Tuesday, September 30, 2008
  The broken circle

The current economic "crisis" and the current climate "crisis" are essentially identical in form.

In both cases the crisis-mongers completely misunderstand the basic idea that things go up and then down. They've apparently never noticed a circle, a wheel or a wave. They pin their entire soul and life on the perpetual increase of one kind of number.

Temperature must increase forever because it was increasing at one point. Share prices and house prices must increase forever because they were increasing at one point.

In both cases the crisis-mongers have fallen in love with computer models based on their blind pigheaded stupid linear assumption. Instead of looking at history to see what has actually happened before; instead of using common sense and logic; they put numbers into their models and trust the result.

And in both cases the crisis-mongers insist that we must destroy Western Civilization, steal its goodies, and put them into the hands of a few Jews who are already rich beyond the dreams of Midas.


An article in the latest New Superstitionist is especially instructive because the NS people are blind and pigheaded on global warming but fully logical and conscious of history on the stock market.

The crisis did not come without warning. Ten years ago a giant hedge fund called Long Term Capital Management collapsed when it suffered a liquidity crisis. Yet banks and regulators seem not to have heeded the lessons from this wake-up call by improving their predictive models.

Well, how about noticing the actual relationship between CO2 and temperature from earlier years? Nope, can't do that, have to stay blind.

How could so many smart people have got it so wrong? One reason is that their faith in their models' predictive powers led them to ignore what was happening in the real world. Finance offers enormous scope for dissembling: almost any failure can be explained .... When investors don't behave like the self-interested 'economic unit' that economists suppose them to be, they are described as 'irrationally exuberant'.

Look in the mirror, folks. Climate also offers enormous scope for lying. Any failure can be explained as a temporary aberration from the inevitable warming trend. Even when all rational observers can see that the warming trend stopped ten years ago, the crisis-mongers still insist that their models are correct, the warming still continues in some strange spiritual way, and an accidental event like a volcano or El NiƱo is momentarily counteracting the "real" warming.

That may be true, but it is dangerous to assume that the approximations are sound. Even small modeling deficiencies can have huge consequences.

Yes, like the 'hockey stick'.

Until we are clearer about this, it would be wise to proceed with caution. Banks should be careful not to assume that they have it right and the rest of the world has it wrong.

Et tu, Brute.

= = = = =

Later thought: There's another parallel between these two gigantic scams. Both of them seek completely false optimal values for their basic variables.

With global warming, the Gaia-worshipers insist that the optimal temperature is colder than the current global average, though they never answer the question "Which temperature is best?" They just want us to get colder. Trouble is, this runs against history. During the last two milennia, humans have been better off at the warmer times and worse off in the colder periods. When it's warmer, crops grow on a wider range of land, and grow better; and we need less fuel to keep us from freezing.

With the economic "crisis", the Goldman-worshipers insist that the optimal value of stocks is high, the optimal value for house prices is high, and the optimal value of interest is below zero. Trouble is, this runs against history, at least in America. When we had lower house prices, lower stock prices and higher interest, we were better off. More people could honestly afford houses, saving was encouraged, borrowing was discouraged, and stocks were bought mainly for dividends, which turned the eyes of businessmen toward serving the customer and making a real profit.

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