Climatologists and financial modellers share more than we might think, or like. Fundamentally, both climate and financial models propose bold predictions based on highly sophisticated mathematical systems. One has already collapsed and the other will too.
Both the planet’s climate and the financial system are very, very complex beasts. Yet, people in both camps claim an ability to roughly model and predict their behaviour. Nicholas Taleb, a very popular figure these days and author of The Black Swan and Fooled by Randomness, has long prophesized that the mathematical models used in the financial world were useless because of large unpredictable events. The recent crash being a case in point. He calls these unpredictable events “Black Swans”, named after the discovery of black swans in Australia. Traditionally, it was taken for granted that all swans were white because that is all that was ever observed, but surprise, surprise they aren’t. When Europeans travelled to Australia for the first time, they came face to face with an impossibility – a black swan.
Talebs theory stands on the mathematical work of Benoit Mandelbrot, the man who discovered fractal geometry. Fractal geometry (figure below) demonstrates that an apparently simple mathematical formula can generate an infinitely varying pattern of shapes with unpredictable behaviour. It goes on to illustrate how a nearly imperceptible change in the initial conditions can have incalculably large effects on the final outcome. Fractal geometry is self-repeating patterns that grow more and more complex through time, but start from a very basic shape. Here is an example of an equilateral triangle being repeatedly copied to produce a Koch Snowflake.
Fractal geometry is found everywhere in nature. The geometry and size of twigs, trees, and forests are all related through fractal geometry. As are ant colonies, plant distribution, and coral reefs. Human dwellings in Africa, human village size, and other parts of our societies exhibit fractal behaviour. As a brief introduction to fractals, watch the amazing PBS Nova special.
Mandelbrot’s discoveries, led to “Chaos Theory”, popularized in Jurassic Park, and the “Butterfly Effect”. The basic idea is that the flap of a butterfly’s wings changes the air around it and eventually results in a violent tornado on the opposite side of the planet. An apparently inconsequential event can have unforeseen consequences. Sounds crazy, but it is true. It therefore follows that modelling complex, non-linear systems with any degree of accuracy is an activity in self-deception.
The IPCC, financial analysts, and other “modellers” who predict outcomes of complex systems should have their credentials checked. A superficial survey of fractal geometry, chaos theory, shrodinger’s equation, quantum mechanics and complex adaptive systems should trigger alarm bells. Big alarm bells.
There are numerous ecological “Black Swans”, some natural: the eruption of Krakatoa and Mount Tambora, sunspots, tectonic plate shifts; and others human: the discovery of fire, the steam engine, oil, and electricity. Explicitly and simply stated, events and discoveries we are completely incapable of predicting will occur and dramatically alter history. Single events can, and will change everything – we just don’t know what or when.
Imagine yourself in Victorian England, around 1880, as an oxford educated elite with the best education available. Your country controls a good part of the globe and you have read most of the available knowledge. If I were to predict that within 4 generations, man will visit the moon, explore every corner of the earth, have global wireless communication to every living person, regularly fly through the air near the speed of sound and have a black man as world leader; you would call me mad. And yet.
J.B.S. Haldane, the famous geneticist, once said,
I have no doubt that in reality the future will be vastly more surprising than anything I can imagine. Now my own suspicion is that the Universe is not only queerer than we suppose, but queerer than we can suppose. Possible Worlds and Other Papers (1927), p. 286
Think about it. If we cannot even suppose how queer our universe is, how can we hope to model and predict its behaviour? A word of caution, I am not saying no models work; models do work with relative accuracy most of the time, but when they fail – they fail miserably. It is therefore unwise to base long term planning for the entire planet on a model that has a high likelihood of falling on its face.
Another way of putting it is that there are known knowns (things we know we know), known unknowns (things we know we don’t know) and the unknown unknowns (and things we don’t know we don’t know).
James Lovelock a fervent environmentalist and father of the Gaia Theory, which claims the Earth behaves like a living organism, has expressed doubts that complex models offer much valuable information.
Lovelock is as provocative as ever. He is withering about the attempt of the Intergovernmental Panel on Climate Change to forge a consensus, a word that he says has no place in science: “Just think, over 1,000 of the world’s best climate scientists have worked for 17 years to forecast future climates and have failed to predict the climate of today.” UK Telegraph
Lovelock is correct. Until you can demonstrate that your models from previous years have accurately predicted today, your model is broken.
