‘This, too, will pass,’ but we must be more rational
How do we move forward accentuating the positives and mitigating the negatives?
We continue to face serious challenges as 2021 begins. At the forefront are political uncertainty and Covid-19. Our animal instincts tend to dominate in stressful times like these–fight with anger or flight to whatever safety we can find. While it is difficult to overcome such fundamental behavior, it pays to find moments of repose and to focus on the long term, assuming we will survive and become stronger while taking a degree of comfort in the old idiom related to short-term disruptions in our lives: “This, too, will pass.”
As an economist educated with rational expectations being the core assumption, my reflective moments lead to greater despair as I find much greater validity in the emerging economic theories based upon irrational behavior. Rather than assuming decisions will be rationally made with the best information available, it appears our decision-making is irrational – so much that we are predictably irrational.
I am confident our short-term challenges will pass, but I increasingly question whether we will have the wherewithal to effectively, with sufficient rationality, address the compelling trends in our longer-term future. These trends include:
Demographics: including declining boomers, rising millennials, American browning, and Homo sapiens reaching peak global population after mid-century.
Climate change, which even if corrected in the coming decade or two, will have lasting impacts through this century at least.
Radical technological transformations on virtually every scientific front.
Mass migration pressures, even without climate change, promulgated by water shortages, great disparity in economic opportunity, and growing political disorder around the world.
The accelerating modern monetary economic theory to go along with predictable irrationality where printing and spending massive amounts of money at the federal level is acceptable despite party affiliation.
Combining these trends, which are largely certain in direction, but uncertain in magnitude, leads me to frame the future in terms of going from a relative state of stability with improving standards of living on average over the last 50 years to a faster pace of change with more disequilibrium and less human wellbeing in the coming 50 years. Unfortunately, “this, too, will pass” does not apply to such long-term shifts.
Herein lies the central challenge: How do we move forward accentuating the positives and mitigating the negatives? How do we best navigate the dramatically different landscape on the horizon as we add the concept of social and environmental sustainability into our penchant for perpetual economic growth? This is especially problematic for democratic institutions in highly pluralistic societies given the tribal tendencies of Homo sapiens on the one hand and expectations for more equal distribution of political and economic power on the other.
These fundamental trends will create reverberating disequilibria through every facet of our personal and organizational lives. Within this emerging world there is cause for real concern and some optimism as well. Behavioral economics suggests we tend be more irrational when operating in an aroused or emotional state caused by hunger, anger or frustration (Dan Ariely 2008). Reason for optimism can be found as disruptive times tend to support greater technological innovation. Hence, we need to stay fed, remain calm and invest in science and technology to address some of our most pressing problems as we reach peak population worldwide. These are foundational conditions for the future.
We need to stick with what elevates us to human beings from Homo sapiens – a moral compass predicated on mutual respect while we ardently debate in order to avoid tribalistic “groupthink” in which a desire for harmony and confirmation bias toward our own righteousness can also lead to irrational outcomes. We need a plurality of decision makers, governors and judges who can lead us with composure and integrity from more or less the middle while society as a whole appears polarized over issues like abortion, universal health care or gun rights.
As an economist I just hope we can stay focused on effectively addressing the compelling trends on the horizon in a more rational manner rather than being sucked into the whirlwind of emotion that remains the ultimate risk to all societies, and especially democracies.