Free Markets, Free People


A comparison of catastrophic scenarios

Consider the following generic proposition:

“System Y is a complex system, and its destabilization would have a dramatic negative impact on society. Factor X is known to influence System Y, and the growth of Factor X is believed to destabilize System Y and even make it possibly vulnerable to catastrophic Failure Mode Z.

“Therefore, for the good of society, it’s extremely important to reduce Factor X. Everyone must make sacrifices to avoid Failure Mode Z. “

If any particular values of System Y, Factor X, and Failure Mode Z come to mind when you read that, please note them before you read the rest.

Whether such a proposition is valid in the real world depends on many things. For example, is it proven that Factor X’s growth contributes to the destabilization of System Y? What is the probability that the current rate of growth of Factor X will cause System Y to fail in some way. What’s the probable timeline involved? What are the likely negative results if System Y becomes unstable? Are there results from the past of such systemic failure, and if so what can we learn from them about the probabilities and outcomes in this case?

Let’s take a look at a couple of real cases of the proposition.

First, let’s consider

System Y = global climate

Factor X = carbon dioxide

Failure Mode Z = significant global temperature rise with attendant sea level rise and other forms of extreme environmental degradation

With this particular substitution, most of those on the left would vigorously assure us that the proposition was valid. They would then tell us that, in order to reduce carbon dioxide, drastic measures are needed, even though those measures have some very undesirable side effects on various members of society.

Next, let’s consider

System Y = US or world financial system

Factor X = government spending and debt

Failure Mode Z = financial system meltdown, in which financial institutions fail en masse, and normal commerce is halted or seriously disrupted

Now, if we make this substitution and present the proposition to a typical leftist, their reaction would be quite different. They would very likely not agree that drastic measures are needed to reduce spending and debt. Based on recent arguments from the left, they would look to comparatively small changes to address any dangers, such as raising taxes on rich people, or “rooting out fraud and waste”. Such changes have been tried before, and clearly are not a long term fix, yet the left keeps insisting that they are sufficient to head off potential financial catastrophe.

They would certainly not be in favor of dramatic reductions in Factor X in this case. They would be very concerned about the effects on society of the spending reductions, and would likely even resort to hyperbole to highlight those effects. They might even say that those who advocated dramatic reductions in spending and debt were cruel, heartless people who were simply unwilling to do their part for other, less advantaged people.

Let’s first assume, just for the sake of argument, that both forms of catastrophism are real dangers. I think they actually are quite different in the amount of danger they pose, but for now let’s pretend that they are both serious dangers that could result in catastrophes affecting many millions of people in drastic and awful ways.

In that case, why would the left react so differently to the presumed obvious solution of reducing Factor X?

I believe the real reason the left supports drastic measures in the first case but not the second is fairly obvious. In the first case, the reduction of Factor X (carbon dioxide) requires a dramatic increase in government size and influence. In the second case, the reduction of Factor X (spending and debt by various governments) requires a dramatic decrease in government size and influence. In fact, it calls into question the entire viability of the welfare state. (More on this below.)

Of course, those on the right are subject to the symmetrical analysis. One might conclude (in fact, the typical leftist would almost certainly conclude) that the right makes such decisions solely based on their distaste for big government. They don’t accept the first proposition because it increases government, while they accept the second one because it decreases government.

However, as I said earlier, there are a lot of other factors in play. The probabilities involved and the historical analogs are quite different.

In the climate change case, there is no historical example of the climate system failing by going into a catastrophic mode. There have been ups and downs due to natural causes, but no mass extinction, for example, has been clearly traced to runaway temperature rise.

We have some geological evidence about climate change. Geological examples are necessarily fuzzy, but the best ones we have go the other way. We know that ice ages are not uncommon, and in fact occur on a semi-regular basis. We know that one ended about 10,500 years ago, and that ending (i.e. the warming that went with it) was probably a major factor in the spread of modern humans around the planet.

We know that there have been periods when the climate was warmer or colder than average, and we also know that mankind has generally fared better during the warm periods.

So there’s no tangible example from history or geology that should fuel fear of catastrophic warming. All we have are models. They have a short baseline, and even in that baseline, they have shown serious flaws. Other factors such as solar variability appear to have a greater influence than mankind’s carbon emissions than most of the models include. (This ignores the strong possibility of outright incompetence, fraud, and other human factors that cast doubt on the models.)

