The only thing we can be sure of about the future is that it will be absolutely fantastic. So if what I say now seems to you to be very reasonable, then I have failed completely. Only if what I tell you appears absolutely unbelievable, have we any chance of visualizing the future as it really will happen.

- Arthur C. Clarke (h/t Brin)

Thursday, October 2, 2008

Asking the Right Questions

From Herman Daly's keynote to the AMS workshop on Federal Climate Policy:
However, it is useful to back up a bit and remember an observation by physicist John Wheeler, “We make the world by the questions we ask”. What are the questions asked by the climate models, and what kind of world are they making, and what other questions might we ask that would make other worlds? Could we ask other questions that would make a more tractable world for policy?

The climate models ask whether CO2 emissions will lead to atmospheric concentrations of 450-500 parts per million, and will that raise temperatures by 2 or 3 degrees Celsius, by a certain date, and what will be the likely physical consequences in climate and geography, and in what sequence, and according to what probability distributions, and what will be the damages inflicted by such changes, as well as the costs of abating them, and what are the ratios of the present values of the damage costs compared to abatement expenditures at various discount rates, and which discount rate should we use, and how likely is it that new information learned while we are constructing the model, will invalidate the results? What kind of world is created by such questions? Perhaps a world of such enormous uncertainty and complexity as to paralyze policy. Scientists will disagree on the answers to every one of these empirical questions.

Could we ask a different question that creates a different world? Why not ask, Can we systematically continue to emit increasing amounts of CO2 and other greenhouse gasses into the atmosphere without eventually provoking unacceptable climate changes? Scientists will overwhelmingly agree that the answer is no.

...

To make the point more simply, if you jump out of an airplane you need a crude parachute more than an accurate altimeter.


Go. Read it. He's just getting warmed up.

Update: Thingsbreak points out that you can read the same text with less strain on your eyes and your mouse hand at Grist.

 

12 comments:

Dano said...

Oooh. Good find, Michael. I have pounds of Daly papers and books in my office. Current favorite, for its simple explanation of our consumption patterns and I = PAT. I've given this paper to a few Councilpersons I know.

Best,

D

thingsbreak said...

Especially relevant in light of the continued and recently renewed attacks on an emissions limit by the Breakthrough crowd.

Michael Tobis said...

tb, your link doesn't work, but your article here is enough of a clue to follow up

thingsbreak said...

mt,

I was attempting to link to the Nordhaus and Shellenberger op-ed in the LA Times.

Interesting that on being challenged at Climate Progress directly on how their "no emissions limit, all breakthrough" strategy would actually ameliorate the climate issue- specifically in regard to the coal problem, they don't seem to have an answer. They seem to be too busy attacking "Greens" (I wasn't aware that those who supported an emissions cap were "Greens"- I'm pretty sure I am not a member of the Green Party, or any other political party).

David B. Benson said...

Air capture of CO2 followed by sequestration deep undergraound is a 'crude parachute', but does not seem overly expensive. Here is the Univ. Calgary press release, which has a link to technical stuff at the bottom:

Keith's air capture of CO2

Assuming electricity at $0.10 per kwh and DoE's estimate of $20 to sequester a tonne of CO2, that is but $30+ per tonne of CO2; $110+ per tonne of carbon. I know of no other method less expenisive.

David B. Benson said...

Posted too early. I forgot about the step of recovering the CO2 from the sodium carbonate. I suspect this is expensive.

David B. Benson said...

It is expensive. See the comment by Bruce Dunn (also by Paul Dietz) in

Low Cost Atmospheric Carbon Dioxide Removal Looks Possible

davidlewis said...

I'm not that familiar with Daly's thought. I tune in on the NY Times Dot Earth blog and was interested one day when I saw that Andy Revkin, the reporter who runs the blog, wrote that he had invited Herman Daly to give him something that day as food for thought as we all contemplated the global financial meltdown along with our usual, run of the mill, everyday, what to do about the planetary ecological collapse problem. Here is the link to what Daly came up with:

http://dotearth.blogs.nytimes.com/2008/10/13/growth-economics-on-a-finite-planet/

Daly may make more sense when speaking on his own ground, whatever that is, but as he discussed what is happening in the global economic crisis he seemed not to understand what he was talking about. I had just been reading Paul Krugman's introduction to The General Theory as I turned to study this bit of Daly on Dot Earth. I found this assessment of Keynes, written by Krugman, interesting as I thought about Daly:

"Challenges to economic orthodoxy are a dime a dozen. At least once a month I receive a new book that purports to overthrow conventional economic wisdom. The vast majority of these books’ authors, however, don’t understand enough about existing economic theory to mount a credible challenge.

