Kenneth Rogoff: prediction

Transcript context

…What’s the most plausible scenario you can imagine where the US does not have to make any major adjustment? I’m not saying you’re predicting it. I’m not saying you think it’s very plausible, but you have to come up with something. What is it? Oh, I don’t think there’s any question. It’s that the AI revolution turns out to just work magically much better than anyone imagined, that people like me quietly acquiesce to just getting transfers from the government instead of having jobs, and we just continue to have a high income, and the robot income pays for everything. AI is absolutely the thing which is most likely, some kind of technological change. But other than that, the problem is in our politics. It’s in our DNA. We’re convinced that we’re immortals, and we can just do whatever we want. You go around Washington, whatever they say, I think that’s what they think. Again, this key thing is that real interest rates, the interest rate adjusted for expected inflation — and I’m looking at the long term — they’ve come up. They’re not super high, but they’re more like they were in the early 2000s, and, I think, of reasonable projections, they’re going to stay around the level they are now. I’m sure you know the classic Paul Samuelson paper on overlapping generations model. In that paper, the real interest rate is equal to the rate of population growth. There’re other papers where the real interest rate is in broad harmony with the rate of productivity growth. If either of those models are correct, aren’t we okay again?…

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