In the midst of Congress’ discussions on healthcare reform, Nobel Prize economist Edward Prescott spoke about America’s economic future at Washington State University’s Smith Center Undergraduate Education building Thursday.
“Over time, things have been getting better for the modern humans who are dominating the world, making the world a better place for our species,” Prescott said.
Prescott said economists can examine current economic constraints by reviewing past market turmoil and expansion. He said he sees a regime change reoccurring after the 2008 recession and recently in 2016.
“(Economics) is an exciting field. So much progress is being made over the last 18 years. We know much more now — well, the few of us,” Prescott said.
According to Investors’ Business Daily, the U.S. stock exchange has gradually risen since November 2016. However, Prescott said forecasting future investments can be a predicament, especially in retirement. He said baby boomers are retiring, often with a lack of savings to access, and Millennials may also suffer this fix as well.
“Our retirement is in grievous shape,” Prescott said. “My undergraduates … I make them do a present value (model) of their time endowment.”
This means that for Millennials to retire by age 67, Prescott said they have to start working at 22. He said another question is how much that person is worth, because the value might shrink over time.
Prescott said wars often cause dramatic fluctuations in the market and increase Gross Domestic Product (GDP), especially during the economic mayhem.
“Sometimes there are things like depression and there are sometimes (World War II) when we make and build a lot of guns and have 10 million people, young men, over in Europe,” Prescott said. “They weren’t making cars then — just jeeps and tanks.”
By the 1960s, a different paradigm ruled supreme — macroeconomics, Prescott said. The Great Depression proved economists knew so little about the market, and its certain random variance of change that could collapse industries, he said.
The 2008 recession was small compared to the 1978-1982 recession, which resulted in shortages, gas price inflations and an overall economic downturn.
“(But) I’m an optimist, things are getting better,” Prescott said. “(Economist) Robert Gordon seems to say that everything has been invented.”
Prescott said he disagrees with Gordon. He said there is a new market of intangible assets accessible through a network that will hopefully bring prosperity.
“The frustrating thing is keeping up with the changes,” Prescott said.
He said Schweitzer Engineering Laboratories is a dynamic company that has expanded because of its innovation in technology. He said Edmund Schweitzer is a contributor to the Palouse community and a sign of what Prescott expects to see in the future.
“(Schweitzer) is quite an entrepreneur,” Prescott said. “He made things happen. He made you investments.”
Catherine Keenan can be reached at [email protected] or on Twitter @Ckeeneye