Keynes, by contrast, was deeply versed in the economic theory of his time, and understood the power of that body of theory. "I myself," he wrote in the preface, "held with conviction for many years the very theories which I now attack, and am not, I think, unaware of their strong points." He knew that he had to offer a coherent, carefully reasoned challenge to the reigning orthodoxy to change peoples’ minds."

Krugman went on to write that the work of Keynes "transformed the way everyone, including Keynes’s intellectual opponents, thought about the economy".

Now it is too much to expect Daly to be as powerful a writer as Keynes or that his challenge to economic orthodoxy be so devastating as Keynes was to the economics of his time. But, in this light, consider what I found as I examined the logic and factual material he presented as his analysis of the current crisis:

In his Dot Earth piece, Daly argues that the problem of today is the "overgrowth of financial assets relative to growth of real wealth - pretty much the opposite of too little liquidity". No orthodox economist would put it quite this way. Most don't even call the crisis a liquidity crisis. Although many did early on, that view is seen as a mistake now.

The root of the problem is now seen as a solvency crisis. The banks were all cruising along until they all discovered that there was a big question as to what a lot of a very specific type of debt, i.e. the sophisticated financial instruments Wall Street had been churning out the last number of years selling on to them calling them AAA securities, were worth. To their horror, the market for these disappeared completely. No one wanted one more bit of any of them. Now because the houses the sophisticated financial instruments derive their value from ultimately are worth something, the instruments are not ultimately worthless. But the housing market continues to plummet in value, there is no market for this specific type of paper known as derivatives, because of the way it derives its value from the housing market, so the banks all had tremendous holes in their balance sheets. The banks each knew they were insolvent or close to it, and they didn't want to lend to any other bank because, who knew how bad it was over there? They have rules and regulations in that industry, and if suddenly you have to tell the world you are bankrupt, its over for you, your employees and everyone you owe money to. If you loaned to a bank that was gone the next day, your money was gone. No one wants to do that. When Lehman Bros went, all confidence exploded. The entire system froze up. Daly would just dismiss this explanation as irrelevant.

Daly says its all debt - not any specific type of debt. The problem is debt - there's just too much of it. Debt has multiplied compared to "real wealth" which can't increase more than at some natural rate, whatever, Daly knows what he's talking about, but he doesn't explain. What Daly's "real wealth" is seems problematic. If I invent a piece of software that transforms millions of existing machines into something a lot more valuable, where does that fit in Daly's wealth classification system? Never mind. He knows there's only so much "real wealth" so let's let him have that one, as his logic is so flawed he's going down even if we grant that to him. Well, I'll throw this in: what difference would it make if paper multiplied relative to real things whatever they are, the paper just becomes worth less than what you thought. Its called inflation. Its automatic, and markets determine what the relationship is between paper and assets all the time. What's happening now is one type of paper in a vast quantity has suddenly been seen to have almost no value in relation to all the other paper and to all real wealth and the sudden shock was big enough to cause a crisis.

Its a very specific type of debt that no one wants. Well that hasn't got anything to do with the problem, says Daly. What Daly says: "No one any longer is eager to trade real present wealth for debt even at high interest rates". Funny thing: there is this thunder in the background as herds of investors are all rushing over to the US Treasury to buy up T-bills at almost zero interest because they're all looking for somewhere safe to stash their "wealth" and Uncle Sam's T-bill debt looks safe, so even in the middle of the worst financial storm he's faced for quite a while the world continues to hand its wealth to him in exchange for it.

