Economists blowing sunshine
A ballooning money supply, an unprecedented expansion of liquidity, the terminal decline of manufacturing…None of this seems to deter the economics profession from seeing sunshine in America's future.
Wake Forest Econ Chairman Robert Whaples surveyed his fellow economists last year and describes the results in this op-ed:
I found that by wide margin economists are exceptionally optimistic about the future of the American economy: most predict that the robust economic growth of our recent history will continue into the foreseeable future. My respondents’ median prediction is that per capita income in the United States will grow at a rate slightly less than the 2 percent inflation-adjusted growth rate of the past sixty years. Almost half forecast a growth rate equal to or greater than 2 percent. Only one economist in my poll predicts economic decline for our grandchildren.
Actually, I guess that by itself isn't implausible. Per capita income adjusted for inflation has grown by 50% over the last 30 years. But I'm not sure if that's the best measure of economic health. In any case…
If my respondents are correct and economic growth continues at this pace, incomes will rise more than three-fold in the next sixty years—average incomes would equal approximately $147,000 in today’s dollars. If the growth rate does dip slightly, say to 1.8 percent per annum, incomes would almost triple, rising to only $131,000. These predictions are eye-popping.
You don't need a degree in statistics to know that averages can be deceiving; they can be pulled upward by a just a few extraordinarily high numbers. I wonder what the prediction is for the median.
Of course, there are clouds on the horizon for this merry band of economists, but they're light puffy clouds that don't darken the skyline at all:
The bottom line is that most economists are very optimistic about the economic future of almost all the world. They find pessimism implausible because the forces that have driven past growth—the accelerating pace of technological innovation and the strong incentives embedded in the capitalist system that steer us around potential roadblocks—aren’t likely to disappear anytime soon. Moreover, the consensus among economists is that climate change has very little potential to slow down our economic growth machine. Rather, economists identify the major challenges facing the American economy over the next sixty years as coping with the effects of an aging population and flaws in the Social Security system, exploding health care and health insurance costs, and our inefficient educational system.
The unspoken assumption, then, among the economists surveyed is that an ever-expanding money supply fueled by a policy of endless entitlements at home and perpetual war abroad is no big deal. (Peak Oil doesn't even enter the discussion.)
And it's a widely-held consensus, judging by this survey. An ill and contrarian omen if there ever was one.
For a differing scholarly point of view, check out our History of Financial Disasters. It goes back not 60 years, but nearly 250.
[Disclaimer: This post is not intended to denigrate the overall body of work put out by the Independent Institute, which published this study. Independent has many excellent scholars among its ranks, including Robert Higgs and Ivan Eland.]
Comments: