Predictions (hard to be accurate)
Some examples of economists getting it wrong
- in the 1920s floating exchange rates was not a success
- in the 1950s and 1960s, the Bretton Woods agreement generated strong economic growth for the USA and Western Europe but it collapsed in the early 1970s. This agreement involves
"...A collocated system of exchange-rate pegs, capital controls and a gold pool (and other methods) to control gold prices and redemption ratios......whole thing was dependent on America's role as global hegemon, both politically and economically. The dollar still was tied to gold, and other major currencies tied to the dollar......the system evolved that required that no one was too keen to redeem dollars for gold..."
Tyler Cowen 2019
- in the 1960s, economists thought they had tamed the business cycle and prevented recessions by fine-tuning tax and spending policies. What happened in the early 1970s with high unemployment and inflation shattered this myth.
- then the monetarists (led by Milton Friedman) urged central banks to focus exclusively on the supply of money circulating in the economy. This was found wanting.
- in the 1990s, economists oversold the benefits of targeting inflation and forgetting about the other perils, ie human costs of unemployment, destabilisation caused by financial bubbles, etc
- in the 1990s and 2000s, it was common belief amongst economists that the market was not necessarily perfect but it would keep in check players more efficiently than regulators could. The GFC shattered this myth!!!
Inequality has grown
"...to unacceptable extremes in highly developed economies. From 1980 to 2010, life expectancy of poor Americans scandalously declined, even as the rich live longer. Meanwhile, the primacy of economics has not generated faster economic growth. From 1990 until the eve of the financial crisis, US real GDP per person grew by a little under 2% a year, less than the 2.5% a year in the oil shock 1970s..."
Sebastien Mallaby 2019
"...today's international competition and disruptive innovation oblige businesses to cut costs or go under. The dilemma is that, even as they compel efficiency, globalisation and technological changes exacerbate inequality and uncertainty..."
Sebastien Mallaby 2019
NB
The core lesson: there will be major changes in monetary and institutional arrangements and that events will happen that cannot be imagined now
"...Assume the permanency of the status quo at your peril..."
Tyler Cowen 2019