The Lessons of Back to the Future Part II

In the 1989 film Back to the Future Part II, Marty McFly travels through time to this very day, where he finds that the Chicago Cubs have won the World Series for the first time in 107 years. Cubs fans watching their team this week in the National League Championship Series are hoping it is prophecy.

But even if the film is proven correct about baseball, we already know it missed life in 2015 in some big ways. The movie was meant to be entertaining, not accurate, but it's also a helpful reminder that all of us — and especially policymakers — should be careful about claiming to know what the future looks like.

Back to the Future certainly did get some things right. Its predictions include flat-screen televisions, video conferencing, biometric technology (on devices that look like smartphones), and a product resembling Google Glass. None of this was available when the movie was made.

However, it's interesting to note how many big predictions were wrong, and how. For example, while cars are vastly improved, as seen in their increasing fuel efficiency, they still do not fly. Fax machines, found in numerous scenes, are largely irrelevant today. Instead of showing China as an economic powerhouse, the filmmakers chose Japan because of Japan's impressive growth in the 1970s and 1980s. Unfortunately, since 1989, average GDP per capita for Japan has grown by only 1.1 percent annually, while China's has grown 8.7 percent.

Back to the Future's vision of 2015 is a shinier, robotic version of 1989, rather than an accurate picture of the present. And, in fairness to the filmmakers, that's the way it has to be, because our imaginations are anchored by what we know of the present and what we experienced in the past.

The lesson we should learn from futuristic movie predictions is humility, and it's especially important for policymakers, whose actions have widespread consequences and can be felt for generations.

Policymakers operate with incomplete and often contradictory knowledge, as F.A. Hayek argued in his seminal 1945 essay The Use of Knowledge in Society. Because of this, policymakers suffer from the "planner's problem," or the difficulty of allocating scarce resources to their most valuable ends. History is littered with examples of failed projects where the government directly tried to pick winners but instead picked losers. Examples include Solyndra and Fisker Automotive, each given hundreds of millions of federal backed loans, only to declare bankruptcy shortly after. The federal government even bailed out Chrysler, twice.

Instead of constraining the actions of economic actors and directly intervening in the economic process, policymakers should adopt and defend policies and institutions that harness the creative talents of entrepreneurs and consumers. As Hayek noted, the knowledge needed to make wise economic decisions is distributed widely among the population. It's only by harnessing that knowledge — not by imposing solutions from the top down — that government can promote economic progress.

For example, 2015 MacArthur Fellowship winner Heidi Williams argues that prizes can successfully spur innovation, while Nobel Prize-winning economist Joseph Stiglitz writes that prizes are better than patents at creating innovation. Additionally, research shows that countries that favor economic freedom — policies, like open trade and minimal regulation, that focus on market processes rather than outcomes — achieve higher income levels.

The fewer unnecessary constraints we put on people's creativity, the faster we get to a better future. And this becomes more important as the economy becomes more complex and interconnected. Back to the Future Part II is a humbling reminder that none of us can see the road ahead. We ignore that truth at our own peril.

Jared Pincin is an assistant professor of economics and Brian Brenberg is chair of the Business and Finance Program at the King's College in New York City.