News Without Context Harms Us

The “Fourth National Climate Assessment”

This report was released recently and it made headlines on CNN. “Climate change will shrink US economy and kill thousands, government report warns.” Hundreds of billions to be lost. Job losses, water shortages, seas rising, land use affected and more.

I am surprised they did not quote Woody Allen.

“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

The theory being passed around is a concern

You will notice theory not fact. I have followed climate science as an amateur for several decades. Since the “New Ice Age Coming” headlines of the 70s. It is always about science and its effects on the way we live. It is about science, but the implications of the science are unknown. It is also a wonderful political opportunity for those interested in controlling the lives of others. That part has lead me to become an objective skeptic.

I, as much as anyone, am concerned for clean water, clean air, and unspoiled soil. Forests and lakes are a wonderful addition to our lives. I doubt anyone on Earth prefers, dirty water, dirty air, or the Love Canal.

Let’s review

Climate policy relies on three legs, science, models, and economics. The report touches all three and the big headlines relate to the economics of it.

In its modern form, climate science is multi-disciplinary. I think there is little disagreement on the physics, chemistry, biology, and climatology involved. After all, individual pieces of science are readily testable. Errors show up very quickly.

The problem comes with models. Forecasting models are not science. Models are tools that allow scientists to estimate the future effects of certain reliable factors. So far, climate change models have proven unreliable. In that respect they are no different than models of other complex system. Their problem, and that of all other models, is that they never use all of the factors involved and they do not necessarily weight the factors they do use in exactly the right way. Climate is a chaotic system. The models, therefore, cannot be deterministic as some would have us believe. In chaotic systems tiny variations in one variable can have vast effects on outcomes.

Models of long term events are unlikely to be accurate despite the honest effort of those who build them.

Economics imposes other limits. There is little doubt that people sometimes act selfishly when there is an economic advantage. We have examples of toxic waste being buried carelessly, smoke in the air, acid rain, over-fishing and more. These errors do not mean that anything that might be bad must be extinguished. Business people rely on a simple concept to make such decision. Cost/Benefit. Essentially, how much will be the gain if we spend the money? There is little cost benefit analysis available because the models that might provide a useful measurement are unreliable. It is not inconceivable that spending money on efficient use of fossil fuels might provide some benefit at a much lower cost. Recall that economics is about allocating scarce resources, while politics first assumes infinite resources.

How the news is hyperbolic

According to CNN, if we do nothing, we will lose 10% of the economy by the end of the century. There are flaws in that statement.

No one can project 81 years into the future. Based on examined history, 5-year government plans are seldom achieved. No one 81 years ago in 1937 would have foreseen the world we have today. Planning is for direction. Accuracy is an advantage but not the entire purpose. It is good enough to be directionally accurate. In the directionally accurate sense, climate and environmental science have a point. We should look after our world. The issue is how far should we push it? Cost/benefit is always an issue. Money you spend for perfection today would almost certainly have a higher benefit in other places.

The projection ignores adaptation. People are very good at making the best of their situation. No one can take what we know know and assume it will never change. New inventions, and new technique will have an effect and we do not yet know what those may be. It has always been that way. Henry Ford once commented that he never asked his customers for advice on what to build. “In the beginning, if I had asked people what they wanted, they would have said faster and stronger horses.”

The expected loss is within the error range of projections of this length. The 2018 GDP in the US will be about $20 trillion. In 81 years, with growth at 2% annually, it will be $99.46 Trillion. A 10% loss and it becomes just $89.5 trillion. While losing $10 trillion seems a huge price, examine it further, The growth rate to reach $89.5 trillion is 1.87%. I don’t know about you, but I am unable to notice the difference that results from my actions where the range of outcomes is 1.94% plus or minus 6 basis points. I doubt I am alone in the deficiency. The loss they are expecting is well within the margin of error when projecting the growth rate and the resulting future amount.

Why the news is hyperbolic

CNN and other purveyors of “news” have a business model that relies on attention. Politicians have the same need. Good news and expected news get no attention, so they focus on the events that we find interesting. Like 10% loss of GDP. Lose $10 trillion is a story. Growth rate will be an eighth of a percent lower, is not.

We must be more skeptical and demand evidence of the efficacy of their conclusion. Common sense says, no one knows the distant future and the time frame is chosen solely to make the numbers big enough to get attention.

Learn to find meaning rather than the carefully packaged attention grabbing headline. Be smarter.

I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. 705-927-4770

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: