FORTUNE – Virtually the entire economics profession failed to recognize the housing bubble and the devastating impact that its collapse would have on the economy. Hundreds of millions of people across the globe are suffering as a result of this failure. The economics profession has responded with a limited dose of soul searching and a promise to do better.
Six years later there is little evidence that it is meeting this commitment. Most obviously, the fact that the economies of all the wealthy countries are still operating well below potential GDP is compelling evidence of continuing failure of economists to produce an agreed upon solution to the crisis.
This is not the only area where economics has failed in a very fundamental way. In recent years, we have been given numerous warnings about a future in which robots and the computerization of tasks once done by people will displace tens of millions of workers creating a world of mass unemployment. At the same time, we have a whole industry of deficit fear mongers who warn the public that we lack the means to support an aging population. Their argument is that a rising ratio of retirees to workers will impose an impossible burden on the dwindling pool of young people still in the labor force.
In case it is not immediately apparent, these are directly opposed concerns. The robot story is one of too few jobs. In this scenario technology is rapidly displacing workers, leaving little need for human labor. This is a world of abundance; we can have all the goods and services we may possibly want, while working less than ever. There can be an issue of distribution if we manage our economy poorly, but there is no basis for concern about scarcity or inadequate resources.
Even environmental problems will not be a concern. The robots will be able to produce and install solar panels everywhere at very low cost. And, we can save an enormous amount of energy that is currently wasted commuting, since few of us will have to go to work.
By contrast, the demographic story is one where we experience hardship because we don’t have enough workers to meet essential needs. Our aging population will be trying to get workers to provide health care and cook their meals at the same time their children need workers to educate and care for their kids. This leads to an inevitable conflict where one group or the other must suffer. The robots are nowhere in sight.
The incredible part of this story is that we have prominent economists who argue each position. Of course it’s not a bad thing to have a diversity of views in any discipline, but if economics cannot tell us whether we will have incredible abundance two or three decades from now or be suffering from extraordinary scarcity, then we have a serious problem. This would be like biologists not being able to tell us whether carbon was an essential component of most life on Earth or a deadly poison.
In this case the reality almost certainly lies somewhere in the middle, a point that is quickly clarified when we remember that the item at issue is productivity growth. Under any remotely plausible scenario, productivity growth will proceed at a pace that is fast enough to ensure that both seniors and young people have higher standards of livings. The aging of the population is not new; we have been seeing it for more than a century. However, productivity growth swamps the impact of demography.
Even if productivity growth fell back to the 1.5% annual rate of the slowdown years (1973-1995), output per worker hour would be almost 60% higher in three decades than it is today. And, productivity would keep rising in subsequent decades, whereas the demographics would change little for the rest of the century.
The moral of the story is that we could have a situation where inequality within generations is a drag on living standards, but changing demographics will not make us poor.
Those claiming that technology will lead to mass unemployment need to provide a productivity number. We saw productivity growth of almost 3% annually from 1947 to 1973. This was a period of high employment and rapidly rising wages. In their technology story, is productivity growth even more rapid? And if so, why shouldn’t that lead to even more rapid improvements in living standards?
These contradictory stories of future dystopias seriously confuse current economic policy. We badly need to focus on policies that will bring us back to full employment now. If we can sustain full employment, we will have little reason to fear either demographic or technological change.
Dean Baker is co-founder of the Center for Economic and Policy Research.