Commentators right and left disagree about the short term outlook for the U.S. economy, but they agree almost unanimously on the long term – living standards for nearly all Americans will maintain and extend the huge increase they have enjoyed since at least 1900. Regrettably the long term future, as well as the short term, contains factors that cloud this sunny prediction. Whether or not we have reached the point of “peak oil” we may in the United States be close to that of “peak wealth.”

Optimism about the long term future is hard wired into the American psyche, and why not? The country was already the richest in the world at the time the colonies revolted and Adam Smith wrote “The Wealth of Nations” in 1776. Although the nineteenth century saw appalling poverty in the cities, it was suffered primarily by new immigrants, while second and later generation Americans saw their living standards increase steadily as industrialization took hold. After 1900, the rate of increase accelerated, with only one prolonged setback in the 1930s. Only since 1973 has the legacy of rising living standards been denied to a major part of the U.S. population, those lacking a college education.

Even during this period, the continued growth of the economy as a whole, without a major recession since 1980-82, and the bounteous rewards reaped not only by the rich but by most college educated two career families have overshadowed the decline of unskilled living standards. Thus the sufferers from decline continue in general to accept the economic status quo, and to believe that their impoverishment is of their own making or due to random factors, rather than part of a general malaise.

The American Enterprise Institute Monday looked at one factor that should cause concern, the declining “market share” of the United States in science and engineering research. A paper was presented by Richard Freeman, of the National Bureau of Economic Research and discussed by Steven Davis of AEI and David Weinstein of Columbia, with moderation by AEI’s Kevin Hassett. Freeman pointed out that the U.S. share of science and engineering PhDs was falling from 40 percent in 1970 to 15 percent in 2010, and that even within the United States much of the research was done by immigrants, since research stipends were uncompetitive with other opportunities available to American-born science PhDs.

The general view at AEI was that the United States still led the world in commercializing research, that Chinese and Indian PhDs were often not the same quality as those from U.S. institutions, and that by increasing high-skill immigration and further subsidizing research stipends, the U.S. could maintain much of the economic “rent” that scientific research brings. There was considerable optimism that the large worldwide increase in the number of researchers would combine with Internet communication to produce a “singularity” in which the pace of innovation and productivity improvement sharply accelerated, with consequent benefit to the world economy as a whole.

The “singularity” theory is a favorite among bullish commentators, particularly those attached to Wall Street firms hoping to peddle Internet stocks to the masses. However a moment’s thought about the dynamics of the world economic system should convince us that if there is a singularity, it is likely to be a negative one. Positive factors operate over a long period and work their magic gradually; even the onset of the Industrial Revolution happened so gradually that historians have great difficulty in dating it. Singularities happen with a stock market crash whose damage is compounded by mistaken policy (as in 1929-32) or with a major war, or a meteorite striking Manhattan.

In any case, the AEI panel failed to explain why incremental scientific talent should not be subject to the same law of diminishing marginal returns as every other economic variable. While the number of U.S. science and engineering PhDs has remained approximately constant since 1975 at around 18,000, the worldwide total has risen since 1975 from around 40,000 to a projection of over 100,000 in 2010. However U.S. and world productivity growth has shown no comparable increase; in 1995-2004 it remained significantly below the level attained in the halcyon period 1950-73 (globally 1.0 percent per annum in 1993-2003 according to the International Labor Organization.) If the Internet and an increased supply of PhDs was so important as to produce a growth “singularity” some effect should surely have been apparent by now.

If there is not be to be a growth “singularity” from the increased worldwide supply of scientific researchers, and the U.S. share of the world’s researchers has sharply reduced, then the United States’ ability to reap additional “rents” from scientific innovation must also have shrunk. Outsourcing of top level research to Asia is likely to be an increasing trend, and U.S. living standards are likely to be pressured even at the top end. World living standards will be improved by globalization and the scientific innovation that accompanies it, but that improvement will be concentrated in countries such as China and India that are raising themselves from a low base. For the United States, tighter controls on immigration and higher interest rates (which reduce investment in emerging markets) would reduce the pressure on living standards, but they would not eliminate it, nor would protectionism which overall would do more economic harm than good.

