Arnold Kling  

Trends to Watch, Updated After Five Years

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Five years ago, I wrote


As an end-of-year type post, here is a list of economic stories that I think will be worth following next year. Note that all of them are long-term stories, which won't be resolved in 2006 alone.

The first issue I mentioned was labor productivity growth--if it exceeds 3 percent, a lot of long-term budget problems could be alleviated. As this chart shows, productivity growth has been between 2 and 2.5 percent, which is better than some conservative long-term estimates, but not better by enough to help the budget.

The second issue is cognitive neuroscience. I think that we continue to see progress there, and I still would be happy to own shares in the human capital of anyone going into the field, but I don't see any world-changing results over the past five years.

The third issue is solar power, which at the time the Department of Energy thought was 10 years away from being competitive with traditional energy sources. That seems optimistic, no?

The fourth issue is cancer therapy. I think the progress there has been pretty decent. Maybe that reflects availability bias on my part, because I have a friend who had a cancer that I figured was incurable and he is doing fine. If nothing else, The Emperor of All Maladies is one of the best books of the year.

The fifth issue I called "mainstream media meltdown." The way I look at it, that one is proceeding on schedule.

Overall, I would say that the last five years have been disappointing. Today, if I were putting down a list of important issues to follow, I definitely would include sovereign debt. You've got problems in Europe, problems with state and local governments here, and a looming problem at the federal level here. Certainly a big issue. I would take "mainstream media meltdown" off the list, because that is pretty much a done deal.

I would keep the other issues on for now, but I would say that with the possible exception of cancer therapy, the progress has been less than what I would have expected five years ago on all of them.

So it's a more pessimistic outlook than I would have had in 2005. On a more cheerful note, I continue to believe that the economy will stage a fast recovery some time in 2011 (a year ago, I would have predicted this for 2010). Once the three-month moving average of job growth passes 200,000 jobs per month, I expect to see a very vigorous boom. But it's like the old metaphor of a train--it takes a while to build up momentum.

Possibly related links, from Tyler Cowen: nGram showing a declining interest in the future; Felix Salmon on the prospects for many municipal bond defaults. My guess is that we will have either fewer than 5 or more than 150 cities default--nothing in between. Once default stops being unthinkable, it will be widespread.


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CATEGORIES: Growth: Consequences



COMMENTS (5 to date)
physecon writes:

That ngram is only for "Future." The ngram search engine is case sensitive. http://ngrams.googlelabs.com/graph?content=future&year_start=1800&year_end=2008&corpus=0&smoothing=0

Joe Cushing writes:

I don't see a major boom until the government stops making new rules for business. That may happen now that we have a Tea Party movement gaining momentum. I think austerity measures would be a great boost to growth. Europe will likely pop back soon. It may crash more first though.

Mr. Econotarian writes:

I still think we are not out of the mortgage mess. A lot if worthless mortgages are still on the books of many private and public entities and have not been fully written down.

I also think the US state level financial situation is about to be blown out of the water if rises in Medicaid reimbursements are required by Federal law.

And I don't think anyone understands how private business will respond to the ACA. I've seen plenty of evidence that companies have no clue what will happen to their health care compensation rates.

Jeremy, Alabama writes:

Neuroscience, cancer therapy, and to some extent growth and advanced technology, are "Singularity" issues. Although I remain upbeat about these, the trends have decoupled from exponential just when they become interesting.

The spats over green power are fascinating to watch. Having lectured us that fossil and nuclear fuels are bad for the planet, eco-activists then lobby to prevent solar farms (because of some desert mouse), wind farms (because of birds), hydro (because of the fish), etc. In the next 5 years, with brownouts and $7 gasoline, eco-BS will have become a tea party issue.

I strongly agree that sovereign, state and municipal debt is a huge issue for the next 5 years.

The internet free-speech fight is just getting started. Also, there is likely to be a successful major terrorist attack in the next 5 years. A stuxnet-type worm is almost certain to go wild, and a major military cyber attack is also possible. This will all be bundled up to justify an "American Patriot Cyber Security Act" that will nationalize the internet within 5 years.

Hyena writes:

Physecon got there first. But also run "within a" and you see a significant downward trend.

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