Can Economists Predict The Future?
In a previous article we discussed the role of central banks, their chaotic affect on the global economy, and some useful tools created to help the unbanked. We also reviewed why Bitcoin has led the way for projects never before imagined.
Following up, we now look at the role of economists within our globally connected world, and at an industrial revolution which has been growing exponentially: “The Sharing Economy.”
Can Economists See The Future?
Naturally, most economists such as Roubini will argue and debate about the future implications of this technological paradigm. A book titled: ‘The Art of Forecasting: From Ancient to modern Times’ — written by the Deirdre McCloskey: distinguished Professor of Economics, History, English, and Communications at the University of Illinois at Chicago — highlights several thought provoking points on the matter.
“People have always wanted to forecast the future. In trying to do so they have probably revealed more about themselves than about the future, and the revelation may be of permanent value.”
You can imagine that forecasting the future correctly as an economist would mean that you can ultimately predict the movement of an economy, industry or a specific market — whether on a national or global scale — and be extremely rich from it. But, as McCloskey has written,
“[Most] of these philosophers and seers, like modern professors of economics, were not rich. An Economist who claims to know what is going to happen to the price of corn is claiming to know how to make money.”
McCloskey adds another perspective in a book titled ‘Bourgeois Dignity: Why Economics Can’t Explain the Modern World’ by saying that “the big economic story of our times is not the Great Recession. It is how China and India began to embrace neoliberal ideas of economics and attributed a sense of dignity and liberty to the bourgeoisie they had denied for so long.”
“The result was an explosion in economic growth and proof that economic change depends less on foreign trade, investment, or material causes, and a whole lot more on ideas and what people believe.”
The Sharing Economy
So, with that in mind: What do people believe?
Well, statistics alone would tell a very different story to that which Roubini would like us to believe. His impaired vision lacks an understanding of the sharing economy.
The sharing economy is a shift that is occurring globally thanks to technological advancements and the ability for people to connect with one-another without the need to go through intermediaries and companies with large overheads.
People are also becoming more aware, and more willing to use something rather than owning it. A report published by PWC, titled ‘sharing economy,’ notes that:
“PwC´s projections show that five key sharing sectors — travel, car sharing, finance, staffing and music and video streaming — have the potential to increase global revenues from roughly $15 (2015) to around $335 billion by 2025. We project sharing economy revenues will grow at roughly 35% per year, around ten times faster than the wider economy as a whole — which we expect to expand at roughly 3% per year over the same period.”
As emphasized in the report, “the so-called sharing economy is getting very big, very fast — and is something that business executives very much need to tune into.”
Blockchain technologies and decentralised protocols are being designed to sit at the heart of such systems. Where people can pay one another without a bank or a facilitator taking their fees, determining who can access the system and when — while invading people’s privacy — or having their data hacked due to their centralised and unencrypted nature. A case in point would be the Equifax hack, which compromised 143 million people’s personal information — including social security number and driver’s licence number — within the US, late last year (2017).
PWC has also shared some statistics as to why the sharing economy is growing rapidly and what aspects please people the most.