The Dragon's Size

Robert Fogel, a well-respected growth and population economist, has predicted that the Chinese economy will grow to $123 trillion by 2040.  Read that again.  That's not a typo, that really is his prediction.  Now I haven't read the paper since I no longer get free access to NBER working papers, so I can't comment on his methodology, but I'm nevertheless skeptical of this number.  Here's why:

1) China's current economic output is around $5 trillion.  The percentage change (growth rate) from last year is 10.3%.

2) Most economists expect China's economic growth to slow over the next decade.  However, I'm going to ignore that and just go with the 10.3% growth rate and assume it for the next 33 years.

3) Based on a model of continuous exponential growth at 10.3%, in this case the simplest and also the theoretical limiting case, China's economic output will double every 6.7 years.

4) Over the next 33 years, then, China's economic output will double 5 times.  So, $5 trillion now, $10 trillion (1), $20 trillion (2), $40 trillion (3), $80 trillion (4), and finally $160 trillion (5).

So that's the limiting case, the absolute maximum that can be attained.  China's economic output in 2040 cannot exceed $160 trillion if current trends hold and the country avoids any and all economic, political, and demographic pressures.  And granted, Fogel's prediction is easily under this theoretical maximum.  But it's still $123 trillion.  Stop and think about what that actually means.  That's more than 10 times the current size of the US economy.  It's more than 3 times the current size of the global economy.  It also represents a per capita standard of living of around $60,000 (yes, I've accounted for population increases also), which is just an unfathomably large number.  I'm not convinced that there are enough resources on the planet to sustain that kind of growth and standard of living.  But maybe there are.  Either way, it will be fun (or nerveracking) to watch, so strap on your seat belts and get ready for the Chinese Century.  It's going to be one hell of a ride.