Most people’s exposure to economists is radio or newspaper bits from bank economists making their best guesses about economic growth, the unemployment rate, or the track for interest rates.
Every economist who isn’t a forecaster has to be patient when asked at parties which way the markets are likely to go. For most of us, that just isn’t what we do. And some of us view that kind of forecasting as being a bit too close to fortune-telling.
But I am especially glad not to be an economic forecaster right now.
Two very big things, pushing in opposite directions, over different horizons, are happening simultaneously. And how it will all cash out seems radically uncertain.
American President Trump is dismantling the rules-based trading order that took decades to build.
The day before Trump’s tariff announcement, trade economist extraordinaire Douglas Irwin ran a Twitter poll asking what tariff policy would be announced. The most popular response was ‘something completely different.’ That option proved correct. Announced tariffs seemed based on America’s trade deficit as a fraction of America’s imports from each country.
New Zealand came out relatively well not because we’re free traders who do not deserve retaliation, but because we do not run a particularly large trade surplus with the US.
The integrated North American market is being demolished. That on its own will be terrible for global economic growth.
Tariffs and retaliatory tariffs will make things worse. Most economists do not think that America’s Smoot-Hawley tariffs caused the Great Depression, but it’s generally agreed that they made it much worse. Global trade spiralled downward with successive international rounds of tariffs and collapsing economic activity.
The Tax Foundation’s early estimate suggest almost a percentage point decrease in American GDP and the loss of almost 670,000 jobs – before considering how other countries respond with tariffs of their own.
Tariffs hitting New Zealand are small relative to those hitting others. But every country we trade with will face disruptions, and will be poorer, and will be less able to afford the things we sell. East Asian countries are particularly badly hit, and we export a lot to them.
That’s the downward trend. It is very bad in the immediate term, and even worse over the medium term. We are all going to be poorer because of it. There is some chance Congress reasserts its authority and overturns Trump’s tariffs, but it seems unlikely.
But that is hardly the only thing going on in the world.
We are, right now, at the beginning of an age of unprecedented wonders.
Last year, I noted the potential productivity boom as artificial intelligence leaps forward.
Every few months, new AI models bring step changes in model capabilities.
When I was writing last July, OpenAI and Claude could give me a decent list of sources for most things I’d ask about, but with a lot of hallucinations. GPT’s Deep Research, released about a month ago, can give me a literature review, in about fifteen minutes, roughly comparable to a term paper project from a good final-year undergraduate student. It’s good, but it needs to be checked and refined.
The best conversational AI is now good enough that, in rigorous tests, it is better than actual humans in convincing other humans that it is human.
And these systems, right now, are the worst that they will ever be from now on. They will only improve.
Every week brings news of seemingly impossible technological breakthroughs.
Nature Neuroscience reported this week of a neuroprosthetic that can restore speech to the severely paralysed. Sensors track your brain activity, and AI translates it into your own speech, using pre-paralysis voice recordings, in real-time. It enables the severely paralysed to have conversations. It works, right now.
Meanwhile, Nature Machine Intelligence told us of new deep-learning techniques for peptide identification that will bring faster diagnostics and revolutions in therapeutic development.
Wanted flying cars? Chinese regulators just approved flying drone taxis developed less than a year ago. New Zealand’s regulators are surely only mere decades behind.
All in the past week.
It always takes longer than you’d hope for new technology to be integrated into workflows, or to create new and better ones. But for the medium to longer term, look less to Treasury forecasts and more to science fiction novels.
It is only going to speed up from here.
And so, I’m very glad not to be a forecaster. America could cause the next Great Depression or force NATO allies to defend Canada, Greenland, or both, in the next year or two. On the upside, we could have explosive technological development powering unprecedented productivity growth – if we don’t screw it all up.
Perhaps the only safe forecast is volatility.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
But I am especially glad not to be an economic forecaster right now.
Two very big things, pushing in opposite directions, over different horizons, are happening simultaneously. And how it will all cash out seems radically uncertain.
American President Trump is dismantling the rules-based trading order that took decades to build.
The day before Trump’s tariff announcement, trade economist extraordinaire Douglas Irwin ran a Twitter poll asking what tariff policy would be announced. The most popular response was ‘something completely different.’ That option proved correct. Announced tariffs seemed based on America’s trade deficit as a fraction of America’s imports from each country.
New Zealand came out relatively well not because we’re free traders who do not deserve retaliation, but because we do not run a particularly large trade surplus with the US.
The integrated North American market is being demolished. That on its own will be terrible for global economic growth.
Tariffs and retaliatory tariffs will make things worse. Most economists do not think that America’s Smoot-Hawley tariffs caused the Great Depression, but it’s generally agreed that they made it much worse. Global trade spiralled downward with successive international rounds of tariffs and collapsing economic activity.
The Tax Foundation’s early estimate suggest almost a percentage point decrease in American GDP and the loss of almost 670,000 jobs – before considering how other countries respond with tariffs of their own.
Tariffs hitting New Zealand are small relative to those hitting others. But every country we trade with will face disruptions, and will be poorer, and will be less able to afford the things we sell. East Asian countries are particularly badly hit, and we export a lot to them.
That’s the downward trend. It is very bad in the immediate term, and even worse over the medium term. We are all going to be poorer because of it. There is some chance Congress reasserts its authority and overturns Trump’s tariffs, but it seems unlikely.
But that is hardly the only thing going on in the world.
We are, right now, at the beginning of an age of unprecedented wonders.
Last year, I noted the potential productivity boom as artificial intelligence leaps forward.
Every few months, new AI models bring step changes in model capabilities.
When I was writing last July, OpenAI and Claude could give me a decent list of sources for most things I’d ask about, but with a lot of hallucinations. GPT’s Deep Research, released about a month ago, can give me a literature review, in about fifteen minutes, roughly comparable to a term paper project from a good final-year undergraduate student. It’s good, but it needs to be checked and refined.
The best conversational AI is now good enough that, in rigorous tests, it is better than actual humans in convincing other humans that it is human.
And these systems, right now, are the worst that they will ever be from now on. They will only improve.
Every week brings news of seemingly impossible technological breakthroughs.
Nature Neuroscience reported this week of a neuroprosthetic that can restore speech to the severely paralysed. Sensors track your brain activity, and AI translates it into your own speech, using pre-paralysis voice recordings, in real-time. It enables the severely paralysed to have conversations. It works, right now.
Meanwhile, Nature Machine Intelligence told us of new deep-learning techniques for peptide identification that will bring faster diagnostics and revolutions in therapeutic development.
Wanted flying cars? Chinese regulators just approved flying drone taxis developed less than a year ago. New Zealand’s regulators are surely only mere decades behind.
All in the past week.
It always takes longer than you’d hope for new technology to be integrated into workflows, or to create new and better ones. But for the medium to longer term, look less to Treasury forecasts and more to science fiction novels.
It is only going to speed up from here.
And so, I’m very glad not to be a forecaster. America could cause the next Great Depression or force NATO allies to defend Canada, Greenland, or both, in the next year or two. On the upside, we could have explosive technological development powering unprecedented productivity growth – if we don’t screw it all up.
Perhaps the only safe forecast is volatility.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
No comments:
Post a Comment
Thanks for engaging in the debate!
Because this is a public forum, we will only publish comments that are respectful and do NOT contain links to other sites. We appreciate your cooperation.