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Economic Possibilities for Our Grandchildren

The world as we know it is undergoing a dramatic remaking.  We are facing what at times seem like insurmountable challenges – a global public health crisis, an impending climate and ecological crisis, rising inequality. As Milton Friedman once said, “only a crisis – actual or perceived – produces real change”. Is this moment we are currently living through just a hiccup on the economy’s trajectory or will it shape the economic possibilities for our grandchildren? 

 

Building a fairer and more sustainable economy is going to need a unique blend of both economic analysis and vision. We often neglect the latter, perhaps at the detriment to society. At times of such great uncertainty, the intellectual endeavour should not just be about what is but what could be.

 

Inspired by John Maynard Keynes’ 1928 essay Economic Possibilities for our Grandchildren and the need for change and vision now more than ever, we asked academic staff and students at the School of Economics: “What will the world economy look like in 100 years?

 

Dr. Sean Brocklebank, Senior Teaching Fellow

 

Individually, I’d bet on any of these seven trends continuing, but collectively I’d only bet on five or so of them, because probably a couple will reverse (but I don’t know which ones).

 

  • Average incomes will be a lot higher in all regions of the world.

 

  • There will continue to be cross-country income convergence.

 

  • That said, there will be divergence within regions – like Sub-Saharan Africa, with some countries (Ethiopia?) racing ahead of their neighbours.

 

  • There will be more currently-developing countries which fully catch up to living standards in places like France, Germany, or Japan. My top bet is Vietnam.

 

  • We will find ways of making cheaper skyscrapers, so big-city urban living will become relatively more affordable, but the price of land will go up a lot.

 

  • Manufacturing will continue to decline as a share of GDP. Few countries will grow rich in manufacturing (maybe Vietnam though). 

 

  • Average retirement will continue to lengthen (even with higher retirement ages).

 

Dr. Ahmed Anwar, Lecturer in Economics

 

I’m afraid I am really pessimistic about the immediate future but in 100 years everything will be great!!! We may even have solved the economic problem as Keynes put it. We will start by learning some lessons from the impending economic and social turmoil that will afflict us for a decade or two. 

 

We will learn the simple lesson from economics that we must accumulate the Earth’s capital if we would like for it to produce for us a greater income. We will nourish again the soil and respect again the seas.

 

We will learn that the biggest hindrance to economic and social progress is power. Without it in markets we will realise Adam Smith’s vision of a perfect coordination of economic activity. Without it in social relations we will have liberty for all.

 

100 years from now: no tariffs or subsidies, no governments to levy them, no borders, free movement, decentralised markets, decentralised monetary systems, decentralised everything. We will then have the economic and social progress that will lay the conditions for Keynes’ vision for human progress or even better, Oscar Wilde’s (in his 1891 The Soul of Man under Socialism). 

 

Dr. Jonna Olsson, Lecturer

 

Keynes’ famous prediction that his grandchildren would work 15 hours a week turned out to be wrong. First of all, Keynes never had any children, and thus no grandchildren, and second, most of us still work more than what Keynes imagined: two days of work and five days of rest every week. However, even though he was wrong quantitatively, he was right qualitatively: the big picture over time and across countries is that we are working less and less. I think this will continue. Economic growth will lead us as a society to choose more leisure, not only more consumption. It might not necessarily be fewer hours in the weeks we work, but more vacation, more parental leave, later entry into the labour market for the young and earlier exits into retirement for the old. Maybe some people will not work at all. The challenge will be to not let this unequal work burden translate into inequality in terms of welfare. But I am optimistic: we will figure out a way. In 100 years, we will wonder how we ever arranged our society without a universal basic income.

 

Prof. Simon Clark, Professor of Economics

 

Maynard sighed. He had no idea how to complete his assignment. ‘Show how economics can explain the end of the world.’  

 

How had it come to this? Where did it all go wrong? Was it President Harris’s decision, almost 100 years ago, to ban fracking and go deep green? That had certainly hastened the break up of the USA. The new Mid West Confederacy, free of regulations, quickly overtook China in the race to destroy the atmosphere. 

 

Or was it the inability to contain the spread of COVID-36? It had killed so many, especially in Europe after the libertarian victory in the culture wars of the 2020s. 

 

But he was glad he was studying Economics. Its neat theories, rigorous quantitative methods, and faith in human reason, were strangely comforting. And as the fires in the forest outside continued to burn, he felt a certain peace, that the best of all possible subjects had no problem in explaining this, the best of all possible worlds. 

 

Justinus Steinhorst, 4th Year Economics and Politics Student

Aside from climate change, artificial intelligence strikes me as the most transformative dynamic of the coming century. Where we will end up in 100 years depends crucially along which path this technology will develop. The grim scenario is a world of monopoly power, in markets and political life alike. Machine learning thrives on scale, a characteristic inherent to centralised systems. A world of even greater political and socioeconomic inequality is a very realistic prospect in this case. However, if we rein in these darker tendencies, adapting our laws and institutions, we can channel AI into a force for good. It could enable an economy where machines take over mundane tasks, yielding astronomical productivity gains – something advanced economies have been struggling with for decades. It would allow us to focus on our comparative advantage in intangible skills such as creativity, empathy, critical thinking and vision – the very things that make us human. 

 

Amber Murray, 4th Year Economics and Politics Student

 

Hopefully, quite different to today! I’d love to see a reduced focus on profit and growth as the cornerstones of our economy, and a more equitable and socially focused system.

 

I reckon that we’ll look back on this decade as a turning point (for good or bad) in our response to the climate crisis. I think that we either face up to global warming and drastically change the way we live, or the environment chooses for us and our economy will change to accommodate climate disaster.  

 

I don’t think that there’s a silver bullet which will save us from economic/ecological disaster, so I’m not going to say that I think the world could be ‘fixed’ in 100 years’ time. I’d guess that we’ll end up somewhere in the middle of the above options (although fingers crossed there’ll be flying cars).

 

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