The Guilty Fisherman

I’d just formulated my proposition that guilt may not be an appropriate emotion for dealing with the global warming problem, and, not having slept too well last night, I was pondering whether to change my usual habits and take an afternoon nap, when an old book of stories fell from my overloaded bookshelves. It fell open and I found myself starting to read…

“Once upon a time there was an old fisherman. He was fond of regaling his son and the other youngsters in the village with stories of the bounty he’d known in his younger days. ‘You didn’t have to cast a net, ‘ he’d tell them, ‘Fish would just land in the boat. And sometimes you could just go for a walk, miles from land – on the backs of great fish, of course!’ The boys would laugh excitedly. ‘Will we do that?’, they’d ask ‘when we grow up and go to sea?’ He’d nod and smile. He could see them telling their own tall tales to the next generation.

But he couldn’t help thinking that there was a grain of truth in his stories. He remembered days when in honour of some anniversary, festival or betrothal, or just for the hell of it, he’d drunk and sung with his friends until the early hours, not set sail until midday, yet been back long before sundown with his hold filled to the brim, with a shimmering, writhing mass of plump fish of whichever variety he’d sought. Nothing like that ever happened nowadays. And he wasn’t just becoming old and slow. The other fishermen agreed. Nowadays it was tough landing any catch large enough to feed a family, let alone sell on the quayside. And you couldn’t afford to throw anything back. You had to keep whatever miserable specimens you found in the nets.

The old fisherman pondered and pondered. Eventually he resolved to seek advice. Was it the fault of the villagers? Were they taking too many fish?

One day, when he’d landed a half-decent haul the day before, the old fisherman took his stick and climbed the mountain near the village. Many times he slipped and nearly fell, but eventually he made it to the craggy plateau where he knew an Old Woman lived. He hoped she still survived, as it was some months since she’d been seen.

He scouted around, and behind some rocks he found a small wooden hut. She was in. Her broom was propped outside, although only a few hazel twigs were left. Perhaps he should have brought her a new one.

He was still staring at the broom when a hand closed round his arm, the arthritic, clawed fingers more bone than flesh. He turned with a start. His pulse racing, he felt as if his heart would burst before he’d even asked his questions.

‘Steady on,’ she said, ‘I have to be careful not to fall. You wouldn’t believe the waiting list for a hip-replacement these days. Why do you think I grabbed you? You don’t think I fly around on that broom do you? If I tried’, she cackled, ‘my brittle bones would break into a million pieces on the rocks down there.’ The fisherman felt a little vertiginous as she gestured the way he’d just come.

He apologised and gave her the dried fish he’d brought. Her eyes lit up. Or would have done if it hadn’t been for her cataracts. Still, he sensed she was pleased with the offering.

She read his thoughts. ‘Yes, yes,’ she said. ‘Lovely, I hardly ever have fish. Just the odd half-digested morsel.’

As she spoke, they both became aware of a fluttering and a squawking. A seagull was trapped in a net she had strung between two heavy sticks wedged into crevices in the rock. The old woman walked slowly over, grabbed the bird with sudden, remarkable dexterity. There was an unpleasant crunch as she broke its neck.

‘Well, what do you think I eat?’ she said, ‘Sometimes there’s some fish still in the gullet, though I usually leave most as bait for the next bird. Would you like a nice cup of tea?’

As they sipped the hot drink, he explained his problem. Should they fish less? Should they instead try to scrape a living growing crops and hunting in the forest? Did they need to develop new skills?

‘Heh, heh, heh!’ the old woman laughed. ‘Why are you asking me?’

‘The whole village knows you for your wisdom,’ he replied.

‘But I am of Man,’ she said, ‘Even though you shun me.’

‘We’ll visit more often…’

‘That’s alright, young man, the feeling’s mutual. As I was saying,’ she continued, ‘I deal in the affairs of men. I provide harmless powders, so lovers can pretend to discover what they already know, so that angry men can make an enemy sick for a day in revenge for some ill-deed – better than bloodshed, don’t you agree? – but mostly I give advice to simply be calm or to act on desires, depending on the state of the visitor. These are the services I provide.’

‘I can’t help with your problem. You need to consult the Mermaid. She is born of the Earth and knows its ways. Not I, I only know the ways of Man’. She cackled. ‘You must go back whence you came.’

