This blog (originally named Climate and Risk) was partially inspired by a paper (here) entitled ‘Mitigate, Adapt or Suffer’ by the leading climate scientist Lonnie Thompson. That article argued that the majority of scientists working in the field “are now convinced that global warming poses a clear and present danger to civilization”.
(Within the non-fringe scientific community, the acceptance of climate change is now almost universal. Accordingly, this blog takes the reality of climate change as a given; the truly interesting questions are “how fast is it happening and how bad will it get?”)
As an ex-hedge fund manager, equities analyst and economist steeped in a neo-classical analytical tradition that sees progress as almost a certainty, the science behind climate change came as something of a shock. Lonnie Thompson and others are advancing a cogent argument that all our economic and social relations could be destroyed if we let the global climate change drastically.
Climate change is therefore the kind of risk that every thinking adult should understand: the worst outcomes are seeing a steadily increasing probability of coming about, and the pay-offs associated with these outcomes are horrible. Unfortunately, due to the complexity of the problem and the fact that it undermines expected life paths, most people choose to remain ignorant of the risk of climate change.
At the same time, global warming prediction is something of a Gordian knot as it does not just rest on the physical sciences (for example in terms of temperature rise in response to a higher concentration of green house gases), but also the geopolitics and societal challenges posed by emission mitigation and climate change adaption.
The latter soft sciences, in turn, are highly influenced by the looming problem of resource constraints (energy among them) and the degree to which technology can help us transcend such problems. The feedback loops among these variables are complex and could evolve in a number of different ways. Peak oil could blunt global growth and therefore put a brake on carbon emissions, or it could lead to the accelerated use of dirtier sources of energy production such as tar sands or coal that exacerbate global warming.
Meanwhile, technology could present us with a non-carbon source of energy that puts an early stop to climate change or it could undermine existing economic institutions and thus prevent mitigation or adaption. Moreover, technological progress is deeply entwined with economic growth. Technology-led productivity gains have been the bedrock of global economic growth since the industrial revolution, lifting billions out of poverty. Should such productivity gains decelerate (and there are tentative signs that this is happening), we will have far less future wealth available to transcend the climate change and resource challenges that we face.
This blog aims to help people quantify, interpret and respond to the risks posed by global warming, resource scarcity and technological change to their way of life. Critically, while humans are not well designed to deal with longer-term time horizons, they are capable of such forward-looking thought (think of education and insurance). My hope is that individuals will consider the risks to themselves and their families from the possibility that future climate, resource availability and the fruits of technological progress could evolve in a manner quite dissimilar to the recent past.
Unlike the hardcore of active climate skeptics, the majority of people I meet are passive skeptics or deniers; that is, they deny the importance of climate change to the future of themselves and their families through choosing to remain uniformed about the issue. At the same time, only a small minority consider the potential impact to their lives should economic growth cease, or access to cheap food and energy evaporate. But choosing to remain ignorant of climate change, resource constraints and technological change is a very short-sighted decision to make (especially if you have a family).
This blog is not an extension of “doomer porn” and does not see an imminent collapse of civilisation. However, it does view itself as an antidote to the irrational belief that technology will solve all problems and economic growth is all but guaranteed—the type of sentiments that still underpin the mainstream media and were elegantly extolled in Matt Ridley’s recent book “The Rational Optimist”. Unfortunately, the facts as conveyed in the form of price and volume are telling us something negative is going on. In short,we face a new world of risk.
Critically, this blog is neither anti-capitalist nor anti-market as are some blogs sympathetic to the environment. While climate change is probably the single largest market failure ever, this is not a reason for scrapping markets (just for regulating them more wisely).
With two advanced degrees in Economics and Business, a CFA and long-term experience as an economist, analyst and hedge fund manger (and a past winner of the EuroHedge Japanese Equity Hedge Fund Manager of the Year Award for my sins), I hope this blog will also take a somewhat different tack to the many excellent blogs that address global warming, resource constraints and technology from a scientific standpoint. The blog starts from the premise that to manage risk we must actively understand what risks we face.
Finally, optimism and happiness are not always linked. Indeed, misplaced optimism can fade into recklessness and later remorse. A rational pessimist may be quite content, having adapted well in advance to what life is going to throw at him or her. Forewarned is forearmed.
Justin Bowles, Oxford, U.K.