MIT Has Predicted that Society Will Collapse in 2040 | Economics Explained #Finance

in 1972 researchers at mit concluded that society was on track to collapse by the year 2040. a follow-up study conducted by an analyst at kpmg found that we are ahead of schedule advanced human civilizations have existed for at best 10 000 years in that time many great empires rose from

nothing and returned to nothing leaving behind little more than artifacts and crumbling architecture while it’s hard for historians to definitively say what caused any of these particular collapses the determining factors tend to fall into four broad categories political issues social and

cultural issues environmental issues and of course the one that we’re specifically interested in economic issues any civilization that has been reduced to little more than an entry into a textbook fell through some combination of these four factors some were almost instantaneous the great

city of pompeii succumbing to the eruption of mount vesuvius some took a few weeks the aztec empire collapsed after 93 days of resistance against the spanish and some took centuries 300 years separated the height of the roman empire with its eventual collapse our modern civilization is the greatest

ever known hundreds of thousands of times wealthier and more advanced than even the most massive empires of history could have imagined if you are watching this CashNews.co you have access to the internet if you have access to the internet you have access to a source of knowledge that scholars and

kings could not have dreamt of just a hundred years ago the same is true for other modern luxuries that we take for granted climate control worldwide travel cheap and effective clothing medicine instantaneous communication plentiful and safe food water on tap and even little luxuries like being

able to listen to your favorite song pretty much whenever you feel like it a question i get asked a lot is who is the richest person in history the answer elon musk or it was about a week ago when he was worth more than 270 billion dollars that might have changed depending on when you actually

watch this CashNews.co oh but what about rockefeller the rothschilds the romanovs or even this monster moosa fella that people keep on bringing up what about them sure they were rich for their time but their time was one of almost universal poverty despite their relative wealth they couldn’t

dream of all the amenities that you think nothing of let me tell you if i had the choice between my modern rented two-bedroom apartment and a sprawling 15th century french palace with no air conditioning no plumbing and no food that wouldn’t give me cholera i would take the apartment 10 times

out of 10 and you are a fool if you wouldn’t do the same the best part is i haven’t even mentioned war yet despite what most people might think based on their diet of cable news on the front page of reddit we are living through one of the most peaceful periods in human history ever

overwhelmingly this has all been thanks to a combination of technology education and global cooperation even nations that have resentful hostilities bubbling away beneath the surface are more dependent on one another today than even the closest of allies were back in the time of napoleon why get

hostile when you can get rich it sounds vapid but it’s a good thing albeit a fickle one comparing our modern global economy to even the greatest empires throughout history is like comparing a jet engine to a donkey that’s not hyperbole that’s how far ahead we are today but this is

actually the problem sure a jet engine is faster and more powerful than a donkey but it’s less resilient one tiny flaw in its incredibly complex network of interdependent components could render the whole thing useless what’s worse is that it moves so fast and flies so high that even

the slightest hiccup becomes catastrophic most of us alive today and especially those of us sitting at home watching internet CashNews.cos on our smartphones would not know how to survive very long if we didn’t have food within easy reach sometimes literally delivered to our door but

i’m getting ahead of myself and probably starting to sound like some kind of deranged doomsday prepper screaming the end is nice so let’s break down exactly how this mit study predicted that society would collapse what measurable metrics was mit looking at to determine that the world

was going in a good or a bad direction what did these metrics tell us about the way our society would supposedly break down and finally is the fact that this report is ahead of schedule actually something to be worried about or is this all just the case of too much weight being given to statistical

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below to get a one month free trial of skillshare premium after signing up you’ll gain instant and unlimited access to my course as well as thousands of other awesome courses again the link is in the CashNews.co description below okay so the mit study specifically titled the limits to growth

set out to primarily explore if our current usage of the world’s resources was sustainable spoiler alert it wasn’t the study was actually one of the first economic studies ever to use computers sporting dynamic systematic models i am not a computer scientist so there are plenty of

people who could explain what system dynamics are far better than i could but in brief it’s basically a piece of software that attempts to replicate the workings of complex real-life systems by replicating them in the software it sounds very familiar to us today but remember this was taking

place back in the 60s and the 70s where computers looked like this and had about as much processing power as your kettle despite these limitations the mit team eventually created world 3 which was a computer model for the entire global economy this piece of software modelled everything from

variable population growth to industrial capacity it also crucially modeled how everything would interact with one another for example a large population is naturally going to require more resources more food more water more homes more of everything but a larger population will also naturally lead

