic theories assume that humans are rational, and so tend to ignore apparently irrational behaviour." By the end of the 1980s, however, Frank Hahn - president of the Royal Economics Society - was reported (by Karen Gold) as saying that "The interesting work in current economics is work which starts from the assumption that people are not peanuts, but act according to rational expectations based on past experience." This was an earlier, narrower and less flexible, version of the more general 'expectations theory' from which viewpoint this book is written. Originally introduced by Richard Muth in the 1960s, in the 1970s it was combined with the work of Milton Friedmann by Robert Lucas at the University of Chicago - from where much of the conservative economic their which dominated the later 1970s and 1980s emerged - to offer, for a time, a powerful, conservative argument for non-intervention. As The Economist, five years later when the position had moved on yet again, criticises "...some macro-economists continue to subscribe to fairly strict versions of 'rational expectations' theory - which holds that people behave as if they fully understood the workings of the economy."
The Economist, in the context of personal investments, says that "People like to believe that their is prudent. They also tend to pay too much attention to recent data and no enough to long-run averages or statistical odds. Together, these biases make people crowd together and follow trends. This may explain why markets become dominated by prevailing moods, why bubbles form..." However, as David Hirschleifer - of the University of Michigan - and Ivo Welch - of UCLA - are quoted by The Economist[p] as saying, "...the cost and difficulty of getting and processing information means that observing the choices of others is often a cheap and helpful alternative. If enough people - it need not be too many - do the same, the case for everyone to follow suit can become irresistible."
Joseph Coates, admittedly coming at the issue from the direction of forecasting the future of science and echoing what many econometricians believe, suggests "Applied economics will lead to a greater dependency on mathematical models embodied in computers. These models will have expanded capabilities and will routinely integrate environmental and quality-of-life factors into economic calculations."
27 April 2003
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