The biggest problem facing the global economy is not climate change, trade imbalances, financial regulation, or the eurozone. It is short-term thinking. An epidemic of myopia has swept over the world in the past few decades, and it threatens our living standards like nothing else.
It's an epidemic with more than one cause, and not all of them are obviously sinister. Part of the problem is the growing complexity of the global economy. Life is simply getting harder to handle with the brainpower at our disposal.
To understand why, imagine a chess master. She might be able to think her way through the game about eight moves in advance. Now add more squares to the board, and perhaps a few new pieces. How many moves in advance can she think? Not eight -- maybe not even five. Because of the growing interconnectedness of the global economy, our lives are becoming more complex in much the same way, with many more moving parts; we can no longer worry just about those closest to us. As a result, we can't plan for the long term as easily as we used to. Every corner of the global economy is like a chessboard with an infinite number of squares; there's simply too much uncertainty.
Structural aspects of the global economy are magnifying the problem. For instance, the quarterly-earnings culture of financial markets -- the obsession with meeting analysts' expectations for corporate profits every three months, no matter what financial acrobatics that may imply -- owes its existence in part to arbitrary choices about how often companies have to report their results. Similarly, the money pumped into political campaigns has allowed them to lengthen considerably -- up to 22 months in the case of the 2008 U.S. election -- but legislative cycles have stayed much the same. With only two years between Congresses in the United States, for example, there's hardly time to focus on anything except reelection.
Together with these challenges, there is one truly odious cause of short-term thinking: narcissism. This personality trait has been changing in a measurable way. In surveys taken by psychologists, the level of narcissism -- often defined as a lack of empathy -- among successive cohorts of college students has been rising steadily since the late 1970s. Evidently, the "human potential" movement of the 1960s became transformed into the self-realization movement of the 1970s, the selfishness of the 1980s, the self-affirmation of the 1990s, and finally the self-absorption of the Internet age. Narcissistic people don't only empathize less with others today; they also empathize less with others in the future, including their future selves.