You can read a recent summary of the state of that argument in this article. A few extracts:

“…the data was issued last week without fanfare by the Met Office and the University of East Anglia Climatic Research Unit. It confirms that the rising trend in world temperatures ended in 1997.”

 

“CO2 levels have continued to rise without interruption and, in 2007, the Met Office claimed that global warming was about to ‘come roaring back’. It said that between 2004 and 2014 there would be an overall increase of 0.3C. In 2009, it predicted that at least three of the years 2009 to 2014 would break the previous temperature record set in 1998. So far there is no sign of any of this happening. But yesterday a Met Office spokesman insisted its models were still valid.”

 

“Meanwhile, since the end of last year, world temperatures have fallen by more than half a degree, as the cold ‘La Nina’ effect has re-emerged in the South Pacific.

‘We’re now well into the second decade of the pause,’ said Benny Peiser, director of the Global Warming Policy Foundation. ‘If we don’t see convincing evidence of global warming by 2015, it will start to become clear whether the models are bunk.”

 

Climate change has been vigorously discussed on QandO, so there’s not really any need to go further. It’s enough to note that the entire case for climate catastrophism looks a lot shakier than the left wishes to acknowledge. And again, we don’t really have any historical examples to learn from, and the geology is fuzzy.

However, on the economic side, we certainly do have examples of system failure. From Roman times to the Weimar Republic, we’ve seen that an economic system can certainly fail from too much spending and debt.

Further, the economic models have something in them the climate models don’t – clear and obvious exponential factors at work. Compound interest is one such factor that no one can deny. It’s also the opinion of many (including myself) that the spending curve for most welfare-state governments exhibits an exponential shape.

We know that exponential growth cannot go on indefinitely in the real world. Eventually, the amounts outstrip the boundaries the real world will tolerate. This is often expressed by the saying “What can’t go on forever, won’t.”

There are other differences. Climate change, if it happened at all, would happen over a span likely measured in decades. No one outside silly movies is saying that a city such as New York would go to being underwater, or too hot or too cold to live in, in a matter of weeks or months.

Financial failure, on the other hand, could happen quite suddenly. Most people would not be prepared for it, and that would cause the suffering to be worse.

Finally, it’s not clear how much of the populace would be negatively affected by significant warming of the earth. Some would clearly benefit – just ask the folks who live in Greenland. Others could suffer, of course. However, remember our history – humankind does better in warmer periods. So there would have to be a dramatic runaway spiral on heat to get into territory where the net effect would be dramatically negative.

I’m not saying it couldn’t happen, but the probabilities for that look ridiculously low and we have no historical, archeological, or geological examples to point to.

However, an economic catastrophe in the US financial system would affect almost everyone here, and many others around the world. Certainly those with lots of assets could ride out the effects better (“women and minorities hardest hit”) but hyperinflation on the Weimar scale wipes out even huge fortunes. Plus, our financial system is more complex than ever, and we now have a society utterly dependent on its smooth functioning. In the Great Depression, a majority still lived on farms and grew their own food. They were insulated from the very worst effects. Not true today – if the system really broke down, a lot of people would grow hungry quickly. You can write your own ending from there, but it’s pretty much certain to involve civil violence, looting, etc. Because we’re in uncharted territory in the complexity of our society and our financial system, it’s not inconceivable that outcomes could involve depravation and widespread violence never seen in this country (though I think that’s an unlikely, worst-case possibility).

So to summarize: the left is frantically worried about climate change, even though the outcomes are quite murky. They are ready to take drastic action right away, even though those murky effects might be quite a ways into the future, if they can just get those Neanderthal righties to accept the consensus, etc.

But they are quite blasé about an approaching catastrophe that is much more likely, has historical parallels, has effects that could be worse for more people, and could happen in very short order.

How can this be? If what I say is correct, how can they support dramatic intervention to mitigate climate change, but not support dramatic intervention to mitigate economic meltdown?

Because accepting the possibility of economic catastrophe means rethinking their entire philosophy. Intervention to mitigate economic meltdown means dramatic reversal of the welfare state. Most of those on the left are mentally unable to accept that possibility, and will therefore resort to any level of rationalization necessary to reject it.

Thus, I conclude that most leftists have convinced themselves that an economic catastrophe is wildly unlikely to occur, just as those of on the right simply don’t believe that a climate catastrophe is likely to occur. As I outlined above, I think their conclusion is logically unsupportable, whereas I think doubting a climate catastrophe is completely supportable.