to more innovation we have a much better chance of finding a tesla da vinci haber bosch or whittle with a population of 8 billion than we do with a population of two billion which is where the world was a hundred years ago it’s a common joke amongst macroeconomists that every change you make

to the economy changes at least three other things sometimes we pave over this issue by assuming ceteris paribus or all other things been equal in our models this economic assumption is great for looking at cause effect in isolation for example a soda tax increases the price of and therefore

reduces the demand for sugary beverages all other things being equal but this is the real world nothing ever remains the same just because it’s easier to model that way predicting the future is extremely hard at the best of times and almost impossible if you don’t account for almost

every variable and that’s what world 3 attempted to do the world 3 program had systems for modeling everything from birth rates to farming technology the idea was all of these variables were very important to maintaining the modern lifestyles that we enjoy today but because they interact with

one another they were prone to feedback loops the idea of a feedback loop actually comes from musical performances if you have ever held a microphone up to a loudspeaker you will know the horrible high-pitched sound that comes out of it that’s because the microphone is hearing a loud noise it

is then telling the speaker to amplify and play that loud noise even louder only for that new loud noise to be picked up by the microphone all over again the same kind of effect can happen in economies for example declining birth rates can lead to an ageing population an aging population will put

more financial pressure on younger workers to care for the elderly either directly by caring for them at home or indirectly through Taxes to fund pension schemes and aged care this financial pressure will mean younger workers have less time and less agreeable conditions to make a

family of their own and you are left with further declining birth rates this is actually a very important example as it pertains to the mit study you see while the study accounted for hundreds of variables in its computer-generated model of the global economy it was actually only interested in

tracking five of them these were population industrial output food production available resources and pollution it’s worth remembering that this report was published in 1972 before climate change was more than a blip on the scientific community’s radar and certainly far from being the

widely recognized issue it is today chances are if the paper was replicated today it would also include average global temperatures but it wasn’t so it didn’t now despite that you should be able to see that all of these individual factors are very important to how we live and work in

the world today but perhaps what is more important is again how they end up interacting with one another let’s go back to the economist safe space for a second and assume that all other things are equal outside of food and population now these variables are obviously dependent on one another

if one moves the other will too all other things been equal but what sounds like a more concerning order of events a declining population leading to a decline in food production or a decline in food production leading to a decline in population yeah obviously two very different scenarios right

there okay so now that we understand how to interpret the data generated by this report what did it actually say well like good economists the researchers kind of hedged their bets predicting the future exactly is a fool’s errand they could have published their paper one day before a design

for a commercially viable fusion reactor was developed and researchers realized this so what they did instead is they tweaked the initial conditions and ran the simulation over and over again in some simulations they would assume that innovation remains at a constant pace and worker productivity

continues to improve at the rate it currently has been in other simulations they would assume that technological innovation continues to compound on itself meaning things like harvesting resources from space or growing food in laboratories becomes possible and then in other simulations they would

assume that technological progress would slowly plateau a quick side note is that a technological plateau might not sound very realistic to us today but that’s only because we have grown up in a time of constant innovation moore’s law is a great example of this for the past five decades

computing power has roughly doubled every two years but we are starting to reach the physical limits of how many transistors we can pack onto a microchip promising technologies like quantum computing may solve this issue and let us continue to gain access to even more computing power but then again

it may not and that’s just one example a lot of technological innovation these days is just major companies finding new and innovative ways for you to waste your time consuming advertiser content and yes i realize the irony that i am part of the problem here but here you go have an ad what a

good little consumer you are anyway technological innovation was just one variable the researchers of this report tweaked they also ran models that assumed lower birth rates higher birth rates higher rates of recycling more resource discoveries greater levels of global trade reduced levels of

global trade they basically tried to account for every outcome that would be possible with a realistic combination of factors in this economic model they then averaged out the trajectories of five crucial factors to determine where humanity would end up as you would suspect from a range of models

with variables changed up every time they got a range of different results but they all sort of had one thing in common they all showed a significant decline around the year 2040. of course it’s impossible to address all of the thousands of potential outcomes that were modeled but the

researchers really focused on a few that fell well within the standard deviation of all of these potential outcomes the first and potentially most optimistic outcome was called the comprehensive technology scenario this was a model where we continue to live like we currently do today but technology

progressed fast enough to ensure that our productive capacity was able to keep up with the new people that needed to be fed and housed and clothed the model still predicts a significant drop in food production brought about primarily due to pollution of waterways and the misuse of arable land but

