Predictions from 1998

[Quantum Windbag]

I just came across these predictions from a pundit back in 1998. You really gotta admire this guys ability to see future trends and the impact they will have on the economy. The author was pointing out why economist are really bad at predicting the future. He was pointing out that they often get overly optimistic and expect things to happen that won't, like flying cars and robots. He then pointed out that we do not live in a world where technology is living up to the hype, and that we are doomed to a life of technological disappointment.

Here are his predictions.

* Productivity will drop sharply this year. Nineteen ninety-seven, which was a very good year for worker productivity, has led many pundits to conclude that the great technology-led boom has begun. They are wrong. Last year will prove to have been a blip, just like 1992.
* Inflation will be back. Wages are rising at almost 5 percent annually, and the underlying growth of productivity is probably only 1.5 percent or less. Sooner or later, companies will have to start raising prices. In 1999 inflation will probably be more than 3 percent; with only moderate bad luck--say, a drop in the dollar--it could easily top 4 percent. Sell bonds!
* Within two or three years, the current mood of American triumphalism--our belief that we have pulled economically and technologically ahead of the rest of the world--will evaporate. All it will take is a few technological setbacks or a mild recession here while Europe or Japan recovers a bit.
* The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.
* As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.
* Sometime in the next 20 years, maybe sooner, there will be another '70s-style raw-material crunch: a disruption of oil supplies, a sharp run-up in agricultural prices, or both. And suddenly people will remember that we are still living in the material world and that natural resources matter.

Before I provide the link, I want to ask people to think about what a man who got everything so wrong should be doing now. Anyone that thinks that this would be the go to man for progressives when they want to defend their pet economic theories raise their hand.

Ladies and Gentlemen, I give you Paul Krugman, modern day Nostradamus.

The Red Herring - Economics - June 1998