Given 2008, given the spending curves, given the obvious incompetence and mendacity of our politicians, how can they doubt the strong possibility of economic catastrophe? Well, in their lifetimes, there has always been one more set of kludges that kept the system stabilized for a while. They can rationalize that, if certain selfish parties just give in to another set of kludges, things will work out fine. They simply ignore historical parallels, or come up with rationalizations for why they don’t apply to our present circumstances. Some have abysmal math skills, and don’t intuitively grasp what an exponential effect really means, so they don’t give such factors any weight.

They also take comfort in the idea that they are fighting for the poor and downtrodden, and cannot conceive of a world in which the welfare state is not the framework where they do that. To them, preventing a catastrophe that has not yet occurred by taking measures that are sure to hurt such people is simply unthinkable.

I think this is insanity. Even if we accepted the most aggressive Republican proposals currently out there, they don’t even turn the tide against spending and debt. Fall 2008 gave us a pretty clear warning that the system is no longer stable. If the financial catastrophe occurs, it will hurt everyone, and it will hurt the poor and downtrodden the worse – far worse than spending reductions that gradually start reducing the welfare state.

This leads to a troubling corollary. Most leftists don’t really seem to believe the system is vulnerable to catastrophe, but, based on behavior, neither do establishment Republicans! If they did, last year’s dance around the debt limit would have a far different character to it. The establishment Republicans are engaged in only a slight variation in the “kick the can” strategy favored by Democrats, and the only reason they vary at all is the influence of the newly elected, tea-party-backed contingent in the House.*

In 2008, both the establishment Republicans and the Democrats in Washington panicked. For a while, it looked like the catastrophe might actually be imminent, and that scared them spitless. They authorized huge, unprecedented levels of spending and debt, mostly because of their fear.

They don’t seem scared now. Even though it ought to be obvious that you don’t solve a debt crisis for the long term by adding a lot more debt, and even though their measures certainly did not achieve the predicted results on growth and employment, they have lapsed back into their mental fiction that nothing that bad is really going to happen.

I’ve pretty much stopped listening to them. The coalition of welfare state leftists and establishment Republicans are living in a fantasy land. I don’t think they will really believe in the possibility of economic meltdown until it actually happens or is so imminent that it can’t be denied. As Heinlein said:

“Human beings hardly ever learn from the experience of others. They learn; when they do, which isn’t often, on their own, the hard way.”

Then, since they’ve never really considered it possible, when/if it happens, they’ll be clueless about what to do. When they take additional panicked action, it’s likely to make things worse instead of better (as I think many of the actions in 2008 did).

Make whatever preparations you think necessary. I don’t think financial catastrophe is inevitable, but I do think it is the most likely outcome, whether it’s ten years from now or twenty years or next month. I have a bumper sticker on my car that sums it up: “Believe in yourself, not the government”.

(*) I concede the possibility that some DC politicians know we might be facing economic catastrophe, but have concluded that they can’t do anything about it politically, so they might as well keep playing the business-as-usual game. I regard that as dishonest and cowardly. If we are to prevent the catastrophe, one of the absolute pre-requisites is that people understand that it could happen, and are therefore willing to endure the measures to prevent it. Also, obscuring the possibility of financial catastrophe in the guise of “not scaring the people” is condescending, arrogant, and makes it more likely that the catastrophe will actually come to pass.

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30 Responses to A comparison of catastrophic scenarios

  • Michael Kinsley committed one of his “gaffs” last week.

    He stated that EVERYBODY knows the truth about our fiscal situation at the national, state, and local level (after admitting that…ShaaaaAAA-zam…states had debt or obligation burdens they could not possibly meet), but they dunno how to deal with it.

    Partly true. We all (excepting delusional morons) KNOW how to deal with it. We just WON’T.

    That would be too haaaaard…

  • Climate change is about science, hard evidence, and a consensus amongst climate change specialists. The second is about politics, ideology, and vast differences in perspective. You’re comparing apples and orange. Also, consider that the countries faring best right now in the industrialized world during recession are Germany and a few of the Scandinavian countries. The proposition that the problem is just government spending and debt (not unfair tax codes that reap rewards on the wealthy, de-regulation that allowed financial ruin, lack of integration of financial regulations globally, etc.) is weak. I personally favor of mix of entitlement reform, increase taxation of the wealthy, mostly through closing loopholes, restructuring social welfare programs to assure the incentive is still to work and not cheat the system, and tougher regulation of the financial sector.

    The view that the state has a role in making sure markets function, Ordoliberalism, is a school of thought often associated with Hayek (the Freiburg school).

