Uncertainty is everywhere, and it is especially prevalent in the economic sphere.

Do you worry about your weekend plans being disrupted by bad weather? Although we have various mobile applications that can forecast the weather, none can truly avoid uncertainty. Uncertainty pervades our lives: Is my job secure? Will I earn more money next year? Can I afford a house in my lifetime? Is now the right time to buy a house? Is the down payment I've saved appreciating? Is there a risk of a stock market crash? What will be the interest rate for renewing a loan? Is it more advantageous to choose a short-term loan or a long-term loan? How long is my life expectancy? Can my savings meet the needs after retirement? Why are gasoline prices so high this week? These questions are quite complex for individuals, and even more challenging for businesses, as they need to consider more factors.

From this perspective, both employees and employers face the same economic uncertainty. Economic growth and recession, inflation rates, interest rate levels, exchange rates, stock markets, employment opportunities, wage levels, housing market conditions, government spending, and tax expectations are all important to us. From the perspective of ordinary people, although macroeconomic concepts may seem abstract, they are factors we must consider when making all major economic decisions. Whether to look for a job and where to work; where to live, rent or buy a house; if buying a house, then when to purchase; whether to borrow, and what proportion of the loan; when businesses recruit employees, lay off staff, and expand their businesses... Economics is everywhere; it is the air we breathe, and the pond where we play.

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Even without professional economic knowledge, ordinary people can perceive that the economy is becoming more unstable, which means that planning for the future will become more difficult. People often ask, "Will everything return to normal?" The answer this book gives is "Yes," but it may not be the kind of "normal" that most people imagine. In short, the economic fluctuations in the coming years will only be greater, not smaller.

A future with greater economic fluctuations means that things may be worse or better than we expect, and the range of possible outcomes may be broader. People instinctively dislike uncertainty, even though we understand that it is actually a "double-edged sword" that can bring both misfortune and good luck. Therefore, the more uncertain the future, the greater the risk we take when making daily decisions. How do people make decisions in the face of uncertainty? People's decisions are mainly based on their own past average experiences and always expect the future to "get back on track." In other words, if things seem unusual now, most people hope they will "return to normal." But how confident are people about "returning to normal"? The more uncertain we are, the more pressure there is when making decisions. Of course, we can seek advice from family, friends, or experts to alleviate the pressure when facing the unknown.

Experts are a special group; they form expectations for the future differently from ordinary people. They make predictions based on broader and more complex information, including an understanding of economics, a large amount of data, and computer models that can be used to predict economic outcomes. Experts are busy with this work all day, while ordinary people are busy with their daily work and can only try to understand the world in their spare time in the evenings and on weekends. Ordinary people get in touch with the world by reading newspapers and books, searching online, or browsing business news and various experts to understand how the world works. However, the number of economic experts is huge, and their opinions are countless. The economic information people come into contact with is too cumbersome, most of which is flashy, overly confident, and contradictory, and experts do not always make the correct predictions. There are many things that experts cannot predict.

During my tenure as the Governor of the Bank of Canada, I developed the habit of honestly facing the uncertainty of the economic outlook. This is especially important when the economy is subject to significant disturbances, as economic models can easily lead us astray. A good example is the global financial crisis in 2008 and the subsequent great recession. At that time, Canadian exports plummeted, and the appreciation of the Canadian dollar made the situation worse. Eventually, the Canadian dollar fell below parity against the US dollar in 2011, triggering a wave of bankruptcies among Canadian foreign trade companies. In the following years, the US dollar experienced continuous devaluation, and economists predicted that Canadian exports would recover. Unfortunately, this prediction was wrong because many foreign trade companies no longer exist. Economic models simply cannot explain why such a large-scale bankruptcy occurred. This incident perfectly demonstrates that economic forecasts should always be interpreted as the midpoint of a range of possible outcomes, and sometimes the differences between these possible outcomes are huge. Economic forecasts are just guesses by experts, usually supported by models based on historical data. Economists are similar to scientists; they receive a large amount of information and then propose hypothetical models of economic operation. However, scientists can verify whether scientific hypotheses are correct in the laboratory, while economists and central bank governors can only build models based on past events. Therefore, these models only appear to be more accurate when the future is similar to the past.

