Ignacio Palacios-Huerta - In 100 Years: Leading Economists Predict the Future

In 100 Years

In 100 Years

Leading Economists Predict the Future

edited by Ignacio Palacios-Huerta

The MIT Press
Cambridge, Massachusetts
London, England

2013 Massachusetts Institute of Technology

All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.

Library of Congress Cataloging-in-Publication Data

In 100 years : leading economists predict the future / edited by Ignacio Palacios-Huerta.

p. cm.

Includes bibliographical references and index.

ISBN 978-0-262-02691-8 (hardcover : alk. paper)

ISBN 978-0-262-32009-2 (retail e-book)

1. Economic developmentForecasting.I. Palacios-Huerta, Ignacio.II. Title: In one hundred years.

HD82.I29852013

330.900112dc23

2013025303

To Ana, Ander, and Julene

To Jose Antonio, M Luz, Javi, Patxo, Antton, and Jon

Acknowledgments

My deep thanks go first to each of the chapter authors for the gift of their chapter. They have decided to use their time, human capital, and intuition in a most laudable way: to argue, write, debate, and speak, as they have always donein this case about a question that I hope you will find of the utmost interest. I cannot thank them enough for the pleasure of reading their views and analyses. Whether you are reading this book in 2013, 2063, or 2113, I hope you will find their essays a true gift as much as I do.

Second, I thank John S. Covell at MIT Press, who enthusiastically supported this project from the very beginning.

Finally, I thank my wife, Ana, and my children, Ander and Julene, for their love and for giving me a life I never dreamed of. My mother, my late father, and my brothers also deserve the same thanks. I am sure the idea for this book would have never occurred to me without the love, support, and environment they have always provided.

The Idea for In 100 Years

Ignacio Palacios-Huerta

In An Enquiry Concerning Human Understanding, published in 1748, the Scottish philosopher David Hume reduced the principles of associative memoryin which each idea is linked to many others in a networkdown to three: resemblance, contiguity in time and place, and causality. I do not remember exactly how the idea for this book appeared in my mind, but Humes principles provide good guidance. I have three suspects. The first are my twin children. When they were born eight and a half years ago, I started thinking about the future with much greater care and intensity than before. Before their birth, my thinking about the future was mostly scientific (as in the economics literature on human capital investments that pay off in ones lifetime or in the literature about how one day in the far future, the sun will run out of fuel and end its life). When they were born, however, I started thinking with much greater precision about the next ten to twenty years (e.g., what school and neighborhood would be most appropriate for them, which foreign languages they should learn, and so on). True, this is not the future in 100 years, but it is something along that line. The second suspect is perhaps more difficult to express in simple words: it is the perception, the deeply and fundamentally sad perception, that my life is going to end. All of us know that this life is finite, of course, but the unbearable awareness that it will end for sure, which in my case has been patently obvious only recently, particularly in the dark early hours, made me wonder about the more distant future only in the past few years. How will this world look when I am not here? Will there be other world wars? Will the ice poles melt? Will poverty as we know it today disappear? What will my great-great-grandchildren be like? Will the human race have begun planning to move to another planet as physicist Stephen Hawking is suggesting today? Will... ? How will... ? When will... ? I am so curious.

The third suspect is the 1930 essay by John Maynard Keynes, Economic Possibilities for Our Grandchildren, which I read recently. Published in his book Essays in Persuasion as the Great Depression was beginning, Keynes looks 100 years ahead to a time in which learning to live well had replaced the struggle for subsistence. He makes a number of interesting predictions. Some of them turned out to be absolutely correct, for example, living standards would be between four and eight times higher, and some spectacularly wrong, for example, a working week cut to around fifteen hours per week (I know, it is not 2030 yet!).

I do not know for sure, but if I had to guess, I believe the combination of these three ingredients installed in my mind the question: What will the world look like in 100 years? Once it appeared, it was hard to stop thinking about it. It was an unusually difficult and interesting questionperhaps even an important one, and not just to me but potentially to thousands and millions of other people. At first I tried to give myself a few answers, which I will not venture to write down now. After a few minutes, my demand for knowledge increased by an order of magnitude: What would Mr. X and Mr. Y think? How about Mr. Z and Ms. W? What would they say? How do they imagine the future? I thought it would be great to know. So at that moment I strongly felt this was a book that had to be written and that it was my responsibility that it be written.

I was certain that the specific people X, Y, Z, and W I first had in mind would agree that it was an original, difficult, and attractive question. And so when the thought that they and others might find it uninteresting or ridiculous crossed my mind, I quickly dismissed it. In any event, just to make sure, I first mentioned the idea to a few close friends. When I saw that it was enthusiastically received, I became strongly encouraged to pursue the project of this book. Then I contacted John S. Covell at MIT Press (the publisher of Revisiting Keynes, a book in which a number of authors analyze Keyness 1930 essay). He was also enthusiastic about the idea and immediately said that MIT Press would be interested in publishing it. The last step was to ask the question to X, Y, Z, and W and see if in fact they were interested and had the time to write an essay with their predictions for the next 100 years. My plan was to edit a book with just about ten to twelve chapters by people I like, find insightful and interesting, and who have different backgrounds and fields of research expertise. And so I started with some invitations hoping that I was not overly optimistic about this project. I was not. The reaction was excellent and the vast majority accepted the invitation immediately. For instance:

Hi Ignacio: to my surprise, I do find your invitation tempting. Its a sign of old age, Im afraid. Count me in: Ill be happy to try to predict the far future...

Al Roth

or

Dear Ignacio, It is good to hear from you after all these years. Making predictions in the secure knowledge that one will not have to see them tested is a temptation one should resist. But, at least tentatively, I dont plan to resist. However, given my background in statistics, I would undoubtedly give error bands or at least alternative scenarios. Put me down as a yes.

Yours, Ken Arrow

Even people who politely declined had good words to say about it:

After reflecting on it for several days, I am not sure I have enough confidence in my views on this matter to share them so publicly. But I appreciate your thinking of me, and I look forward to reading the book!

Others declined with interesting thoughts:

Dear Ignacio: My answer to your kind and thoughtful invitation is that I do not predict the future. Rather, I try to understand the past. I am an economic historian, not a fortune teller. I know that the big money is in prediction. But that is not what I do. Best of luck with this project. Regards