Long view on the economy, careers, vocations and lifestyle and living standard

Sam — Sat, 30 Apr 2011 14:15:21 GMT

Greetings (I realise this is an odd thread. I'm hoping to stimulate discussion and maybe get some advice on several things. I was torn between couching it in terms of a discussion about where the world is heading or advice for my situation, or about a situation I imagine applies to many on the board. It's sort of a combination, so if it seems odd please forgive me)

For young people (or really anyone with several decades of work ahead, and plenty of financial planning and career decisions ahead) how do you think the world will change over the course of your life and how does or should this affect these decisions?

What do you think of the following forces? Which do you think will be the most significant? Would you add any? What do you think the resulting world will be like (mostly what will the economy be like)?

1) Economic growth will occur as long as there isn't a big increase in intervention. I expect the economies of the West to proceed much as they have done since 1945. So they will probably remain far from laissez-faire, but the economy, though hampered, will continue to grow.

2) Lower birthrates and increasing life expectancy in the West will lead to a demographic crisis. Coupled with government promises about pensions and healthcare which cannot be kept, things could become very difficult for the working age population. Namely working longer, paying higher taxes, then having pensions and healthcare reduced or removed when they retire.

So this is partly a demographic problem independent of politics and partly the result of bad government intervention. Even in the best case scenario of a free economy and rapid economic growth, the cost of caring for the elderly will probably rise a lot due to cost disease (http://en.wikipedia.org/wiki/Baumol%27s_cost_disease).

3) Global population will continue to increase. Emerging countries (particularly China, India, Brazil, also
some other Asian, Latin American and east European countries) are experiencing population growth as life expectancy increases and they slower adapt to having fewer children, as they get richer (also they are not that rich yet!). Poorer countries (much of Africa) may still have growing populations in many cases. A growing population will have impacts in the West. Even if the population stays the same, the rapid economic growth of China and India alone will mean that there is more pressure on a number of resources and prices will be bid up accordingly. The supply of some resources will be more elastic and some will have substitutes. But overall a number of resources (particularly food prices) will still increase probably. This has happened recently.

4) It seems that even the most extreme predictions of global warming will not come to pass in our lifetimes. And Europe and north America will anyway be hit last by global warming. But record high temperatures over the last decade have begun to have serious consequences elsewhere in the world. So even if there is no warming perhaps the world is already hot enough to make it difficult for farmers to remain productive in a lot of areas. This is made worse by perverse incentives of subsidies and
regulations in many cases. Bad droughts in Russia last year meant that Russia didn't export grain. I don't know if China and India are beginning to import more. But if they are forced to do so, then food prices will rise, meaning the rich world gets poorer and the poorest starve in greater numbers than they do at present.

Another big problem related to agriculture is water. Clean water is already in short supply in Africa and
other poor areas. Supplies of clean water are falling in most places. Apparently water purification requires fossil fuels (if true this will probably still be feasible for the rest of our lives, but may become very expensive). Even if it seems we in the West can rely on having safe drinking water for another 80 years say, if the supply has literally gone in Africa in a few decades, wars will probably be fought over this. Indeed some ongoings conflicts are probably fought over resources such as clean water, rather
than being due racial or religious hatreds. This should not be controversial to those who believe much
fighting in the Middle East is over oil.

Oil supply is unlikely to increase much. This may be the case if peak oil has been reached, or political restrictions on oil exploration are imposed in the West (Alaska, deepwater drilling etc.), or non-Western countries (middle East, Venezuela etc.) decide not to export so much. Oil demand seems likely to
increase. I expect the West will want to use about as much, whilst the demand of emerging economies seems set to increase rapidly. So it seems oil will get more expensive and this obviously has grave
consequences for the world as we know it.

So how do these forces affect your decisions? Some lucky people find the highest paying career is also the most enjoyable. Most of us probably face some trade-off. A good proportion of us on these boards have considered a career in academia. Unless you are very successful an academic career pays less well than comparable alternatives. If you are interested in Austrian economics or libertarian politics/philosophy you may well be setting further barriers to successful career.

Of course, just as I outlined the forces operating on the world economy, we need to examine the forces operating in academia (though over a shorter timescale, as our academic careers must be established quicker):

1) If the recession drags on, there may be less money for education, so perhaps fewer academic positions, with worse pay, benefits, conditions and security. Increasingly parents cannot send their
children to university, or realise it is a bad investment. Government begins to feel the same way, grudgingly!

2) There are still lots of people looking for these jobs as PhD enrolment remained high even as academia shrinks.

3) Will Austrian economics become more prominent in academia? Difficult to predict? It seems to be on the up I'd say at the moment. But it is not really getting through in the top journals or top schools to really entrench itself - it hasn't really got enough momentum yet. Even if Austrian economics does occupy an increasingly important proportion of academic economics (measured in journals and academic positions), it does seem to me that it could easily continue to reach an increasing number of people. This seems to happen primarily through the Mises Institute. This may be good for economics, but unfortunate for people who'd like to work in this field.

So what do you think?
I've considered several scenarios:

1) Try for an academic career. Best case is success (tenure), moderately affluent and enjoyable career. Medium to worst case is limited funding, then not very successful or enjoyable. Either have to give up mid career to earn a decent living, or continue trying to make it, but have to find other ways to supplement income.

2) Get a high paying job. For those of us studying economics probably in finance. Otherwise law, medicine, engineering, managerial etc.

If you do this, do you reckon you'd prefer to pursue economics as a hobby alongside your career (like Frank Shostak for example), or pursue an academic career after making your money. Doug French is the closest I can think of here, though I realise he is not an academic. But if you had accumulated a decent safety net (say £500,000) by aged 35-45, would you consider trying to make your way in academia, or would you plow on and make sure you had a really big fortune in case the world really goes to hell in a handbasket?

Economics Questions

Long view on the economy, careers, vocations and lifestyle and living standard