The New York Times just reported that new studies have halved the estimated sea rise due to Antarctic melting, from 20 feet to 10. The change is due to gravitational effects not previously accounted for in the models. So, the new model has changed the outcome by 50% (or 100% depending on your perspective). Imagine this, I advertise my height as 6 feet on a dating website, I then arrange to meet a beautiful woman for a walk in central park. On Saturday, at the convened time, I meet her, and I am 3 feet tall. She might be disappointed.
This is the inherent problem with any model of a complex system; a tiny oversight can have dramatic effects. And since there are so many unknowns; thousands of tiny oversights are inevitable.
I am not saying we should do nothing – quite the opposite. We should do everything possible to place the odds in our favour: invest in education, challenge the status quo, increase healthcare, and most importantly, invest in ourselves.
Some lament that even if the west changes, China and India will drag the entire planet into an ecological black hole, from which there is no escape. Gandhi even prophetically stated, “God forbid that India should ever take to industrialism after the manner of the west… If our nation took to similar economic exploitation, it would strip the world bare like locusts.”
Yet, environmental issues are not a priority in developing nations because they have more pressing issues, not for a lack of caring. Once their wealth increases sufficiently, they will start to pay attention to the environment – it is already happening. As an analogy, efforts to curb aids in Africa have had mixed results. Different groups advocate for education, abstinence, condoms, antiretroviral drugs, or a combination. Yet, the most effective tool to treat the diseases is increased life expectancy. I know, that smacks of tautology, but hear me out.
If a person thinks they can live to be 40, as opposed to say 25, they will invest in their health, school, and birth control. When you expect to die at 25, you might as well party it up. Get rich, or die tryin’ as 50 Cent says.
When you change the framework a person lives in, the person changes – not the other way around. If we change peoples’ life expectancy, their behaviour will change. The vast majority of countries with improved living conditions, improved health first, then wealth, then the environment. With increased life expectancy, people value the future more and put more emphasis on maintaining their local and global environment for future generations. You need to make people value life; their own, their peers, and that of the natural world.
Too often, environmentalists claim that if everyone were as wealthy as the North Americans, we would need six planets to sustain our lifestyle. This is linearly true, but pragmatically false. Fundamentally, it assumes a static, linear relationship between resource consumption and wealth. Thomas Malthus, a 19th century classical economist, stated, “The power of population is indefinitely greater than the power in the earth to produce subsistence for man”. Source A man of the clergy, Malthus saw this relationship between earth and man as divinely imposed to teach virtuous behaviour: he regarded optimistic ideas of social reform as doomed to failure. Two hundred years later, it is clear that the Malthusian approach predicting limited economic growth due to resource scarcity has been proven wrong by consistent growth of the world economy. The lack of empirical evidence for the theory is clear and to promote it undermines the legitimate environmentalist. Malthus and his supporters failed to imagine the transformative power of innovative technology.
Once we agree innovation can release us from the bondage of resource limitations, we can start to move the environmental debate forward. Returning to fractal geometry, recall how a small change can have incredibly large impacts. Who, do let me know, accurately predicted the effects of democracy, the end of slavery, mass produced antibiotics, the splitting of the nucleus, or the power of the semi-conductor?
In conclusion, here are four emerging technologies that will fundamentally change the wealth to consumption ratio of modern society.
- Metal in construction and machinery will be replaced with carbon fibre beams and plates. (Amory Lovins at Stanford)
- The efficiency of solar and energy storage technology will improve in a similar way as semi-conductors did in the 20th century (Moore’s law). (Varia)
- All plastics and packaging will be replaced with bio-degradable materials. (Varia, EU laws, general trends)
- Vertical, high-density farming will allow for near unlimited production of any food we like. (TED talk
by Dickson Despommier, 2009)
None of these breakthroughs will be easy, but each has the power to change everything we take for granted. In all likelihood, something else will happen that no one has predicted. I can’t wait to see what the future holds for us and what we hold for it. It certainly does not forebode a global warming catastrophe.
Alan Greenspan, former federal reserve chairman had this to say about his financial model:
ALAN GREENNSPAN: And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.
REP. HENRY WAXMAN: You found a flaw in the reality…
ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?
ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
Micheal Crichton on Global Warming – Charlie Rose