There was a silence as the fisherman contemplated the night he must spend alone on the Forbidden Rock.

‘I’m a pretty Mermaid! I know how Nature works! I pee in the sea, see!’ mocked the Old Woman cryptically, cackling. The fisherman was becoming a little disconcerted.

She saw him laughing and smiled. He saw her black teeth, but forbade himself to look away. She could tell, and laughed. He still met her gaze, but with even more effort. This only made her laugh more. Finally, she tilted her head back, cackling: ‘Positive feedback! Positive feedback!’

He didn’t know what she was talking about. He sipped his tea, now feeling very uncomfortable indeed.

‘Be guided by reason, not emotion,’ said the Old Woman after a long silence. ‘That’s the only advice I can give you.’

‘Well, mostly harmless powders,’ she muttered, after another long silence.

The fisherman glanced at his tea, then looked at her, worried.

‘It’s hard work getting the ingredients,’ she explained. ‘By the time I reach the forest, I’m too tired to look for newts. I just gave you a little something to make sure you get down the mountain safely.’ He was drinking only tea, but she knew he’d believe her and avoid a tumble.

—

The fisherman was determined. But even he was about to give up as the first ruddy rays of sunlight reflected on the sea to the East.

He heard it first, though he couldn’t tell where the sound of the wind and waves ended and the whispering voice began. ‘You seek my knowledge,’ he heard. He looked. She was there. He could feel her presence. Though he couldn’t tell where the glittering jewels of light on the rippling water ended and the Mermaid’s iridescent beauty began.

She seemed to read his thoughts. ‘You should have seen me in my younger days,’ a laughing voice seemed to tinkle, ‘I really was beautiful then!’

The music continued. ‘You must stop. Tell your people they may only fish but once a year, to provide for the great winter festival, and never beyond this rock. Otherwise the seas will never recover.’

He sat there staring, his mind in turmoil. At first, he sensed she was still there, but as the sun rose higher in the sky, the harsh light perhaps made her invisible, before she vanished beneath the waves.

—

The fisherman set sail for home. After a night without sleep his memory was confused. The Mermaid had confirmed his worst fears. But perhaps it had all been a figment of his imagination.

It was evening by the time he docked. His son was waiting to meet him. Apparently, for the first time, all the village’s boats had returned empty that day. A crowd gathered as he tied up his boat, worried and murmuring.

‘Did you see the Mermaid?’ ‘What did she say?’ ‘Was she as beautiful as the stories tell?’ They were crowding in on him.

He couldn’t let his people down. He had to tell them what they wanted to hear. Surely the young men deserved to experience what he had. If he told them they couldn’t, wouldn’t it be because of his own greed over the years?

Besides, he quite fancied a few more fish suppers himself during the years he had left.

He cleared his throat: ‘The fish will return,’ he said. There wasn’t really a cheer, just puzzled relief. They needed more convincing. ‘It’s a natural cycle,’ he improvised. ‘To do with sunspots. They affect the migration patterns of the fish, you see.’ One or two in the crowd aahed their understanding. He looked at the sea. ‘Like the waves!’ he said, triumphant, pleased that he’d come up with an analogy. His confidence was now reflected in his tone, ‘we’re just in a trough, that’s all. Soon we’ll be riding on the next crest!’

‘But go easy, don’t take too many fish,’ he added. But by then no-one was listening.

Was it his imagination? Or did he hear, over the sound of the wind and the waves, a long low moan in the distance, far out to sea?

—

The man who came to the Forbidden Rock was still young. But his hands were callused from scraping a living in the fields. Many villagers had died as, already near starving, they finally realised that the fish would not return and belatedly started experimenting with crops or hunting the rodents in the forest. If only they’d begun while there were still some fish left.

His father had been one of the first victims. As the catches worsened, he’d seemed to consume himself from within, while others were as yet merely hungry. They’d buried him here on the island where he’d claimed to have seen the Mermaid. By visiting his grave his son was hoping to understand what had happened.

Lost in his thoughts, an awful rotting smell seemed to creep up on him. The Mermaid hauled herself out of the sea, covered in green slime.

‘Look at me!’ she screamed. Her face was covered in warts and sores.

‘Why didn’t you listen!’ He saw her teeth were pointed and sharp, her red eyes burning into him.