This book was written after the outbreak of the COVID-19 pandemic and is a research result on extreme economic uncertainty. Personally, my life during the pandemic can be described as chaotic. In the spring of 2020, irregular and continuous online meetings throughout the day occupied all my time, and I stayed in a rarely used home office, relying on a shaky network to participate in meetings. Under these conditions, financial market plans and monetary policy tools were hastily deployed, and most of us could only rely on intuition rather than real data to make decisions.

Whenever there is an extreme situation in the economic field, economists are immediately asked to comment on the future impact of this situation. Personally, I have limited confidence in our ability to predict how the pandemic will affect the global economy; however, as usual, I still have an optimistic expectation for the future. The vast majority of people predict a major and lasting economic shock, which I cannot agree with. I do believe that the economy will show a certain resilience. This reminds me of the "9/11" incident in 2001 and the optimistic statement I made after that event.Following the "9/11" attacks, many believed that the global economy would plunge into a prolonged and deep recession. At the time, I was serving as the Chief Economist at Export Development Canada, and to this day, I remember the struggle with uncertainty when making forecasts. Ultimately, we realized that uncertainty itself was the most effective insight. We rebranded our forecasts as "The Age of Uncertainty," acknowledging that the future might never be as clearly predictable as the past. In the weeks that followed, I gave about 20 public speeches outlining our views on the future. Throughout this process, I always carried with me John Kenneth Galbraith's 1977 publication, "The Age of Uncertainty." We did not think the global economy would go into recession, but rather that increased uncertainty would hinder the functioning of international business. In a world where the risk of terrorism is ever-present, business risks become greater, and companies will make corresponding adjustments to adapt to the new situation. The reality is that after the "9/11" attacks, the world economy did not go into recession but instead accelerated its development.

Galbraith's work, written between 1973 and 1977, was a period filled with uncertainty for the economics profession. The "baby boomer" generation was disrupting the labor market as they joined the global workforce. The skyrocketing oil prices following the Arab oil embargo had a shock effect on oil-importing countries. The international monetary system established since the end of World War II was gradually collapsing, and global exchange rates experienced violent fluctuations. These events had a significant impact on the world economy, fundamentally altering what people had previously considered "normal." In response, inflation and unemployment rates rose simultaneously, a situation that the economic models of the time had never predicted. It was clear that there were issues with the economic models.

In the decade that followed, these models were thoroughly re-evaluated. By the late 1970s, a new generation of models emerged. As Galbraith noted: Economics has always evolved from one significant new idea to another, and then to another, with each new idea's proponents promoting it with absolute but unreasonable conviction.

Criticism of economists did not begin with Galbraith. He cited the last paragraph of John Maynard Keynes's 1936 work, "The General Theory of Employment, Interest, and Money": The ideas of economists and political philosophers are, in fact, more powerful than commonly understood. Those who rule the world are, in reality, only these ideas. Many practitioners believe they are not influenced by any theory, yet they often become slaves to some deceased economist. As the world changes, economic theory must also change. Economists who fail to adapt to the changing times will draw incorrect conclusions, and all those who follow them will fall into error.

As Mark Twain said, history may not always repeat itself, but it often rhymes. When financial markets calmed down in late spring 2020, I reflected on the economic forecasts I had made at important turning points in the past and the extent of their inaccuracies. Many of these errors were not just decimal point mistakes but fundamental directional errors. The only plausible explanation for these incorrect forecasts is that these significant events altered the fundamental economic factors. Our theories have lost their ability to predict the future.

Economists have their own judgments on the fundamental factors of the economy, which is a conceptual combination of elements and their relationships that do not change over time. Economic operations are always disturbed by different events, so it is rare for people to observe under unchanged preset conditions. However, after being disturbed, the economic situation will still return to a state that conforms to these basic operational laws, which economists call "long-term equilibrium" or "steady state." Economic models are based on this basic structure, attempting to explain the fluctuations of the economy around the steady state. Currently, economic models are used to predict how the economy will recover to a steady state from the present. Given the tremendous impact of the COVID-19 pandemic, I wonder what constants in the economy can serve as anchors for the future, allowing us to return to a comfort zone after the pandemic.

Considering many long-term factors when making future plans is easier said than done. When several forces act on the economy simultaneously, their interactions produce complex results, leading to economic instability that is difficult to explain, or even economic crises. In the 1970s, when Galbraith wrote "The Age of Uncertainty," some of these forces had already begun to take effect. This is why I believe that our future belongs to "the next" age of uncertainty, which is also the origin of the title of this book. The title also implies that "the next" age of uncertainty will definitely not be "the last" age of uncertainty.