Getting back to the titanic holes in all the banks balance sheets caused by the collapse of the market for a very specific type of debt which made it all practically worthless although it ultimately has some worth. Hence the solution, first adopted in the UK but then copied by the US Treasury, of direct injection of capital into the banking system to make all the banks solvent again, aimed at restoring the liquidity that seemed to be the problem in the first place. That's what it means when the governments bought equity positions in the banks. They handed the people who caused the problem, the ones who didn't look that deeply into what it was Wall Street was palming off on them, i.e. the banks, a load of money to restore their books from bankruptcy to solvency. They, the world's banks, then slowly started lending to each other again. The crisis called by economists "the end of the world" is slowly fading away, replaced by their very great concern for selecting the right policy to limit the impact of the recession caused by the sudden shock everyone had when they discovered how badly everyone in the system had blown it. When the banks all thought they all were insolvent the entire system froze up completely as they wouldn't even loan an apple for 24 hours to each other. After they were handed $2.5 trillion worldwide, the credit markets are slowly unthawing. Its amazing what shovelling out $2.5 trillion worldwide as if it were confetti showering down on a newly wedded couple, I mean, the banks, can do.

Daly denies, saying "the banks are not lending to each other" isn't a meaningful thing to even say. So he loses credibility in my mind. By the time he's talking about negative pigs and positive pigs I'm not even interested in following the discussion. When he warns about what's next, it sounds like he's warning that the US can't maintain its living standard because it has financed it for decades on a balance of payments deficit and with government deficits, but the counter argument that policy like that resulted in the overall economy growing so fast the US is on a net analysis better off is not considered. I don't know what is the case on this.

I feel the US must face pressure to balance its trade and budget deficits at some point but my point is this: Daly is full of warnings, he says certain financial instruments should be outlawed, credit should be restricted, but to do what? Save the system he says is killing the planet?

Daly says "only people who have no understanding of markets or who are consciously perpetrating fraud" could have possibly bought the mortgage backed securities that caused the problem, but he's wrong there. A lot of knowledgeable people were asleep at the switch, that's for sure, but its too easy to dismiss them all, what, the entire world banking system, "have no understanding of markets"? I don't think so. It looks like they trusted the ratings agencies of Wall Street too much, they trusted computer programs and securities set up using computer programs more than they trusted their own hard won common sense. Down payments were the security in the old days, plus a thorough examination of the trustworthiness of the customer, that the banks used to protect themselves from bad loans on housing. If the market fell 10%, even a new loan given at 20% down would leave that customer with 10% equity and hence an interest in continuing to pay. Nothing down, ballooning interest rate loans made to people who were questionable credit risks were repackaged into AAA securities and there are a lot of people with a lot to answer for, but it isn't that everyone suddenly lost all understanding of markets and how they work.

I think people who study "hard" sciences would be delighted with some of the economics theories. Bubble theory is great. Herds of fools buy into markets they know are so overvalued they have no possibility of sustaining prices in even the short run, confident there are herds of even greater fools out there about to clamour for the investment the first herd of fools will palm off on them, and on it goes, until the bubble bursts. They say the US mortgage backed security market dried up when people started defaulting on mortgages before they made the first payment. You can understand a market like that very well, yet still participate in it, believe you're going to be the one who gets out in time, and after its all over protest that you understand what markets are, and I'd say maybe I'd loan you an apple if you put up some collateral.

I thought Daly's big point would be that the powers that be do appear to not understand something, and that something would be that endless growth of the human impact on the biosphere will eventually undermine the life support capacity of the planet. Where is his alternate theory, or are the modifications he presents all he's got? I think the prospect of the collapse of the current system should cheer him up. Anyway, I agree with Krugman: if you want to mount a really devastating critique of a discipline, as Daly does seem to want to do with his critique of what he calls "growth economics" you've got to learn what it is and critique it so the advocates can't stand up to you.

And if you want to advocate a new system, you've got to spell it out.

There's something about taking Daly seriously that feels similar to taking a global warming denier seriously. A denier looks to those tiny number of fringe academics who reject the most reputable and intelligent and most widely respected of their colleagues, or they look to no one, and they cherry pick isolated facts and arguments and patch them together into gibberish. If you have absolutely no idea about the state of present knowledge of climate science and no respect for the many sincere people working in that field, you can even read deniers and wonder if it means something. They argue forcefully as if they know what they are talking about, until you discover they think CO2 has different physical properties than it does, or it appears that they think some effect they haven't quantified can be compared to something that has been quantified, something like that. There's always a tipoff pretty early on.