‘We must now go our separate ways, Nature and Man,’ she hissed.

There was a cackle behind him. He turned and saw the Old Woman.

When he turned back the Mermaid was gone.

He turned again. The crone was still there.

‘How did you get here?’ he spluttered, forgetting to be afraid.

‘Never mind that. You’ll have to feed me too now. No fish, no gulls either!’ the Old Woman cackled.”

Well that was the story I found. The strange thing is when I looked for the book again I couldn’t find it. Where I’d put it down there was only a copy of a huge report on the science of climate change. And I don’t remember where it came from in the first place.

What could it all possibly mean?

Superfreakonomics, Oliver Burkeman, Hubris and Bounded Rationality

Oh dear, oh dear, oh dear! Hubris meets rationality…

I very much enjoyed Freakonomics. I see from the position of the bookmark in the copy on my shelf that I’ve read past halfway, so it must have been good. I recollect that I was particularly impressed by the discussion of the absence of ill-effects of a policy of random selection of pupils by over-subscribed schools in Chicago, clearly the fairest solution. In fact, I remembered the discussion of random selection in Freakonomics just last week when I read of a rant by a Mike Best, Headteacher, Beaminster school, Dorset:

“It was George III who said that the pathway to hell was paved with good intentions, and so it is with Labour initiatives. They have ranged from the mad (random allocation of school places)…”

Sir, George III was famously mad, and, if I recollect any history at all, died before the Labour party was even formed…

Unlike George III, the Freakonomics authors, Levitt and Dubner, urge policy to be made on the basis of dispassionate analysis of data. And not, perhaps, on the say so of so-called experts with a vested interest.

Considering myself an arch-rationalist, I eagerly read an article by Oliver Burkeman in today’s Guardian discussing the sequel to Freakonomics, Superfreakonomics. I didn’t know whether to laugh or cry.

The reviewer’s comments make interesting reading too. Burkeman writes, for example, that:

“Those arrested on charges of terrorism, [the authors] explain, are disproportionately likely to rent their home, have no savings account or life insurance, be a student, and have both Muslim first and last names. Superfreakonomics makes no mention of the possibility that the police might simply be targeting Muslims disproportionately, and Levitt seems genuinely baffled that anyone might object, on civil-liberties grounds, to targeting all those who fulfilled the relevant criteria.”

Burkeman seems to be implying that he believes behaviour likely to lead to arrest on charges of terrorism is evenly distributed throughout the population, and that Muslims are therefore being targeted unfairly. Maybe I’m missing something here, and I don’t want to offend anyone, but isn’t the main terrorist threat at present from Muslim extremists? Just as a while back the main threat in the UK was from Irish nationalists? Or are these social phenomena just a figment of my imagination? Maybe in WWII British soldiers took more Germans than Americans prisoner just because they were targeting them disproportionately.

But this is nothing compared to Burkeman’s discussion of Superfreakonomics’ espousal of the geo-engineering plan to block out sunlight by “pumping large quantities of sulphur dioxide into the Earth’s stratosphere through an 18-mile-long hose, held up by helium balloons…”. Apparently, Nathan Myhrvold is promoting the idea. He should know better as well.

Anthropogenic stratospheric SO2 injection is a complete and utter non-starter, for the simple fact that warming isn’t the only problem caused by CO2 emissions. This has been very well known for some time. Conferences have been held to discuss the problem. I’d have expected Burkeman to know this.

5 minutes thought might cause one to wonder as to the biological effects (the impact on ecosystems, crop yields…) of decreasing light reaching the Earth’s surface – at the same time as CO2 levels are increasing. And you’d still have time to realise that we’d have to keep squirting SO2 into the stratosphere indefinitely, because it only stays up there for a short while, whereas the warming CO2 will remain in the atmosphere until we stop emitting it and/or do something to get the level in the atmosphere back to pre-industrial levels. Any disruption of the SO2 hosing process for any reason (war, terrorism, economic dislocation, court injunctions…) would lead to rapid temperature increases, because the CO2 would no longer be masked. And before the egg-timer rang you’d realise that any hint of adverse side-effects would make the plan entirely impractical on political grounds.

