Alex Tabarrok has posts on the amusing story of Westerners overestimating the Soviet economy. For example, here’s a graph from the legendary Paul Samuelson textbook (from 1961):
Tabarrok points out that it’s even worse than it looks: “in subsequent editions Samuelson presented the same analysis again and again except the overtaking time was always pushed further into the future so by 1980 the dates were 2002 to 2012. In subsequent editions, Samuelson provided no acknowledgment of his past failure to predict and little commentary beyond remarks about ‘bad weather’ in the Soviet Union.”
The bit about the bad weather is funny. If you’ve had bad weather in the past, maybe the possibility of future bad weather should be incorporated into the forecast, no?
As Tabarrok and his commenters point out, this mistake can’t simply be attributed to socialist sympathies of the center-left Samuelson: For one thing, various other leftist economists did not think that the Soviets were catching up to us; and, for another, political commentators on the right at the time were all telling us that the communists were about to overwhelm us militarily.
I don’t really have anything to add here, I just agree with Alex that it’s a funny graph.
If tou read Easterly's book, the elusive quest for growth, you will see that at the time, most of economists thought that more investiment would lead to more growth. It is simple logic: More investment implies more growth.
URSS was investing much more than US.
ergo…
Almost every one thought like this. And it is not a problem of keynesianism. In fact, It is a problem with economic theory, since economists do not know what makes a country to grow. I mean, inovation is the key, but how to foster innovation?
Andrew,
What's funny are the crossings: the first one is the beginning of the Peretroiska and the second is more or less at the end of the disintegration of the USSR into the CIS.
Igor.
To be fair, *actual* figures of military manpower *did* show the USSR overtaking the USA.
To be fair, much of the USSR-in-1990 prediction lies below the entire US-in-1990 prediction. (We can compare the 1990 prediction with reality, which is not possible with the 2000 prediction since the USSR didn't exist by then, obviously). In 1990, Samuelson's prediction still has most of the probability assigned to USSR
Listen, if a full scale war had broke out, we'd all be screwed. Russia and US, regardless of who had more of what had great animosity towards the other. If it had REALLY broken out of Cold War, not Soviet Pilots over 'Nam. It would have been a bitter war, a bad war, the deadliest of wars.
US & Russia are nearly impossible to invade. Countless have tried, all have failed. It's only worked when your already in the country. (Bolsheviks, US Civil War, Native American Territorial Wars etc)
My whole point is that no one would win. Not even the banks.