What will the economy be like fifty years hence? At a microlevel, for those of us in the age cohort that reads about economics for pleasure, it will be depressed. We'll be dead.
For the living, my prediction is that the economy will be what it is predicted to be. Like all social sciences, economics is a self-fulfilling prophecy.
The idea of a self-fulfilling prophecy has existed at least since the Oedipus myth. The concept was put into formal academic terms in 1949 by Columbia professor Robert K. Merton in his book Social Theory and Social Structure.
The self-fulfilling prophecy is in the beginning a false definition of the situation that evokes a new behavior that makes the original false conception come true. This specious validity of the self-fulfilling prophecy perpetuates a reign of error.
"Reign of error" is as good a definition of economics as any.
Robert K. Merton was the father of modern sociology. He was also the father of Robert C. Merton, who won the Nobel Prize in Economics in 1997 for his work on the Black-Scholes formula--that staple of prediction that calculates futures option pricing for hedge funds. Robert C. Merton was a partner in the Long-Term Capital Management (LTCM) hedge fund, which lost $4.6 billion in 1998.
Not that Robert C.'s predictions didn't come true. He predicted hedge funds could make a lot of money using highly sophisticated mathematical models. All the other hedge funds began using highly sophisticated mathematical models. Some hedge funds made a lot of money. LTCM didn't happen to be one of them.
As the poet Robert Burns put it in "To a Mouse, on Turning Her up in Her Nest with the Plough,"
But Mousie, thou art no thy lane, In proving foresight may be vain: The best-laid schemes o' mice an' men Gang aft agley, An' lea'e us nought but grief an' pain For promis'd joy! Still thou are blest, compared wi' me! The present only toucheth thee: But och! I backward cast my e'e, On prospects drear! An' forward, tho' I canna see, I guess an' fear! I guess and fear our predictions will come true. Humans have remarkable predictive skills. The secret, of course, is to be as vague and obscure as the Delphic Oracle, one of whose prophecies was, "Get out, get out of my sanctum and drown your spirits in woe."
Another expert in vague obscurity was Nostradamus, the sixteenth-century apothecary with a drug store that also dispensed prescriptions for the future. I gather that--if one puts one's mind to it--Nostradamus's abstruse quatrains can be interpreted to foretell everything from the Great Fire of London to the end of the world that we experienced in 2012 due to the expiration of the Mayan calendar.
But we must give the man some credit. In Les Propheties, published in 1555, Nostradamus says, "Many rare birds will cry in the air, 'Now! Now!' and sometime later will vanish." Here is Rachel Carson's Silent Spring 407 years avant la lettre.
Nostradamus also predicted plagues, earthquakes, wars, and floods. Check, check, check, and check. Plus invasion of Europe by Muslims--now a fait accompli, though accomplished by asylum not by assault.
The last book of the Bible, the Revelation of St. John the Divine, is the oldest and most important predictive document of Western civilization. (And, with all respect to the China boom, it's still Western civilization that controls the mind and means of the world's economy.)
But it isn't easy to tell--especially in economic terms--what Revelation is revealing. Is the book allegorical? Yes. "And there appeared a great wonder in heaven; a woman clothed with the sun, and the moon under her feet, and upon her head a crown of twelve stars: And she being with child" (Rev. 12:1-2). This description is clearly symbolic...