August 7, 2005

PLUS CA CHANGE:

On the Record: Predictions (www.longbets.org)

Long Bets is of a piece with other market-driven prediction sites such as StategyPage, Tradesports, and Iowa Electronic Markets. The author states a proposition, and must be willing to bet a minimum of $200 that his proposition is correct, with the payoff proceeds going to charity. A number of interesting predictions (some are downright frightening) dot the page, and a few of the authors are well-recognized, such as Danny Hillis, and Martin Rees. Discussion of the bets takes place, and voting as to their likelihood is published.

By way of introducing Brothers Judd readers to the fascinating Long Bets.org prediction page, let us consider two unconnected wagers that appear to recapitulate the primary battle of the 20th century:

#22 By 2100 a world government will be in place and in control of: business law, environmental law, and weapons of mass destruction.

and,

#194 The world per-capita GDP in the year 2000 was approximately $7,200. The world per-capita GDP (in year 2000 dollars) will exceed $13,000 in the year 2020, $31,000 in 2040, $130,000 in 2060, $1,000,000 in 2080, and $10,000,000 in 2100.

Now, if the history of the 20th (and early 21st) century teaches us anything, it's that a large government with its tenterhooks into all areas of commerce, law and behavior will strangle economic growth. If wager 22 is correct then wager 194 will not come to pass or be even remotely close; and if wager 194 is remotely close then wager 22 will have failed.

It is a pity that I won't live to see the the year 2100 to see the results. Wait a minute... you mean I might?

Posted by Bruce Cleaver at August 7, 2005 10:04 AM
Comments

Don't bet on it.

Posted by: AllenS at August 7, 2005 10:18 AM

As to # 194:

I don't believe that the predictions will become true, no way whatsoever, and some of you know me to be a pretty optimistic guy.

For instance, U.S. per-capita GNP in '04 was about $ 37,000, roughly five times the '00 world per-capita GNP figure provided by proposition # 194. (That figure is high by at least 10%, but I'll use it for the sake of simplicity).

For real world per-capita GDP to exceed $13,000 in the year 2020, non-U.S. growth would have to average 5% real, per-capita growth for fifteen years in a row*, or 6%+ simple growth, which is...
Very unlikely. For instance, the American economy only averaged 2% real, per-capita growth between 1929 - 2004.
Also, at least half of the Boomers will be retired by then, and not contributing to the world economy. Since this problem is especially acute in the high-income areas of the non-U.S. world, such as Japan and Europe, where retirement is sooner and the Boomer bulge larger, that factor will weigh very heavily on non-U.S. world economic growth.

The 2040 prediction is just as bad, since at that time the world economies will just be recovering from the Baby Boomer bulge of retirees, and the AIDS related labor shortages in the Third World.

For reasons that I won't detail here, (unless someone would like me to), I believe that the U.S. economy will grow at a slightly faster pace in the future then it did between 1929 - 2004, so for the U.S. only, the 2060 prediction is within the ballpark - my guess is that in '00 dollars, the 2060 U.S. per-capita GNP will be around $ 175,000.
Further, in purchasing power parity**, that $ 175,000 will be worth at least $ 1,000,000 2000 dollars, so I suppose that by 2060, we will have hit the 2080 mark.
Advances in energy generation and storage, manufacturing processes, composite materials, transportation, robotics, computers and data storage, communications, and medicine will deliver by 2060, at least to America, the envisioned Star Trek future - minus the warp drives and teleporters.
(Although with the replicators and possibly the interplanetary travel).


* Assuming:
That the 2000 world per-capita GDP figure was accurate, (which it is not), that world population will be 7,300,000,000 in 2020, (which estimates a .85% annual growth rate for the global population between 2005 - 2020, slightly lower than the U.S. Census Bureau's projection of an average growth rate of around 1% annually), that the U.S. population will be 325,000,000 in 2020, and that the average annual rate of real, per-capita economic growth for the U.S. will be 2.5% for 2005 - 2020.

**A method of measuring the relative purchasing power of different countries’, or eras', currencies over the same types of goods and services. Because the costs of goods and services differ between countries, and across time, PPP allows for more accurate comparisons of standards of living.
PPP estimates use price comparisons of comparable items, but not all items can be matched exactly across countries and time, so the estimates are inexact.

Posted by: Michael Herdegen at August 7, 2005 7:53 PM

I will also hazard a guess about # 22: There WILL be a world government in control of international relations, and some aspects of national affairs.
It's what G.W. Bush is working toward.

(Also G.H.W. Bush, but forget about the Trilateral Commission).

If all major and most minor nations by 2100 are capitalist democracies, there's no reason that a system of a central world government with limited and delineated powers, and individual nations with large discretion but not complete autonomy, couldn't work as well as the U.S. currently does.

If this is indeed "the End of History", then such an organization logically follows.

Posted by: Michael Herdegen at August 7, 2005 8:39 PM

Michael -

I caught that too. The reasoning on #194 elided the distribution of wealth in the world, among other things. If it were to be flat that in itself is a miracle, and if not flat then wealthy states such as the US would (in all likelihood) have a preposterous amount of wealth compared to the average, much more so than #194 delimits.

If you read the post it simply assumes a 10% per year increase in GDP near the end of the century, based on 'improvements in technology.'

And atomic power will be too cheap to meter (wink, nudge)!

Read also the rationale behind post # 22.

Posted by: Bruce Cleaver at August 7, 2005 8:40 PM

10 million is greater than 7200 by a factor of 1340. It would take a little over 7.5% constant growth for the next century to get to that point. At one-percent intervals from 1 to 5 here are the numbers to the nearest $100, using the 99-year interval starting at the end of 2000 and using $7200 as base GDP:

Growth.......Per capita GDP in 2100
======......=================
1%............$19,300
2%............$51,100
3%............$134,300
4%............$349,700
5%............$901,700

Somewhere between $20,000 and $50,000 looks right to me, and that's really not too bad.

Posted by: joe shropshire at August 7, 2005 9:30 PM

I'da been happy to have a little side bet with Orrin back in March when he was crowing that oil was heading down and had already got to $47.

Posted by: Harry Eagar at August 9, 2005 3:27 AM

I'll be happy to take the lower-price side of that bet, Harry.

What terms were you thinking of ?

Posted by: Michael Herdegen at August 9, 2005 9:32 PM
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