Humanity has always been obsessed with the future. The ancients studied the movements of stars in the Earth’s skies to predict the future, giving birth to astrology which, even today, is a billion-dollar industry.
Modernity, however, prefers the scientific method, which takes an empirical approach to explanations and predictions. What if I were to tell you that today, using the principles of Economics, we have the capacity to make data-driven predictions about what lies ahead?
Noted science fiction author Isaac Asimov wrote of a fictional science called ‘psychohistory’ that used psychological theories and studied human behaviour in large aggregations to accurately predict the historical movements of human society in his Foundation series. In what is a prime example of fact imitating fiction, economists have been able to identify predictable patterns of behaviour among groups of humans, which can provide immense insight into the forces that drive us and determine our behaviour.
Understanding human behaviour through patterns
Economists study conscious, sentient human beings with free will and agency. Normally, this would mean that predicting future choices is impossible, as there is no way to determine how a human being, free to make decisions, would behave when presented with a choice in the future. However, if someone offers an individual a million dollars, it is easy to foresee what the answer would generally be in that instance.
Economists are using the choices we make and evaluating when and how we make them, thus extrapolating basic rules which seem to accurately foreshadow human behaviour. Evidence suggests clearly that human beings tend to make decisions on the basis of our instrumental rationality — that is, our tendency to take certain actions that we see as required to achieving the outcome we want. For example, if we are hungry, we buy or make food. Even the decision to buy or make food depends on our relative desire for home-made or commercially available snacks and meals.
Essentially, with enough data, economists are able to extract rules for certain behaviour among humans. A sceptic might then ask: what happens to this analysis if a new variable is introduced — say, a way to assuage hunger by popping a pill developed by technology?
Even when it comes to disruptive innovations, some kind of pattern is still discernible. While nobody living 50 years ago could have predicted what smartphones can do and how integral they will be to millions of lives across the world today, economists believe that innovation and their impacts can be predicted to some degree through consummate analysis of data.
Why this is important
What is the value of being able to predict future outcomes? The study of economics enables entrepreneurs, financial officers, business strategy consultants, HR managers, government officials, and policy-makers do their jobs better. Since they understand the outcome they want — a consultant might want to know how to increase a company’s revenue while a policy-maker might want more employment to be generated — they can predict what nudge might push a human being into doing what they want.
The consultant would be able to understand that lowering the price and increasing accessibility would make the desired difference in consumption choices, while a policy-maker would need to provide tangible incentives and education to bring out the change sought in society. At a macro level, economists’ ability to use data as a crystal ball to predict short- and long-term societal reactions to different variables becomes the key to executing critical social, commercial and technological developments for specific outcomes.
This data-driven power to predict change is not limited in its application to larger social, economic or political trends. Even for parents, knowledge of economics can be essential in determining how best to raise their child. Today, those who want to prepare their child for the future must have some capacity to predict what that the future might hold, and be able to evolve an understanding of how to adequately prepare their children for what they believe is the world to come.
Applications across fields
For example: the 10,000 hour rule — closely associated with author Malcolm Gladwell — states that 10,000 hours of deliberate practice could make someone world-class in any field. Should parents provide their child with 10,000 hours of tennis practice to give them the opportunity to become the next Roger Federer or Sania Mirza? Or would they be better off being taught how to think critically and solve problems from an early age? The best answers can only be found through a thorough, data-driven analysis based on the principles of economics.
Economics is a fascinating field of study, with massive applications across different fields of human endeavour, precisely because it is not only focused on what is, but why it is and what it could conceivably be. In examining the various potential futures and helping humanity identify which course to take, it opens the doors to all kinds of interesting queries about humans, society and what the future might bring.