The topic of long term economic prospects was again addressed at the National Economists Club Thursday, where Ben Shackleton of the Congressional Budget Office gave a rundown of the current thinking on global warming. Shackleton emphasized the difference between the West and the developing world; U.S. emissions of carbon dioxide are 6 tons per capita and Europe’s 3 tons per capita, whereas developing countries emit only 0.5 tons per capita, to give a world total of 6 billion tons per annum, about 1 ton per capita on average.

The implications of this are severe. If by 2100 the world has a population of 10 billion, consuming on average at a European living standard, they will emit on current technology 3 tons of carbon dioxide per capita or 30 billion tons per annum. Global warming since 1970 has totaled about 0.6 degrees Celsius; an equal amount of warming from the approximately 180 billion tones of carbon dioxide emitted during that period is expected in the future, for a total of 1.2 degrees. However, if by 2100 the world is emitting 30 billion tones of carbon dioxide per annum, then over the century to 2100 it will have emitted about 1,500 billion tones of carbon dioxide, which will produce an additional 3.7 degrees Celsius of global warming (carbon dioxide’s heating effect is logarithmic, not linear.)

That’s probably more than the world can easily bear, particularly as warming would continue at an accelerated rate beyond 2100. Thus we will have to adapt, which will be very expensive, and/or reduce our living standards which, given the likely compression between U.S. and developing country living standards, will inevitably mean slower economic growth in the United States.

This fate can be avoided if and only if the world’s population growth can be contained and if possible turned into decline. Italy, with its fertility rate of 1.3 children per couple and projected 2050 population 30 percent below today’s, will almost certainly produce fewer emissions in 2050 than it does today. If global warming is to be averted, the Italian example must be followed worldwide. Yale Professor William Nordhaus has calculated that the net cost to society (beyond the direct costs incurred by the family) of an extra individual is $100,000 for a new American, dropping to only $2,500 for a developing country addition. It thus sounds environmentally helpful that the major projected population growth is in developing countries, until you reflect that the cost of bringing a developing country individual up to U.S. living standards must over his life be an additional $97,500 beyond the cost of his existence. By 2100, if the world economy works as it should, there will be far more $100,000 births than $2,500 births.

Finally, there are the impending costs of healthcare, which according to the CBO are likely to exceed 25 percent of U.S. GDP by 2050. If this does not represent simply the bureaucratic costs of an incredibly inefficient state controlled healthcare system, it must represent healthcare decisions that are voluntarily entered into by consumers. To make such high expenditure worthwhile, 2050’s healthcare must provide consumers a substantial extension to the term of active human life, together with a prolongation of youthful vigor.

That’s wonderful, but people who live to 150 will clutter up the world for twice as long as those who live to 75, so there will eventually be twice as many of them as there would otherwise have been. By 2100, our descendents may indeed be living to 150, but voluntarily paying over 1/3 or more of their income in order to do so. The costs of medical care will be low in their early years, but will rise inexorably as they come to exceed the maximum of their “natural” life, until the miserable 130 and 140 year olds are running down savings to pay 60-100 percent of their incomes to the medical profession. Needless to say, retirements will be considerably delayed!

The future for the 21st Century is unknowable, but the combination of the above three factors suggests that the growth in U.S. incomes during the century is likely to be very slow, that much of those incomes may be absorbed in environmental costs that produce no additional satisfaction to the consumer, and that a further huge fraction, maybe as much as 1/3, of those incomes may be absorbed in healthcare. In terms of day to day goodies, the high consumption locust years of 1996-2006 may be looked back at nostalgically as the moment when U.S. living standards reached their historic apogee. Even if this not the age of Peak Oil, it may be the age of Peak Wealth!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

This article originally appeared on United Press International.