Myhrvold and the Freakos (sounds like a 60s rock band, don’t it?) have, it seems, walked into the hubristic trap of believing they understand the whole problem. Messing with the biosphere and the climate system requires other forms of analysis than the correlation of data-sets and a good understanding of the importance of the role of incentives in explaining human behaviour. The authors have exceeded their intellectual authority – they are skilled at analysing “closed” economic problems (where the boundary can easily be defined), but don’t seem to appreciate that tackling global warming is an “open” problem. I’m particularly astonished at this given their background as behavioural economists – I can hardly believe they are not aware of the concept of “bounded rationality“.

All Burkeman does is lamely point out that:

“The primary objection to this plan, as with other ‘geoengineering’ schemes, is that there’s no predicting the unknown negative effects of meddling in such a complex natural system. And it’s strange, given how much is made in both Freakonomics books of the law of unintended consequences, that they don’t mention this in the context of Myhrvold’s plan.”

Quite. But Oliver, they can’t even deal with the known knowns, let alone even the known unknowns. You don’t need to fret about the unknown unknowns!

The geo-engineering twaddle is all a shame, as Superfreakonomics apparently argues that:

“The problem with trying to reduce carbon emissions … is that the incentives are all wrong. Too many of the benefits are ‘externalities’, from which the people making the sacrifices will never benefit – and the whole history of economics demonstrates that such completely unself-interested behaviour is impossible to implement on a large scale, especially when so many people suspect that their sacrifice would not, in fact, make a significant difference to the outcome.”

I wouldn’t underestimate the potential of peer-pressure – as Burkeman puts it, “our self-interest can include a desire for the warm glow of acting in a moral or charitable way” – but I doubt this will be enough. Surprisingly, Burkeman doesn’t press this argument against the economists – whose profession has been known to not fully understand that there IS such a thing as society – but tails off into incoherence after noting that:

“This, of course, is desperately tricky territory. My immediate personal response is that Levitt’s view is irresponsible defeatism, which I find repugnant.”

“Repugnant”???!!! I’m with Levitt here. We all need to grow up and face facts.

Don’t squirt SO2 into the sky because, if this is the level of intellectual debate on how to deal with global-warming, all I can say is that we need the heavens to help us! (If I may be permitted to pluralise in a cryptic nod to Battlestar Galactica – buy the box-set if you don’t know what the frak I’m on about!).

The Wine, The Widgets and The Wardrobe

The blogging medium generally operates in reverse-chronological order. The reader encounters the most recent post first. If anyone has not already read my previous post outlining the Man in a Wardrobe Fallacy, then I suggest now would be a good time to do so. Otherwise the following will likely make no sense whatsoever.

Previously I glossed over what are in fact two distinct cases:
1. When the product for which it is proposed to use taxes to reduce consumption is produced internally to the economy – alcoholic drink for example.
2. When the product has to be imported, e.g. oil or other fossil fuel.

Case 1: Internally produced products
I assumed last time that all income over the 50 units p.a. needed for essentials would be spent on drink. I’d now like to consider a refined example where there is a limit to how much can be drunk – 60 units worth p.a. say, at the untaxed price. Any income over that amount is spent on massages, say, as suggested in the comment by Dr Adrian Wrigley.

I suppose I should address Adrian’s point directly. He argues that the higher the price of drink, the less will be consumed relative to massages. I seriously doubt it. This may well be “classical economics”, but in real life value is determined socially, not just in terms of utility. In this case, the social consideration is paramount. People will only spend on massages what they have left after peer-pressure has forced them to drink with their mates until they fall over.

Now let’s do the math. Remember our population of 100 people earn from 50 to 149 units per year. Necessities in this economy cost 50 units/year and the most that can be spent on drink is 60 units. As before, the guy earning 50 can afford no drink. Those earning 110 or over can afford to imbibe the full 60 units worth. So the total amount spent on drink is 40*60 + 60*(0+59)/2 = 2400 + 1770 = 4170 units.

Only the top 39% (earning from 111 to 149) can afford massage. So 39*(1+39)/2 = 780 units are spent on massage.

Now let’s impose our tax on drink at (say) 100%, redistributing the revenue to the whole population. We can only approximate by simple arithmetic (we have to use a more sophisticated technique such as iteration to find an exact solution), but let’s assume roughly the same amount of drink is consumed as before – around 4200 units worth, before tax, so 8400 units in total with the 100% tax.

