This is the subject of my latest Bloomberg columnhere is the intro:
Out of curiosity, I recently opened The American economy in transition, published in 1980, edited by Martin Feldstein and including contributions from… Nobel Prize-winning economists (Samuelson, Friedman, Kuznets), successful business leaders and notable public officials. Even though most of the essays are wrong, I found the book strangely reassuring.
The problems described in the book truly belong to another era. On the one hand, I was heartened to learn that many of these fears turned out to be unfounded. On the other hand, I fear that many current economists don’t care about the right things.
How did they proceed in their analyses? :
For example, many of the book’s authors focus on capital outflows as a potential problem for the U.S. economy. Today, of course, the most widespread concern is a possible excessive inflow of foreign capital, combined with a trade deficit in goods and services. Another concern cited in the book is the European economies catching up with the United States. Again, this did not happen: the United States increased its economic lead. Energy is also a major concern in the book, which is not surprising given the price shocks of the 1970s. No one predicts that the United States will become the major energy exporter that it is today. ‘today.
Then there is the rise of China as a major economic rival, which is not expected – in fact, China is not even in the book’s index. Neither climate change nor global warming are mentioned. Financial crises are also overlooked, as the United States has not experienced a major one since the Great Depression. In 1980, the U.S. financial sector simply wasn’t that large, and the general consensus was that income inequality remained constant. The economic aspect of pandemics receives no attention either.
You may understand why this book has stoked my fears that today’s economists and analysts do not have a good handle on America’s looming problems.
As for opportunities, as opposed to risks: the book contains no speculation about the imminent collapse of the Soviet Union. The Internet, cryptography or artificial intelligence are also not topics of discussion.
The chronicle is interesting throughout. Milton Friedman, for example, believed that the Fed would not find it politically profitable to fight inflation until it reached 25%. The best essay in the book is by Samuelson, who noted that such predictions usually fail.
