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why bet on climate forecasts?

I have long enjoyed Bjorn Lomborg’s critiques of the climate change mitigation plans (e.g., Al Gore’s trillion dollar 10-year plan, T. Boone Pickens’ giveaway), as he has used numbers of the UN’s scientific consensus to show how little sense most (not all) of the plans make.

Funnily enough, when “green” advocates see the small impact (and immense cost) of the Kyoto Protocol spelled out, they become far more amenable to perhaps a more interesting discussion on the viability of the UN’s forecasts.

Furthermore, in the wake of a financial crisis brought on (partly) by a reliance on the financial community’s consensus statistical modeling, it’s not a bad time to question the reliability of these models in the first place.

Both financial and environmental modeling portend to predict the behavior of a complex system, where even small errors can lead to catastrophically wrong predictions thanks to the great number of feedback loops in the system.

And while the financial system saw the failure of the (Nobel winning) Black-Scholes financial model with the collapse of Long-Term Capital Management, environmental forecasters believed we were actually entering a “global cooling” only 30 years ago (quickly forgotten by the environmentalists’ new Nobel-led movement).

In both cases, these massive failures are dismissed with a wave of a hand – ‘oh, we have better models this time. I mean, we’d never make a mistake like that again. We just needed to add variable X that my stupid old partner missed and not pay attention to variable Y, which I always thought was wrong.’

I greatly enjoyed Nassim Taleb’s “The Black Swan” as Taleb took the financial modelers – indeed all forecasters – to task for just this arrogance and failure to admit their projections should not be relied upon.

He states that he wouldn’t trust a projection over five years; for the sake of context, the climate forecasts are 100 years (!) into the future.

I should add that I believe I did read somewhere that Taleb has spoken vaguely in favor of conserving the environment as a natural resource. I won’t disagree with this. I have already written on what I think makes sense for climate change (Obama’s $150 billion for R&D=good, subsidies for inefficient alternative energy applications right now=bad). This post is about the scientific modeling put forth as a consensus by a community with a long history of making drastically wrong forecasts.

Taleb advises, “Learn to read history, get all the knowledge you can, do not frown on the anecdote, but do not draw any causal links, do not try to reverse engineer too much-but if you do, do not make big scientific claims.”

It appears to me that not only are our forecasters drawing causal links based on highly-fragile models, but also making “big scientific claims.”

Some of my few readers are likely chomping at the bit to add the comment/question: ‘Sure, you can criticize the models, or whatever, but Taleb’s book is all about protecting yourself from Black Swans – highly improbable events that carry catastrophic risk – how can you possibly distort his arguments into a critique of climate forecasts: you are missing the forest for the trees!’

Maybe so – only Taleb knows, as he has been uncharacteristically reserved about commenting on climate change from what I’ve seen – but I do not believe I am misrepresenting his logic.

Taleb writes: “Many of the prediction failures come from hedgehogs who are mentally married to a single big Black Swan event, a big bet that is not likely to play out. The hedgehog is someone focusing on a single, improbable, and consequential event, failing for the narrative fallacy [“creating a story post-hoc so that an event will seem to have an identifiable cause”] that makes us so blinded by one single outcome that we cannot imagine others. Hedgehogs, because of the narrative fallacy, are easier for us to understand- their ideas work in sound bites.”

Taleb emphasizes that Black Swans are Black Swans because they are indeed unknowable — uncertainty is just that. His advice is to “to focus on the consequences (which you can know) rather than the probability (which you can’t know)… Likewise, do not try to predict precise Black Swans- it tends to make you more vulnerable to the ones you did not predict. … These thinkers advocate the opposite: invest in preparedness, not in prediction.”

Does this sound familiar? It should, because Bjorn Lomborg has advocated investing in preparedness that will pay dividends regardless of climate change (e.g., “malnutrition policies, immunization and agricultural research and development”). These proposals stand in stark contrast to the energy-exclusive solutions of people like Gore and Pickens, which will make us indeed more vulnerable to the Black Swans we don’t predict.

To wrap up, I’ll return to Taleb: “I do not forbid myself from using the word cause, but the causes I discuss are either bold speculations (presented as such) or the result of experiments, not stories.”

Environmental forecasters have treated us to bold speculations presented as scientific fact as part of a grand narrative that ends in apocalypse — a Mad Max end of humanity unless if not for drastic, expensive, collective action (but secretly great for our economy!) to reduce our carbon footprints — and thereby meaningfully mitigate climate change in an environment that has undergone catastrophic changes without the help of mankind for millions of years.

Whew. Maybe that is right on target, but I hope that even believers will admit that it just oozes all mankind’s cognitive biases and failings that are now well documented in behavioral economics, psychology, and indeed Taleb’s work.

The ceremonial rain dance is also well documented. People observed climate change. They created a narrative whereby they were responsible for it. They used their scarce resources to participate in ceremonies that would theoretically change the environment. Even after doing it for a period of time, they were able to explain away the many failures of their efforts to preserve the narrative. At least these ceremonies didn’t cost trillions of dollars.

The late Michael Crichton said, Nobody believes a weather prediction twelve hours ahead. Now we’re asked to believe a prediction that goes out 100 years into the future? And make financial investments based on that prediction? Has everybody lost their minds?

I’ll end with some more wisdom from Taleb. We should not play the role of hedgehog, but that doesn’t necessarily mean we slump on the couch and wait or a new wild theory to take root. We should take the advice of Lomborg and Taleb in maximizing our exposure to positive Black Swans by expanding R&D and allowing for the trial-and-error process necessary to innovate, while also investing in multi-use preparedness, e.g., malnutrition, disease prevention, poverty alleviation efforts, etc.

And lastly, a disclaimer: there are lots of good reasons to reduce our impact on the earth, to use resources more efficiently and expend less energy doing the business necessary to provide humans with a healthy and fulfilling life. This post is specifically criticizing the forecasts that have been coopted and the narrative they support.

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Filed under: Natural Resources

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