    • @scotterb And….as if summoned by the mention of “delusional morons”….

      • @Ragspierre @scotterb Old Scotty thinks “Pavlovian conditioning” is something the wife does to her hair.

    • @scotterb Listen, you idiot: exponential curves for compound interest don’t have a political ideology. And if you think the climate change debate doesn’t have a political dimension, you’re even stupider than I thought you were.

      • @Billy Hollis @scotterb Heh…

        and Amen…!!!

      • @Billy Hollis @scotterb The sole comfort you can take Billy is if it does go to hell, this moron will be caught with his trousers around his ankles and with an exceedingly silly look on his face. He has the same level of smug arrogance as the Captain of the Titanic did.

        I presume you didn’t post for this turkey, but rather for people who can comprehend the grim potential of our present course.

        He thinks it’s just another internet discussion that he can ‘win’.

        • @looker @Billy @scotterb Except the Titanic’s captain had the stones to eat the consequences of his hubris.

          Erp NEVER will. He is, remember, a moral coward, a Collectivist dupe, a liar, and a moron (by election).

        • @looker “He thinks it’s just another internet discussion that he can ‘win’.”

          Yes. He’s another post-modern idiot who thinks you can change reality if you just throw enough words at it. As if a problem like the debt bomb will somehow magically disappear is you can somehow get a “consensus” that it isn’t really a problem after all.

          As for the silly look on his face, I thought he had that all the time.

        • @Ragspierre @Billy @scotterb Well, true. He WAS a captain after all, and I’m sure that fact hit him after the disaster occurred. And I doubt he blamed anyone but himself as the water washed up over the bridge before she split in two.

          Erb will be blaming you, and me, and every other wicked conservative and fictional ‘rich’ person he can think of. He’s the epitome of the rhyme “don’t tax you, don’t tax me, tax that man behind the tree!”

      • @Billy Hollis @scotterb
        The “idiot” doesn’t understand that the term “consensus” is a political reference and not a scientific one. Science is simple, it does not need a consensus – from consensus you get so-called scientific truths of previous centuries like the earth is flat, the earth is the center of the universe, and eugenics is the future of man’s evolution.
        As far a Germany is concerned, they have slashed their budget, in spite of Obama’s objections, because they realized deficits are a problem. They are also cutting their tax rates in order to generate increasd investment – Germans have traditionally saved considerably more than is normally done in our country and have watched in some trepidation over the last decade our tendency to borrow to the hilt, even individually.
        The “idiot” is only puking out the Democratic party lines regarding climate change and class warfare he is paid to regurgitate. He will collect his thirty peices of silver and slink away the way he always does.

      • @Billy Hollis @scotterb This “politics, ideology, and vast differences in perspective” thing may finally explain the mind of Paul Krugman, Nobel Prize winner for “politics, ideology, and vast differences in perspective.” You know. What they used to call economics.

    • @scotterb If the evidence supported climate change, there would be no need to point to consensus, there would be actual proof.
      In Germany, the government agreed to severe spending cuts (over the objections of the Obama administration) because it realized that government spending and debt is a problem, even though their debt per worker is about half of what it is for the U.S.

    • @scotterb Climate change is about science, hard evidence, and a consensus amongst climate change specialists.

      >>>>> “Science” isn’t about consensus, dummy. World is flat, world sits on the back of a turtle, maggots spontaneously burst out of rotted meat, global cooling, hole in the ozone, the population bomb, etc etc. All subjects of scientific “consensus” over the years.

      You idiot.

    • @scotterb Just so we can all get on the same page, can you cite the definitive peer-reviewed study that incontrovertibly ties man to any current climate warming. Al Gore’s books and movies don’t qualify, neither do IPCC reports which are mostly put together by politicians.

      • @Neo_ @scotterb It’s accepted consensus! Stop arguing! Get in line Neo! You’re a denier! A denier! You’re evil! You want Erb’s children to suffer! We should do something wicked to you in the name of good so you’ll suffer painfully because we’re good and you’re evil!

  • One thing that the 90s and 00s proved is that low taxes and deregulation can be damaging. High debt levels are in large part due to the bubble economy which was created by the desire of the wealthy to find “easy gains” in dot com and then the real estate market. That not only was an inefficient use of wealth (far better would have been to have higher taxes, infrastructure development, and tax cuts to the middle class to spur demand which would have led to jobs), but it was a cause of the debt trap. The debt increase that started in the 1980s seemed to slow in terms of government debt after 1990 (stabilizing at 60% of GDP), but private and corporate debt continued to skyrocket, and now total debt is near 400% of GDP. Much of that imbalance was market driven, not government driven, due to an illusory economy in the 90s and 00s where people thought real estate value was as good as having savings, and thus private debt was seen as not as risky as it has turned out to be. Of total US debt (public and private), about $14-15 trillion (100% of GDP) is foreign held.

