The Allure and Folly of Projecting Current Trends

While the Glenn Fellows are busy producing drafts of their policy papers, the Washington Buckeye is catching up on his reading in the International Economic Bulletin, a publication of the Carnegie Endowment for International Peace.

The current issue features a story, “The G20 in 2050” by Uri Dadush and Bennett Stancil, that projects current trends into the middle of the twenty-first century. These trends show India overtaking China as the world’s most populous nation by 2031, and China passing the United States as the world’s largest economy by 2032. Click here to read the story and to play with the dynamic graph, “Projected G20 Economic Growth 2009-2050,” that shows these trends unfolding over the next forty years. Click on the “play” arrow to watch the universe as it unfurls. The balloons representing particular nations even expand or contract depending on population trends. Very cool!

And yet, and yet. . . . The problem with this kind of analysis is that we know even before we begin that the underlying ceteris paribus clause—all other things being held constant—is, simply, false. All other things will NOT be constant over the next forty years. We know that, and yet how else are we going to generate information that will help us plan for the future? We have to do it, even though all of us, and particularly those of us who pumped their IRAs full of stocks during the pre-2007 bubble, recognize the folly of projecting current trends.

There is some good news here: in 2050 the United States will still have—by far—the world’s highest per capita GDP. That is, if current trends continue. . . .