The 4200 units raised by the taxman are distributed evenly, so that now the population has from 92 to 191 units to spend each year. But drink costs twice as much, so only those earning 170 units or more can afford to spend the maximum 120 units a year. The rest can spend from 42 to 119 units. The total amount now spent on drink is therefore 22*120 + 78*(42+119)/2 = 2640 + 6279 = 8910 units. But this buys only half as much drink as without the tax. Nevertheless the total amount of drink bought is equivalent to 4455 units, a significant increase over the 4170 units drunk prior to the introduction of the tax regime. (Really we should iterate by feeding the tax revenue of 4455 back into the calculation but this clearly won’t affect the result massively…).

As a sanity check, note that only the top 21% (earning 171 or more units) can now afford massage, so a mere 21*(1+21)/2 = 231 units is spent on that activity. Massage professionals change career to start wineries all over the country.

Of course, if we believe so much in our drink tax policy that we respond by raising the tax to (say) 500%, and redistributing the approximate 25000 units of tax raised (there are just under 5000 units available to be spent on all except essentials, before tax), then the population will have from 300 to 399 units to spend. But with the maximum intake of drink now costing 360 units, no-one will be able to afford a massage. The maximum salary of 399 units is only enough to spend 50 units on essentials and 349 units on drink. Everyone will spend all their disposable income down the boozer!

In real life, of course, the situation would be considerably worse, because there are far more people on low wages than high ones, not equal numbers on each unit of salary as I’ve modelled.

I fear that the implication extends beyond the vice taxes. For example, policies such as increasing taxes on heating fuel and distributing the money directly or indirectly (i.e. by just adding it to the general pool of money raised by taxation) to the poor and elderly would be socially just, but ineffective in reducing carbon emissions. The effect of such policies is to reduce the constraint on consumption for those who were constrained by price, whilst failing to limit consumption of the targeted product by the majority of those who weren’t previously constrained. Dear, oh dear!

An even bigger point is that surely we want everyone to become better off in the future. Productivity is increasing all the time, so this should be the natural outcome. Policies to restrict consumption of products unhealthy to individuals or the environment simply by taxing them should therefore be considered suspect at the outset. It doesn’t really make a lot of sense to keep the majority of the population poor just so that their consumption of harmful products can be limited by taxing said products! Such policies only make sense if the goal is to increase the price of a harmful option above that of a desirable option. If no desirable substitute exists (as for drink) then this result suggests that perhaps we should be thinking more about alternatives to taxation policies to reduce consumption – public education initiatives, for example.

Case 2: Imported products
This is the true Man in the Wardrobe Fallacy. The point is that taxation is a change internal to the economy, but the amount we can afford to import is an external parameter, independent of internal taxes.

It’s not entirely clear to its inhabitants how the UK pays its way in the world these days. But we must be selling something in order to fund our imports. Possibly our main export is now financial services snake-oil, but let’s pretend we make widgets and export £10bn of these a year. We can therefore afford £10bn worth of imports a year, and let’s say we spend the dosh on oil and products that contain “embodied” emissions. [See an interesting recent piece by Monbiot on embodied emissions, and note the comment by SteelyGlint].

Let’s say we impose an import tax on these nasties making them more expensive to the consumer. Why might this be ineffective?

1. Remember we will still be able to import £10bn worth of goods because nothing has changed on the export side – the world still wants £10bn worth of our widgets. And practically everything we might import has at least “embodied” carbon. If we use (say) less oil, because the tax encourages us to use it more efficiently, but import manufactures produced using coal-based power from (say) China instead, then we could find we’re responsible for even more carbon emissions than before! [OK, an explanation: I know the consumer pays tax on the embodied emissions (actually I consider such a tax to be entirely impractical, but let's be hypothetical for a moment), but if the scarcity value of oil is high, the cost of manufacture low and the carbon import tax not too high, the embodied emissions in £1000 worth (even after applying a carbon import tax) of Chinese manufactures could easily exceed the potential emissions in £1000 worth (after the carbon import tax) of oil! Oops!!].

2. Hang onto that point about efficiency. If we’re using less oil, but achieving the same economic output, perhaps by driving smaller cars, then – oops – we’ve improved the efficiency of the UK economy per unit of output! This will allow us to undercut our competitors and export more. We’ll therefore have more than £10bn to spend on imports. Oh dear!

