If government were angels, only humans would be necessary: a look at the economic prospects of 2065.

AuthorDomitrovic, Brian F.

To ask the historian what the economy will be like fifty years from now is to invite comparisons to fifty years ago. As I write in the summer of 2015, weeks before the half-century anniversary of the Watts riots in Los Angeles, fifty years ago was 1965--the very acme of American economic history. A friend of mine, Louis Woodhill, is an entrepreneur and a blogger. Holman Jenkins of the Wall Street Journal once wrote that the reaction to one of Woodhill's blogs questioning the General Motors bailout was "one of those kerfuffles that render the Web a net plus" (2012). Woodhill has told me that he realized that 1965 was the acme of American prosperity when he acquired a superlative Pontiac Bonneville convertible from that year. "Note the exuberant styling," Woodhill wrote to me recently, verbally pointing to a picture of the car, a broad, black beauty. "No other country ever produced anything like the American cars of 1965, and especially not for ordinary people. In 1965, a man with a decent blue-collar job could support a family at a middle-class level. He also had reason to be optimistic about the future."

The American with a job had reason to be optimistic about the future in 1965 because of the trend perceptible at that point. The thing about trends, however, is that you can never quite tell which one you are riding. Are you on an exponential curve or a wave? In small sections, but only in small sections, the two paths are identical. The slope of an exponential curve is exactly that of a wave as the wave climbs out of its trough, reaching toward its peak, but a peak (as well as the inflection toward the peak) is something that an exponential curve does not have. As it turned out, the year 1965--before the Watts riots began in August--was the last moment that the wavelike nature of the trend of American prosperity was consistent with an exponential curve. After that, the trend of economic growth and its dissemination slowed and then reversed course, with variation since then, such that 2015 does not extrapolate from 1965 on the basis of what one saw burgeoning all around the nation in 1965 and in the years immediately preceding it.

The raw, blunderbuss numbers give a rosy picture of 1965. Gross domestic product (GDP) was growing by 6 percent, expanding on the 5 percent growth of the previous three years. The unemployment rate (a lagging economic indicator) was a little less than 5 percent and set to dip to less than 4 percent the next year. The number of employed Americans (also a lagging indicator) was hallway through an increase of 13 million from 1961 to 1969. The inflation rate was 1.6 percent. The Dow industrials crossed 1,000 for the first time in January 1966, a level not exceeded in real terms until the 1990s. And federal government spending went down, not only in real but in nominal terms, from 1964 to 1965--the last time that...

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