Opinion | Climate Change, Deglobalization, Demographics, AI: The Forces Really Driving ... - 0 views
www.nytimes.com/...aphics-deglobalization-ai.html
climate change forces economy demographics politics culture crisis economics modeling survival
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Economists tried to deal with the twin stresses of inflation and recession in the 1970s without success, and now here we are, 50 years and 50-plus economics Nobel Prizes later, with little ground gained
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There’s weirdness yet to come, and a lot more than run-of-the-mill weirdness. We are entering a new epoch of crisis, a slow-motion tidal wave of risks that will wash over our economy in the next decades — namely climate change, demographics, deglobalization and artificial intelligence.
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Their effects will range somewhere between economic regime shift and existential threat to civilization.
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For climate, we already are seeing a glimpse of what is to come: drought, floods and far more extreme storms than in the recent past. We saw some of the implications over the past year, with supply chains broken because rivers were too dry for shipping and hydroelectric and nuclear power impaired.
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As with climate change, demographic shifts determine societal ones, like straining the social contract between the working and the aged.
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We are reversing the globalization of the past 40 years, with the links in our geopolitical and economic network fraying. “Friendshoring,” or moving production to friendly countries, is a new term. The geopolitical forces behind deglobalization will amplify the stresses from climate change and demographics to lead to a frenzied competition for resources and consumers.
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The problem here, and a problem broadly with complex and dynamic systems, is that the whole doesn’t look like the sum of the parts. If you have a lot of people running around, the overall picture can look different than what any one of those people is doing. Maybe in aggregate their actions jam the doorway; maybe in aggregate they create a stampede
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if we can’t get a firm hold on pedestrian economic issues like inflation and recession — the prospects are not bright for getting our forecasts right for these existential forces.
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The problem is that the models don’t work when our economy is weird. And that’s precisely when we most need them to work.
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Economics failed with the 2008 crisis because economic theory has established that it cannot predict such crises.
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A key reason these models fail in times of crisis is that they can’t deal with a world filled with complexity or with surprising twists and turns.
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The fourth, artificial intelligence, is a wild card. But we already are seeing risks for work and privacy, and for frightening advances in warfare.
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we are not a mechanical system. We are humans who innovate, change with our experiences, and at times game the system
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Reflecting on the 1987 market crash, the brilliant physicist Richard Feynman remarked on the difficulty facing economists by noting that subatomic particles don’t act based on what they think other subatomic particles are planning — but people do that.
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What if economists can’t turn things around? This is a possibility because we are walking into a world unlike any we have seen. We can’t anticipate all the ways climate change might affect us or where our creativity will take us with A.I. Which brings us to what is called radical uncertainty, where we simply have no clue — where we are caught unaware by things we haven’t even thought of.
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How do we deal with risks we cannot even define? A good start is to move away from the economist’s palette of efficiency and rationality and instead look at examples of survival in worlds of radical uncertainty.
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In our time savannas are turning to deserts. The alternative to the economist’s model is to take a coarse approach, to be more adaptable — leave some short-term fine tuning and optimization by the wayside
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Our long term might look brighter if we act like cockroaches. An insect fine tuned for a jungle may dominate the cockroach in that environment. But once the world changes and the jungle disappears, it will as well.