The further a society drifts from the truth, the more it will hate those who speak it. ... In a time of deceit, telling the truth is a revolutionary act. George Orwell

Sunday, April 24, 2016

Environmental predictions of the 1970-ties

Interestingly, some environmentalists and climate researchers of the 1960-ties and 70-ties seemed to have believed that the Earth climate faces imminent catastrophic cooling rather than "global warming", and they were backing it up with research and studies. There is an interesting reference article on the Wiki Earth Day. Quote:

Predictions from Earth Day 1970

During the 1970 Earth Day, given assumptions of continued exponential annual population growth of 2% or more[12] and unchanged or increasing climate impact per person, the following predictions were made:[13]

  • Denis Hayes, the chief organizer for the first Earth Day, wrote, "It is already too late to avoid mass starvation."
  • Senator Gaylord Nelson, the founder of Earth Day, stated, "Dr. S. Dillon Ripley, secretary of the Smithsonian Institution, believes that in 25 years, somewhere between 75 and 80 percent of all the species of living animals will be extinct."
  • Peter Gunter, a professor at North Texas State University, stated, "... by 1975 widespread famines will begin in India; these will spread by 1990 to include all of India, Pakistan, China and the Near East, Africa. By the year 2000, or conceivably sooner, South and Central America will exist under famine conditions.... By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine."
  • Paul Ehrlich, author of The Population Bomb, predicted that between 1980 and 1989, 4 billion people, including 65 million Americans, would starve to death.
  • Life Magazine wrote, "... by 1985 air pollution will have reduced the amount of sunlight reaching earth by one half."
  • Ecologist Kenneth Watt stated, "The world has been chilling sharply for about twenty years. If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder in the year 2000. This is about twice what it would take to put us into an ice age."
  • Watt also stated, "By the year 2000, if present trends continue, we will be using up crude oil at such a rate…that there won’t be any more crude oil."

More on the professional environmental "prophecy of doom" business and the achievements of some of its greatest academic spin-masters, read this article:
Earth Day, Then and Now / The planet's future has never looked better. Here's why. (by Ronald Bailey, May.1,2000)


Earth Day 1970 provoked a torrent of apocalyptic predictions. "We have about five more years at the outside to do something," ecologist Kenneth Watt declared to a Swarthmore College audience on April 19, 1970. Harvard biologist George Wald estimated that "civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind." "We are in an environmental crisis which threatens the survival of this nation, and of the world as a suitable place of human habitation," wrote Washington University biologist Barry Commoner in the Earth Day issue of the scholarly journal Environment. The day after Earth Day, even the staid New York Times editorial page warned, "Man must stop pollution and conserve his resources, not merely to enhance existence but to save the race from intolerable deterioration and possible extinction." Very Apocalypse Now.

Three decades later, of course, the world hasn't come to an end; if anything, the planet's ecological future has never looked so promising. With half a billion people suiting up around the globe for Earth Day 2000, now is a good time to look back on the predictions made at the first Earth Day and see how they've held up and what we can learn from them. The short answer: The prophets of doom were not simply wrong, but spectacularly wrong.
Of course, the biggest environmental crisis facing humanity nowadays is supposed to be global warming. Not surprisingly, worries about the future climate were a common theme among alarmists on the first Earth Day. However, they couldn't agree on what direction the earth's temperature was going to take.

"The greenhouse theorists contend the world is threatened with a rise in average temperature, which if it reached 4 or 5 degrees, could melt the polar ice caps, raise sea level by as much as 300 feet and cause a worldwide flood," explained Newsweek in its special January 26, 1970, report on "The Ravaged Environment." In the service of balance, however, the magazine also noted that many other scientists saw temperatures dropping: "This theory assumes that the earth's cloud cover will continue to thicken as more dust, fumes, and water vapor are belched into the atmosphere by industrial smokestacks and jet planes. Screened from the sun's heat, the planet will cool, the water vapor will fall and freeze, and a new Ice Age will be born."

Kenneth Watt was less equivocal in his Swarthmore speech about Earth's temperature. "The world has been chilling sharply for about twenty years," he declared. "If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder in the year 2000. This is about twice what it would take to put us into an ice age."

Watt was wrong. Global temperatures didn't fall, and fears of a new ice age dissolved like frost on an early-autumn morning. Since 1988, when government climatologist James Hansen testified before the Senate Energy and Natural Resource committee that he had detected global warming, climate doomsters have switched almost entirely to worrying about global warming. The theory is straightforward--burning fossil fuels like coal and oil puts excess carbon dioxide in the atmosphere; the carbon dioxide traps heat from the sun and re-radiates it, heating up the atmosphere.

