Economists cannot predict the long-term future
I am a technologist with a great interest in the long term future for business and technology. I always read predictions with interest, but I am increasingly reading Economic predictions which seem to me to be complete rubbish. An example of this is Long-term macro-economic Forcasting up to 2050 by the Economist Intelligence Unit. Don’t bother reading this as its a thoughtless piece of mathematical junk. Economists have often used extrapolation as a useful mechanism for predicting the future. A great example was in 2001 Jim O’Neill predicted the success of the BRIC countries (Brazil, Russia, India and China) based on his accurate review of the trends for these countries compared with US and Europe. He was predicting 10–20 years ahead and these predictions have proved highly accurate. However, this success has led others to use extrapolation to take predictions are far as 2050. The problem with extrapolation is that it does not take account of disruptive change. Technology has provided disruptive change during the last 10 years but these changes have just affected individual industries such as publishing — it’s not had a significant effect at the macro-economic level. However, these type of changes are increasing and it’s clear, to me at least, that there are a number of disruptive changes in the off-ing which will significantly affect macro-economics 15–35 years into the future.
There are two disruptive changes which will have a significant affect on countries at the macro-economics level in the 15–35 year timescale.
- Artificial Intelligence and Robotics will explode between 2025–2050 with Robots taking over jobs starting with blue collar service jobs but extending over the following 25 years to take over most jobs. This means the work force will go from human to machine. Economic models which enable supply from the human population suddenly fail and the advantage of having a large population will disappear in a very fast timescale. Countries with low populations and large land masses will have an advantage. One early benefit from Robots will be agriculture — countries like Russia will benefit from making its massive land mass growing the world’s food supply and the workers on this land mass will be Robots. This is not bad news for humans — even though there will be fewer jobs there will still be considerable wealth particularly in the western countries where the benefit from Robots will come first due to early investment in these technologies.
- Genetic research into curing cancer an other illnesses using personal targeted drug treatments will lead to an increase in old age population of the developed countries in the same 2025–2050 timescale. This increased consumption will have a negative effect on these countries but it will be more than offset by the efficiency increases resulting from Robotics.
Overall the Economists prediction is that China and India will dominate GDP in 2050 is clearly incorrect. Even though there are positive trends for China and India for the next 10 years — beyond this this trend will reverse as the other Robotised economies expand rapidly in the 2025–2050 timescale.
The chart below is the Economist’s incorrect predictions for 2050.