that is addressed through technological innovation the population does start to plateau around the year 2040 but that’s due to the natural tendency of wealthier more urban populations to have less children rather than people starving to death due to lack of food in this model industrial

output does peak and then decline which would normally indicate lower living standards but this is almost entirely contradicted by the more efficient use of the goods that we do have if tomorrow technology got to such a point where we had self-driving cars then the need for individual car ownership

would be greatly reduced this would likely lead to a fall in industrial output but it’s not like we would be poorer because of this it’s just that suddenly a car that used to service only one household can now be efficiently shared amongst dozens this is actually what the world economic

forum was talking about when they famously said that you will own nothing and be happy about it they either just really don’t understand how to communicate with the general public or they secretly enjoy making people angry the more efficient use of resources would also reduce pollution and

ensure that raw materials are never reduced to nothing this wouldn’t be a totally terrible outcome and yeah we might not continue to see the same exponential growth in living standards that we have seen over the past 100 years or so but it also wouldn’t be a societal collapse either if

you don’t feel comfortable relying on some new way of technological innovation to save us all then the researchers who publish this report have an alternative the so-called stabilized world scenario is what would happen if the world just maintained its current rate of innovation while also

investing heavily into things like renewable energy sources and materials recycling processes again this model was made before climate change was considered a factor so when we are talking about recycling and renewables we are looking at it purely through the lens of resource depletion and local

pollution while totally disregarding other externalities like carbon emissions this stabilized world scenario looks very similar in many ways to the comprehensive technology outcome that we explored earlier the main difference is an almost voluntary reduction in industrial output before it creates

problems like food shortages and excessive pollution of all the models based on all the different combinations of variables this is what the researchers identified as the most optimistic again most optimistic barring some crazy unforeseen technological development that radically reshapes how we run

our economies this could happen and hopefully it will but it’s hard to make concrete plans for technologies that we can’t conceive of yet outside of maybe making a spiritual sacrifice to daddy elon can’t hurt anyway the bad news is that while the original study in 1972 thought

this could be something that we could realistically work towards the timeline of all the captured variables in this outcome has the least closest fit to our current reality as explored by the 2021 follow-up study gaia herrington’s study instead suggests that the path that we are actually on

best represents what the 1972 researchers dubbed the business as usual 2 scenario and that’s not good this is a model that highlights a very clear collapse pollution continues to increase exponentially and things like recycling of common materials never become economically viable or

subsidized widely enough industrial output does reach a higher level than in all of the other possible scenarios but that is about where the good news ends a drop in food production causes massively declining birth rates in rich countries and famines in poor countries the lack of young workers

reduces industrial output which further hinders economic prosperity easily accessible resources also dwindle away which again further reduces industrial output and economic prosperity by all accounts this is what we would consider a complete collapse of society i said at the beginning of this

CashNews.co that i would rather be a middle class worker in today’s world than a king from anywhere beyond 150 years ago if the business’s usual model was to play out then i would rather be a middle class worker today than a king just 20 years in the future and that’s a genuinely

scary thought so if you are feeling a bit anxious like i was while reading this study perhaps it’s important to address the criticisms of this model a study that basically amounts to someone screaming the world is going to end is naturally going to be met with some cynics and that was the

case for the limits to growth report it’s worth noting that a lot of these criticisms have been proven wrong simply by the fact that the data is tracking the predictions in the business as usual model with pretty frightening accuracy other critics point out that this study has a very

pessimistic way of dealing with human innovation these critics conceded that yeah sure right now our rate of innovation might not be sufficient to avoid this kind of collapse but necessity is the mother of invention as soon as humanity’s back is against the proverbial wall a lot more

attention will be placed on researching and investing into technologies that could push us from the doomsday scenario of the business’s usual model into the more palatable comprehensive technology scenario we can already start to see this taking place with a huge surge in renewable is

becoming available in the public market certainly there are still some areas where we are lacking waste management been a huge one but we are much better than we were even a decade ago if you want me to tell you what i think will happen i’m sorry i’m just going to encourage you to read

the two reports yourself i generally want to be optimistic about the future but i also realize that my opinion does not carry nearly as much weight as research published by a collection of 17 of the world’s top economists and scientists research that has been vindicated by another very

talented individual best case scenario this was all massively overblown and we could use this as an excuse to learn about the limits of creating systematic models to predict the future worst case scenario well i guess it’s time to start learning how to forage for food in the wilderness which

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