It's generally agreed that the earth's average temperature has indeed gone up by 1 degree Fahrenheit or so in the past century. The question now is, How much man-made warming can we expect in the 21st century? Computer climate models originally predicted that atmospheric temperatures might increase between 3 to 5 degrees centigrade by 2100. However, as the models have been refined, their estimates of how much warming might occur have been declining--the range is now down to 1.5 degrees centigrade to 3.5 by 2100. A recent report from the National Research Council noted that "the surface apparently warmed by 0.25 C to 0.4 C since 1979." Remarkably, the NRC panel also estimates the change in the temperature of the atmosphere as being between 0 C to 0.2 C during the same period. In other words, the atmosphere may not have warmed at all since 1979. This is an odd conclusion because the climate computer models have never predicted that the surface would warm first or faster than the atmosphere--in fact, they predict the opposite. Consequently, this gap between surface temperatures and atmospheric temperatures calls the predictive accuracy of the models into serious question.
Indeed, a far greater threat for the next century comes from environmental activists. To counteract global warming, they essentially want to plan the energy future of the entire world for the next 100 years. They are enacting the plan through the U.N. Convention on Climate Change and the Kyoto Protocol. The absurdity (and arrogance) of that type of planning becomes clear when one imagines the same exercise taking place in 1900. The best scientific panel available in 1900 would simply not have been able to plan for millions of automobiles and trucks, ubiquitous electric lighting in millions of houses and office buildings, fuel for thousands of jet planes, and millions of refrigerators, air-conditioners, and the like. Virtually none of the devices on this nearly endless list had even been invented by 1900. Given the increasing rate of technological innovation, we undoubtedly have even less chance of foreseeing the future than people in 1900.

Why So Wrong?

How did the doomsters get so many predictions so wrong on the first Earth Day? Their mistake can be handily summed up in Paul Ehrlich and John Holdern's infamous I=PAT equation. Impact (always negative) equals Population x Affluence x Technology, they declared. More people were always worse, by definition. Affluence meant that rich people were consuming more of the earth's resources, a concept that was regularly illustrated by claiming that the birth of each additional baby in America was worse for the environment than 25, 50, or even 60 babies born on the Indian subcontinent. And technology was bad because it meant that humans were pouring more poisons into the biosphere, drawing down more nonrenewable resources and destroying more of the remaining wilderness.

We now know that Ehrlich and his fellow travelers got it backwards. If population were necessarily bad, then Brazil, with less than three-quarters the population density of the U.S., should be the wealthier society. As far as affluence goes, it is clearly the case that the richer the country, the cleaner the water, the clearer the air, and the more protected the forests. Additionally, richer countries also boast less hunger, longer lifespans, lower fertility rates, and more land set aside for nature. Relatively poor people can't afford to care overmuch for the state of the natural world.

With regards to technology, Ehrlich and other activists often claim that economists simply don't understand the simple facts of ecology. But it's the doomsters who need to update their economics - things have changed since the appearance of Thomas Malthus' 200-year-old An Essay on the Principle of Population, the basic text that continues to underwrite much apocalyptic rhetoric. Malthus hypothesized that while population increases geometrically, food and other resources increased arithmetically, leading to a world in which food was always in short supply. Nowadays, we understand that wealth is not created simply by combining land and labor. Rather, technological innovations greatly raise positive outputs in all sorts of ways while minimizing pollution and other negative outputs.

As side note, below is Bailey's other fascinating interview, enjoy!

Sunday, April 17, 2016

Rediscovery of Discount Rate


This post deals with economy and bond market pricing rather than medical heresies. I am posting it because the article is somewhat heretical and is pointing out some (probably intentionally) forgotten aspects of the bond investing that may soon become very important.

Rediscovery of Discount Rate.


Some implications of bond discounting under negative interest rate policy (NIRP) are as follows:

* Banks will not be able to avoid discounting of their own held government-issued bonds (otherwise they would be risking their own insolvency)

* Collateral assets held by the banking system will be loosing value (since the discounting would have to be accounted for).

* Total market capital value of the entire bond market will probably keep growing faster in relation to monetary mass in circulation, due to discounting mechanism applied during the roll-over refinancing at maturity. (At roll-over a borrower must re-pay the principal amount by issuing a higher nominal amount of bonds to offset the discounting). .

* Bond market will have to be made working under the truly open market rules controlled by supply and demand rather than by market administrators. Under NIRP the market will probably not be able to tolerate mispricing or distorsions in the discounting mechanism, because it requires accounting for cash losses or gains upfront leaving very little scope for market losses deferrals and creative accounting. Any attempts at manipulating the discount rate back towards 0, would result in buyers (even government buyers) walking away otherwise they would have to book losses immediately.