3. OK, let’s get serious. We’ve taxed the oil we’re importing from Saudi, so that we import less. Instead, we blow the money on something containing no embodied carbon (for the sake of argument) – Indian Premier League cricket, for example. Now all we’ve done is put pounds into someone else’s hands (or perhaps dollars if we use that for such trade) – i.e. Indians working in the cricket industry. Now Saudi has this oil to sell and Indians have the pounds the Saudis were happy to take from us in return for their oil… All we’ve done is move the problem and put another link in the trade merry-go-round.

I seriously doubt that demand-side financial engineering (such as carbon taxes) will alone have any positive effect at all in reducing global carbon emissions. In fact, it could easily make the problem worse!

The Man in a Wardrobe Fallacy

Perhaps it was the Beano where I first read of the Man in a Wardrobe Fallacy. Two guys are struggling with a heavy wardrobe. “I thought there were three of you”, the customer says. Punchline: “The other guy is inside carrying the clothes!”

The Man in a Wardrobe Fallacy relates to one of the numerous problems likely to stymie attempts to use the price mechanism to limit consumption. In a nutshell, everyone forgets that money is just a way of distributing resources.

It may not look like it at first sight, but here is a pertinent example of the Man in a Wardrobe Fallacy : if an economy can produce or afford to import enough fuel (say) for (say) 5% of the possible desires of the population, then 5% of the possible desires of the population will be satisfied, whatever nominal price you put on fuel. [This case relies on the possible desires of the population being large relative to the potential supply of fuel, but has anyone looked at the real world lately? Noticed how much more we all need to fly than we did 25 years ago? Anyone heard of The Reverend Thomas Malthus?].

Don’t believe me? Try a thought-experiment:

(1) Imagine a population of 100 people with incomes varying from 50 to 149 units a year. Everyone spends all their income each year (a total of 9950 units).

(2) Spending is such that all will use up to the first 50 units of their income – a total of 5000 units – to buy essentials such as food. Anything left over is spent on something that you (the government) want people to spend less on – let’s say drink, but the argument is the same for unnecessary fuel.

(3) One poor sod can’t afford even one pint all year, but, with no tax on drink, everyone else spends the remainder of their income in excess of 50 units – from 1 to 99 units – on drink. A total of 49.5*100 = 4950 units are spent on drink.

(4) Can’t have this, says the government. Tax drink at 25%, 50%, 100%! The tax rate makes no difference.

(5) The critical point is that the tax raised is distributed, let’s say evenly across the population. Now, a little thought will show that the government can do nothing more effective with the tax revenue. It could destroy it, but this would simply raise the value of the money remaining in circulation. It could spend it on imports, or even give it away as overseas aid, but then the money must (eventually) be spent on products denominated in units – and returned to our own besotted population!

(6) When we raise and redistribute the drink tax, it’s obvious that the amount of money spent in the economy each year increases from 9950 units to (9950 + x) units where x is the amount raised by the drink tax. As before, 5000 units are spent on essentials, leaving (4950 + x) units to be spent on drink. Whatever x is, (4950 + x) units buys exactly the same amount of drink as 4950 units did before the need to pay x units in tax to the government! Of course, because of the redistributive tax, even the poorest guy can now afford to drink – he had been earning 50 units a year, but this is now supplemented from the tax revenues – but the total amount drunk is the same!

The real world is a little more complicated. For example, as the price of drink is raised, people might choose to buy a substitute product instead. Heroin, say.

If we substitute for drink something more fundamental – fossil fuels (“carbon”), which are embodied in almost everything we consume – we see that the effectiveness of trying to limit consumption with a tax depends (in the first approximation*) entirely on the availability of substitute products. Absent planning permission for nuclear power stations, tidal energy barrages and wind-turbines, imposing a tax on carbon in the UK would have very little effect on overall fossil-fuel consumption. Such a tax would be a case of shuffling the deckchairs on the Titanic. It affects internal patterns of fossil fuel consumption, but not overall consumption, because it has no effect on the amount of carbon the UK can afford to import!

This is the Man in a Wardrobe Fallacy. Even if the Man has imaginary superpowers – like a modern-day Maxwell’s Daemon – in this case including weightlessness, redistributing the weight of the clothes in the wardrobe would not reduce the overall load by one single gram.