    • @scotterb No, the 90′s and 00′s proved that low taxes can increase revenue and that government interference can cause a bubble to get dangerously large. After the Bush tax cuts went into effect, the government’s tax revenue went up. The increases in government debt came becuase spending increased greatly.
      The dot com bubble was severe for the companies and workers directly involved, but had limited impact outside of them because it was market driven. The housing bubble was driven by increased government regulation, and has had a much more widespread and damaging effects

    • @scotterb All the stuff you’re describing is nasty old American crappy market poorly regulated and bubbled and bad tax policy that doesn’t correctly redistribute the wealth of the conservatively voting rich. Our problems are caused by “Americans are stupid and backward” sorts of things.

      Maybe then you’d like to explain THIS – you special genius you.
      http://www.guardian.co.uk/world/2012/jan/28/europes-lost-generation-young-eu

      Pay attention to the ‘jobs’ most of the interviews unemployed trained for – why was iI distinctly NOT surprised.
      I suppose Europe’s unemployment issues are our fault. Please be sure and pick the countries where things are don’t look quite as grim for your defense. I know I know, Germany, Germany, Germany and uh, Germany, are all doing just fine.

    • @scotterb All the stuff you’re describing is nasty old American crappy market poorly regulated and bubbled with bad tax policy that doesn’t correctly redistribute the wealth of the conservatively voting rich. Our problems are caused by “Americans are stupid and backward” sorts of things.

      Maybe then you’d like to explain THIS.
      http://www.guardian.co.uk/world/2012/jan/28/europes-lost-generation-young-eu

      Pay attention to the ‘jobs’ most of the interviewed unemployed trained (went to college) for – why was I distinctly NOT surprised.
      I suppose Europe’s unemployment issues are our fault. Please be sure and pick the countries where things are not quite as grim for your defense. I know, I know – Germany, Germany, Germany, Germany, and uh Sweden, are doing okay. Should be interesting to see how they keep the others from trying to climb into their lifeboats when the appropriate time comes.

  • Forget global warming – it’s Cycle 25 we need to worry about (and if NASA scientists are right the Thames will be freezing over again): Met Office releases new figures which show no warming in 15 years. “The supposed ‘consensus’ on man-made global warming is facing an inconvenient challenge after the release of new temperature data showing the planet has not warmed for the past 15 years. The figures suggest that we could even be heading for a mini ice age to rival the 70-year temperature drop that saw frost fairs held on the Thames in the 17th Century. Based on readings from more than 30,000 measuring stations, the data was issued last week without fanfare by the Met Office and the University of East Anglia Climatic Research Unit. It confirms that the rising trend in world temperatures ended in 1997.”

    Oh. Dear.

    That sounds sort of “sciency”… But people caused it, I just KNOW…!!!

    • @Ragspierre
      Cue Obama’s to respond to the report by saying “It is Bush’s fault” in
      5
      4
      3
      2
      1

    • @Ragspierre That’s actually the article I referred to in the post.

    • @Ragspierre I’ve been saying for a while that the “window” for politicians to “do something” in order to take credit for the coming acknowledgement that warming has stopped has quickly been closing. Before long, there will have to be an official acknowledgement that a cooling trend (temporary or permanent) is occuring … and the politicians haven’t done anything to take credit. Well, except the EPA.
      Expect Obama to take credit for the coming cooling in 5, 4, 3, 2, 1 …

      • @Neo_ @Ragspierre They took some kind of credit for the cooling, I can’t recall what they credited it to, bullshirt of course, but they had a reason for why our tipping board hasn’t tipped permanently into the fiery furnace they were screamin about back at the beginning of the decade.

        You all recall the dire predictions of past the tipping point, right? One would think that having gone past that point, we’d be accelerating, but hmmmmm…seems not.

  • How can this be? If what I say is correct, how can they support dramatic intervention to mitigate climate change, but not support dramatic intervention to mitigate economic meltdown?

    >>>> Because #1 winds up investing them with a whole lot of power over our every day lives, and #2 will wind up losing them power over our every day lives.

    Pretty simple calculation really.

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