I wonder if Daly will be seen to be doing worthwhile work. Daly would reject the NY Times Nobel winner, Krugman, out of hand as a "growth economist" who would "howl" at him. He's better when he talks more generally about what the goal should be, i.e. taking planetary limits seriously, but for him, it seems to be a goal sitting on top of gobbledegook, sitting on top of mumbo jumbo, and after that its turtles all the way down.

davidlewis said...

why would anyone want to capture CO2 from air, as long as there was one coal plant emitting CO2 that wasn't being captured? You go where the gas exists at the highest concentration for the biggest bang for your buck.

Michael Tobis said...

David, to some extent I agree. There is no alternative theory of economics that is anywhere near comparable in elaboration or formalism to what we have.

Unfortunately, what we have is based on faulty assumptions. I believe I have, myself, said that Krugman is the best of a bad lot.

Any view of economics, no matter how elaborated, that treats significant positive growth as normal and sustaining as abnormal is no longer useful. Unfortunately, this growth concept is deeply enmeshed both in the mathematics of the theory and the behavior of the major participants.

The Dalyites have always bothered me not because of their weak economics but because of their weak thermodynamics. Their misplaced attention to entropy is endlessly off base.

None of which means they have no point. If a vast edicifice is built on a foundation which is only conditionally true, and that condition is changing, we need something new. Daly has been arguing that point effectively for a very long time, and it's a good thing that some people are starting to listen.

Michael Tobis said...

why would anyone want to capture CO2 from air, as long as there was one coal plant emitting CO2 that wasn't being captured?

The cost of carbon sequestration is not solely the capture part. It's not inconceivable that scrubbing the ambient atmosphere at a favorable site would be better than capturing carbon at an unfavorable site.

That said, you do have a point. I will offer an amendment that as long as carbon is not being captured and sequestered at favorably sited plants there will be little point to recovering carbon from the ambient atmosphere.

Also, the global economic optimum is not always achieved by individual interests optimizing individually, despite what some hard core Adam Smith types would have us believe. Ambient capture would tend to relieve the power utility of responsibility.

davidlewis said...

Krugman sounds palatable to many because he wants to reduce economic disparity and bring in universal health care, he's in the thick of it trying to stabilize everyone's 401K, and, I think, because he's a bright guy. I love his critique of the Republican party that they have let themselves become "the party of stupid".

But he's calling for massive deficit spending. In Canada we faced economic ruin not that long ago after decades of deficit spending. It was very easy for politicians to ignore that the economists had originally called for doing it only in some years.

I wouldn't care if they wanted to risk my country's fiscal stability if what they wanted to do was really take on the climate issue, but I suspect Krugman is not that concerned.

Krugman writes an occasional column on climate. That's how he got my attention in the first place.

One column of Krugman's that comes to mind is his "Economics of Catastrophe" July 29 2008 http://krugman.blogs.nytimes.com/2008/07/29/economics-of-catastrophe/

He wrote as if there were two poles in the debate on what to do about climate, and he took Bjorn Lomborg to be one of them. As soon as I saw Lomborg's name, I had difficulty taking the rest of what Krugman wrote seriously. In my mind, Lomborg is like a guy who believes there is a bozone layer of clowns in the atmosphere that are being depleted. He's worse than a joke because it seems too many people actually take him seriously. I sent a critique to Krugman but I have no idea if he read it. He did post it on his blog: I just found it by Googling "krugman lewis lomborg". That brings up the blog, my critique is comment #65.

On his blog, Krugman summed up his thought on climate in this way:

"The question is, can we mobilize people to make modest sacrifices to protect against low-probability catastrophes in the distant future?"

After reading that, I thought the question is, when will the Krugmans of this world wake up? Still, it is apparent that Krugman is thinking over what climate change means.

Hence the importance of frank public discussion of what is at stake involving the best climatologists. I originally came to your blog as a result of the Weaver quote you put up. He's been wading out into the political arena in Canada and its good to see. That guy is doing great work.

I hope Krugman comes up with a meaningful position one day.