Our demographic destiny

Within the vast oceans of forecasting hopelessness, techniques based on demographics provide isolated islands of success. This is because the input data is known accurately and the processing of the data is kept fairly simple. The major components of demographic data are the rates of births and deaths, with corrections for immigration and emigration. Historical values of these variables are known accurately and the underlying trends normally change rather smoothly. Once established, the age profiles of populations translate predictably along the time axis. The key to demographics-based forecasting is that financial behaviors are predictable as a function of age. As each generation matures it goes through successive stages of being educated, entering the workforce, forming new households, raising families, putting children through college, saving for retirement, retiring, and dying. Weighting these tendencies by the number of individuals within each age bracket leads to broad but fairly reliable predictions of societal, economic, and financial trends.