———-

Note: Further fallacies (not for the faint-hearted!).

*Actually, it gets worse, but I want to stick to an explanation of the Man in a Wardrobe Fallacy here. Producing (as opposed to importing) renewable energy in the UK would simply allow us to increase our total energy consumption – we could afford to import the same amount of “carbon” as before!**

** Actually it might get even worse, as the economy would become more efficient than any others which don’t invest in renewables. We could undercut others on pricing of exports and therefore afford to import even more carbon than before…

The Perils of Efficient Diplomacy

Ahead of the G20 summit, I was struck this week by a comment by Angela Merkel, in a very interesting piece in the NYT:

“ ‘International policy is, for all the friendship and commonality, always also about representing the interests of one’s own country,’ Mrs. Merkel said in an interview with The New York Times and The International Herald Tribune.”

Germany seems hell-bent on blocking new stimulus spending to try to lift the world out of recession. Merkel is playing hard-ball, even (allegedly) trying to spike plans for a $2trn stimulus package by leaking it to the press at the weekend. France seems to agree, but Sarko emphasises the regulatory agenda, and is even threatening to take his ball away if he doesn’t get what he wants. Nicolas and Angela, hitherto badmatch.com incompatible have even managed to cosy up together.

But what are the French and Germans trying to achieve? There appears to be a G20 majority in favour of a stimulus. The population (and GDP) of the US, UK and Japan, who are all clearly for it far exceeds that of Old Europe or even the EU as a whole. And it’s hard to believe that the developing countries – including potential Franco-German EU partners in Eastern Europe – wouldn’t be very much in favour.

And surely the spillover effects of economic dislocation and political instability and extremism in Russia and the countries it considers fall within its sphere of influence would not be in the interests of Western Europe.

At the end of the day, much of the G20’s output will be just words. Compliance with a woolly agreement such as a fiscal stimulus is hard to verify and there are no effective sanctions. Countries are ultimately going to make their own spending decisions.

If France and Germany find themselves in a small minority, they will be forced to go along with a stimulus, and their leaders will lose face at home.

But if France and Germany succeed in blocking an agreement to take action, they will most likely also fail to achieve agreement on the regulatory changes that are so important to them. And agreements to establish regulatory organisations and protocols are more concrete, verifiable and permanent than spending increases compared to uncertain baselines.

Old Europe seems to have put itself in a lose-lose position. And perhaps they should bear in mind that this is the G20 and not the G7. Indeed, they may have already been outmanoeuvred (for once) by the Anglo-Saxons into a diplomatic forum where it is more difficult for them to block progress than the G7 or to get their own way as in the EU.

It could be very interesting this week. The cards are up in the air. How will they fall? If the emerging countries use the (I suspect temporary) “multipolar moment” to assert their influence, then France and Germany could be the losers.

Perhaps Old Europe is adopting a negotiating position. But the US will remember that their position on Iraq did not turn out that way. And freeloading in Afghanistan, with German soldiers notoriously not allowed out after dark, is a source of continued irritation. From a UK perspective, the French and Germans have stacked the decks in the EU for a long time. The common understanding here and in much of the world is that the CAP is an outrageous subsidy to the wealthy. The fear must be that France and Germany intend to use all their diplomatic weaponry to try to achieve their own national goals, regardless of collateral damage.

But the worst aspect is, win or lose, Franco-German obstructionism might change the mood. At a time when the world needs greater international cooperation on a host of issues.

Ango and Sarki really should take a step back and think about what they are doing. They are saying they are worried about agreeing to concerted international action that might damage their economies. In a few months, at the Copenhagen climate negotiations, the boot will be on the other foot. They will be hoping the US, China and India will agree to concerted international action that might damage their economies.

Merkel’s attitude rather reminds me of transport decisions in Cambridgeshire, where, as I reported, South Cambridgeshire District Council opposes plans purely on the grounds of their perception of the narrow interest of their own residents.

Many difficult collective decisions can only be made if the interests of narrow constituencies are put to one side.

Come on Angela, Nicolas, let’s have a bit of give at the G20, as well as take!

PS Nic, Ang, here’s another bit of pre-G20 reading.

Ice, Fire and the MPC

A number of us have noticed our concern for climate change becoming crowded out by the other Big CC – the credit crisis.  I therefore resolved to try to make some connections between the two.  And there are relationships on many levels.

