[Nasional-e] Refer grim 'futurologists' to Adam Smith

Fri Dec 6 00:12:03 2002

Refer grim 'futurologists' to Adam Smith

By CHRISTOPHER LINGLE
Special to The Japan Times

GUATEMALA CITY -- It is both telling and disturbing that so many of those
wishing to be regarded as "futurologists" seem to prefer Thomas Malthus to
Adam Smith. For his part, much of Malthus' work was premised upon a view
that world conditions are essentially static.

Since Malthus overlooked the dynamic features of the real world, his
predictions were limited to extrapolations into the future based upon
existing trends. This makes it unsurprising that his grim predictions about
the limits to population have been contradicted by nearly two centuries of
evidence. Since so many futurologists tend to follow the same path, it is
likely that their pessimism will prove to be unwarranted.

Pessimists about the future often point to apparent demographic patterns
whereby a growing imbalance in global age distribution is seen to aggravate
the problem of overpopulation. We are informed that these demographic trends
have implications for consumption, production, markets, education, services,
the environment, investments, for war and peace. In grand style, populist
impresarios of doom offer something to alarm everybody and to catch the
attention of every interest group.

As is often the case, there is little to argue against in terms of the
statistics cited. It is undoubtedly true that underdeveloped economies have
relatively high birth rates. The abject poverty and disproportionate number
of children in these countries exaggerate the scale and scope of their
population problems.

Meanwhile, declines in population growth are leading to a graying of
populations in richer countries. However, it should be remembered that
interpretations of these statistics allow for various predictions of the
future.

It is bad enough that Harvard professor Samuel Huntington warns of a "clash
of civilizations" along cultural faultlines. We are also told of a
demographic-technological faultline appearing across the planet, or the
formation of a digital divide. On the one hand, there are latitudinal
faultlines that traverse the Mediterranean -- east to west -- or along the
Rio Grande. On the other hand, Huntington's faultlines seem to be
longitudinal, for example, passing north to south through the Baltic States.

It is as though mankind is being crucified on a complex, self-constructed
cross of conceptual faultlines. All this gloom and doom by modern thinkers
conjures up the necessary elements for selling newspapers. Instead of "Man
Bites Dog," scenarios abound suggesting that "Man Loses Control, Bites
Himself."

Despite their presuming to be global fortunetellers, most futurologists are
as short on prognosis as they are flawed in their diagnosis. Granted they
often offer vague proposals to do something to stabilize population in a
just and humane manner.

Criticisms are often raised that rich countries have failed to fulfill their
promise to allocate 0.7 percent of their GDP toward development aid. Yet the
World Bank has provided more than $300 billion toward this end since its
inception. The harsh reality is that such generosity seldom bears the
desired fruit. By its own accounting, nearly 38 percent of World Bank
projects completed by 1991 were deemed to yield unsatisfactory results.
Meanwhile, bilateral aid is seldom more economically effective as it is
often linked to either strategic or defense interests.

It would be far better to encourage developing countries to follow the
development approach of many East Asian countries. "Trade not aid" is not
merely a catchy corporate policy; it makes good, humane sense. Policy
recommendations and futurologists' models should match the conditions of a
dynamic world. Extrapolations of trends tend to fall apart when pricing
information is imputed.

The famous Club of Rome report ("Limits to Growth") has been widely
criticized for ignoring the dynamic effect of human choices in response to
dynamics and changing prices. When relative prices change, shifts in
expenditures occur toward more highly valued technologies. Similarly, higher
prices induce conservation as individuals and firms change consumption or
production patterns to economize. Extrapolations are too simplistic.
Policies based upon simplistic reasoning can have dire consequences that
risk condemning citizens to continued poverty.

In any event, there is no reason to believe that a technological gap will
necessarily follow any historical or geographic pattern. Such deterministic
reasoning overlooks the fact that many of the hardships facing the
underdeveloped world stem from an array of poor policy choices.

Poor weather and bad luck are simply not plausible explanations for
persistent misery. Systemic problems that persist over a long period of time
reflect defects in the broad incentive structures that are most heavily
influenced by government policies. It is particularly strange that this
deterministic logic is treated as credible when there are such remarkable
success stories in many emerging economies.

As various countries from South Africa to Vietnam, Poland and Chile shake
off the vestiges of authoritarian regimes, they shall release the dynamism
that has been so long repressed. Many of these transition economies are
already beginning to show signs of benefiting from a reverse brain drain and
inflows of international capital. With these observations in mind, it is not
surprising that Smith's dynamic insights into the workings of an economic
order have come to dominate economic thinking, even as naysayers articulated
the scholarly prose of Malthus and Marx.

Pessimistic futurology may sell books and lead to prestigious appointments,
but too much of it stems from facile reasoning based on sets of conditions
unresponsive to change. To gain a better understanding of the world today
and to measure its effects on the future, we must move the dialogue away
from the cackling cacophony of Chicken Little alarmists and "what, me
worry?" ostriches.

Christopher Lingle is a professor of economics at Universidad Francisco
Marroquin, Guatemala City, and Global Strategist for eConoLytics.com. His
e-mail address is CLINGLE@ufm.edu.gt.