Tuesday, January 11, 2011

Are long-term economic projections all rubbish?

My post on HSBC's forecast for 2050 received an interesting comment from Andreas Foster, who basically said the report was all  nonsense and rubbish.

In response to Andreas:

I agree with his point that indeed "the unexpected and unpredictable shapes the world". That said, there is still value in projecting into the future, to the extent that you can shape future events and/or change the probabilities of some events happening. For instance, to give an obvious example, countries like Poland could start doing something about demographics, introducing pro-family legislation and--above all--opening doors to/promoting immigration.

Also, projections on their own shape reality. Just take the BRICs, a PR idea developed by Goldman Sachs back in 2001, which then took a life of its own. The leaders of BRICs now meet for BRICs forums (sic!) and markets seemingly can't get enough of investing into BRICs. This may be silly, and it is, but it is nonetheless the reality. The tail wags the dog.

I myself talk about the weaknesses of long-term projections in my Golden Age paper, arguing a similar point that it would not make much sense to predict where the world was going in 1968 or--above all--in 1989. Or that Asia today looks very much like XIX century Europe, a huge powder keg ready to explode, spurred by the rising enmity between China, Japan, Korea, India, Taiwan and Pakistan. All economics will not matter if you have a war (to be fair, HSBC report mentions this). In addition, I think Europe may unexpectedly and paradoxically become the big winner of the XXI century, despite the current consensus arguing the opposite. This is because the axis of future global conflicts will permanently move away from Europe, where for the last 500 years it has led to innumerable conflicts, including two largest global wars, to the Pacific Ocean, mainly between China and the US. Europe will clearly benefit from it. Others will lose, perhaps even big time. As the Polish proverb says: "when the two fight, the third benefits".
See more in my forthcoming Chimerica paper (will put it on the blog)

1 comment:

DAVID HU husiyuan said...

Dear sir:
I would like to say ,Polish people don't have many information about China .Sometime Polish think Chinese government like USSR.And some Polish people told me like that ,they think China and USSR don't have different ...I'm very worry !
In the future,I think China and USA is parter .is not enemy .Because we are know each other.China and USA know do a parter we will two-to-win ,and Today in China have a lot of problem .Like in China Gini cofficient is to high .And CPI is to high .today some Chinese economic situation is like 1973~1991 Japanese economic situation.The Chinese home industry have a big bubble. I think other county people just see ,We have secondly GDP in the world ,But did see Real GDP per capita is very low.
About TaiWan .TaiWan is part of China ,Chinese government don't want to use army take back Taiwan ,Because we are Chinese.Chinese government want to use economy to keep touch with taiwan . And use economy arm to take back taiwan from USA.