This post is intended to be the first of a series (I’m trying to make them a bit shorter) exploring common problems with the decision-making process as regards addressing both the CC problems.

The CCs are extremely difficult problems to solve, not just because they are complex, but because, not only do we generally disagree over what the problem is, as well as whether we can or should do anything about it, it’s also not clear who is responsible for what aspects of solving them!  I’ll look at these issues another time, but, even if there we no issues with the decision-making process – if there was a benevolent dictator whose decision was final – we’d still be in difficulty, because, as complex problems, both CCs share the property of openness.

What do I mean by “openness”, in plain language?  Maybe I can try to encapsulate the idea by saying that with both the economy and the climate you never know when you’ve got to the bottom of an issue.  There is always the possibility that you haven’t included all the necessary factors affecting what you are trying to control.

Let’s take a couple of examples.

Back in the 1970s there were those who feared we were on the brink of a new Ice Age.  I was quite enthusiastic about this theory at the time, as I hoped this would lead to my school being closed, at least for a few days.  My view – the position championed by William Ruddiman – is that these scientists had the right idea, as far as it went.  If it hadn’t been for human activity before and since the Industrial Revolution, it seems very likely that the climate would have been in a cooling phase during the whole of human history.  The problem is that the Ice Age alarmists were operating within what is sometimes termed a closed system.  They weren’t wrong, as such, they were just taking no account of greenhouse gas emissions.  In fact in the battle between ice and fire, the human timescale of global warming caused by fossil-fuel burning meant it would inevitably overwhelm the gelogical timescale of the Ice Age cycle.

A parallel I see was the dilemma of the UK’s Monetary Policy Committee (MPC) a year or so ago.  Should they have been increasing interest rates to combat inflation or reducing them to try to head off a recession caused by the credit crunch?  They were threatened by both an inflationary fire and and the ice of a steep drop off in economic activity resulting from a banking crisis.  My point is that both sides – the hawkish majority of anti-inflation warriors and the doves led by David Blanchflower -  were right on their own terms.  If the banking system had not blown a gasket then the asset and commodity price bubbles would have caused general inflation.   Perhaps Blanchflower, working in the US near the epicentre of the financial meltdown, was able to see the coming recession more clearly than the rest of the MPC who were continually reading about increased wage demands in the UK.  Maybe the conclusions the MPC majority drew were correct in terms of the information available to them.

It’s difficult to make progress by reasoned argument against any entrenched position, but even more so when both sides are in the right on their own terms.  It is even more difficult, of course, when a closed system is institutionalised – defining an entire profession or discipline – and/or incorporated into mathematical tools or computer models.

And failure to correctly define a problem can be disastrous even when you think you are solving the problem.  The banking system has become the focus of efforts to resolve the credit crisis and prevent a recurrence.  One idea is to require banks to retain more capital during the good years, as a buffer for use in the bad years.  There’s been much water under the bridge since I previously expressed some scepticism, but I still feel inclined to say: “Be careful what you wish for”. Counterfactuals are difficult, but who’s to say the banking crisis hasn’t been a safety-valve for the global economy?  Maybe if asset prices had continued to rise, or even maintained the peaks they reached in 2008, we would now be seeing battles for higher wages and the start of the sort of inflation that turned the 1970s into a Lost Decade for the UK and many other economies.  I said it before, and again I see no need to fundamentally revise my position: there’s no reason why we can’t recover (or at least economic growth to resume) reasonably quickly from this shock.  There’s no poison – such as inflation – that will linger in the system for years and years.

In the realm of climate change, closed system thinking affects (for example) those proposing geo-engineering solutions.  Ideas such as space mirrors to reflect heat away from the Earth are entirely superficial.  Such solutions receive vast amounts of publicity will not return the climate to what it was before global warming – because the distribution of heat would be different – but have a much more serious problem.  They ignore the effect of elevated CO2 levels on marine life (in particular) which is becoming more and more apparent as an environmental disaster in itself.

What can we do?  Maybe all we can try to do is to be a little more self-aware.  Louder alarm bells should start ringing when someone questions whether everything has been taken into account.  Perhaps we also need to explore ways of helping generalists have a greater influence in public debate, addressing the risk of specialists using their detailed knowledge to score points and “blind us with science”.