Explaining Wage Stagnation

Why?

Well, my intuition says one thing — the change in trajectory correlates very precisely with the end of the Bretton Woods system. My intuition says that that event was a seismic shift for wages, for gold, for oil, for trade. The data seems to support that — the end of the Bretton Woods system correlates beautifully to a rise in income inequality, a downward shift in total factor productivity, a huge upward swing in credit creation, the beginning of financialisation, the beginning of a new stage in globalisation, and a myriad of other things.

Some, including Peter Thiel and James Hamilton, have suggested that there is data to suggest that an oil shock may have been the catalyst that put us into a new trajectory.

Oil prices:

And that this spike may be related to a fall in oil prices discoveries:

I certainly think that the drop-off in oil discoveries was a huge psychological factor in the huge oil price spike we saw in 1980. But the reality is that although production did fall, it has recovered:

The point becomes clearer when we take the dollar out of the equation and just look at oil priced in wages:

Oil prices in terms of US wages ended up lower than they had been before the oil shock.

What happened in the late 70s and early 80s was a blip caused by the (very real) drop-off in American reserves, and the (in my view, psychological — considering that global proven oil reserves continue to rise to the present day) drop-off in global production.

But while oil production recovered and prices fell, wages continued to stagnate. This suggests very strongly to me that the long-term issue was not an oil shock, but the fundamental change in the nature of the global trade system and the nature of money that took place in 1971 when Richard Nixon ended Bretton Woods.

UPDATE: Commenters are pointing out that I should probably have concentrated a bit more on the trade and globalisation dimension, which I did mention in passing. However, I see this as an outgrowth of the end Bretton Woods, because it began just after Bretton Woods was ended and there is no way that America could afford to run the kind of trade balance it runs today with the world had America stayed in the Bretton Woods system.

I have covered this issue in quite some depth in the past.

https://azizonomics.com/2012/03/18/global-trade-fragility/
https://azizonomics.com/2012/07/09/the-real-fiscal-cliff/

Free Market Ecology

These gargantuan global conferences where the emissaries of governments meet in hallowed halls to thrash out a global planning agenda — dressed in the clothes of ecology, or sustainable development, or whatever the buzzword of the day — are a waste of time.

They are a waste of time for the taxpayer, who has to stump up to pay for such efforts. They are a waste of time for the protestors who swarm to such events holding placards and shouting slogans. They are a waste of time for the ecologists who — whether right or wrong — believe that the present shape of human civilisation is unsustainable. Possibly the only group that really benefits are the self-perpetuating bureaucratic classes, who often take home huge salaries they could never earn in the private sector.

And the Malthusian targets of the bureaucracy have a history of missing.

The Guardian notes:

Rio+20 was intended as a follow up on the 1992 Earth Summit, which put in place landmark conventions on climate change and biodiversity, as well as commitments on poverty eradication and social justice. Since then, however, global emissions have risen by 48%, 300m hectares of forest have been cleared and the population has increased by 1.6bn people. Despite a reduction in poverty, one in six people are malnourished.

If these bureaucratic classes knew the first thing about economics or markets, they would begin to question whether such conferences — and all the promises, intergovernmental commissions, and regulatory pledges they spawn — are necessary. The more I question, the more I come to believe that all that is needed to halt any man-made ecological crises are free markets and free speech.

The history of human civilisation has been one of triumph over the limits of nature. While we have had our ups and downs, recent projections of imminent ecological ruin — such as those in the 1970s produced by Ehrlich and Holdren and the Club of Rome, or earlier by Keynes, Malthus and Galton (etc) — have all failed to materialise. But the trend goes back much further, into the distant past. Throughout our history our species has done what has been necessary to survive. Humanity has lived on this planet for upwards of 500,000 years, and through that time, we have survived a myriad of climate changes — solar variation, atmospheric variation, cycles of glaciation, supervolcanoes, gamma ray bursts, and a host of other phenomena.

It will be no different this time. We are dependent on our environment for our life and for our future. That is widespread knowledge, and so as the capable and creative species that we are, we have already developed a wide array of technological solutions to potential future environmental problems. This is a natural impulse; humanity as individuals and as a species hungers for survival, for opportunities to pass on our genes.

As I wrote last month:

If we are emitting excessive quantities of CO2 we don’t have to resort to authoritarian centralist solutions. It’s far easier to develop and market technologies (that already exist today) like carbon scrubbing trees that can literally strip CO2 out of the air than it is to try and develop and enforce top-down controlling rules and regulations on individual carbon output. Or (even more simply), plant lots of trees and other such foliage (e.g. algae).

If the dangers of non-biodegradable plastic threaten our oceans, then develop and market processes (that already exist today) to clean up these plastics.

Worried about resource depletion? Asteroid mining can give us access to thousands of tonnes of metals, water, and even hydrocarbons (methane, etc). For more bountiful energy, synthetic oil technology exists today. And of course, more capturable solar energy hits the Earth in sunlight in a single day than we use in a year.

The only reason why these technologies are not widespread is that at present the older technologies are more economically viable. Is that market failure? Are markets failing to reflect our real needs and wants?

No; those who so quickly cry “market failure!” fail to grasp markets. Certainly, I think GDP is a bad measure of economic growth. But throwing out the concept of money altogether as a measure of society’s needs and wants is completely foolish. Markets are merely an aggregation of society’s preferences. Capital and labour is allocated as the market — in other words, as society — sees fit. As Hayek showed in the 1930s, the market gives society the ability to decide how a good or service should be distributed based on individuals willingness to give money for it. The market gives feedback to producers and consumers through the price mechanism about the allocation of resources and capital, which in turn allows on the basis of individual consensual decisions corrections that prevent shortages and surpluses. Under a planned system there is no such mechanism.

The fact that greener technologies have not yet been widely adopted by the market is merely a symptom of the fact that society itself is not yet ready to make a widespread transition. But the fact that research and development and investment continues to pour into green technologies shows that the market is developing toward such an end.

Solar consumption has gone parabolic:

And so it will continue; as society evolves and progresses, the free market — so long as there is a free market — will naturally reallocate resources and labour based on society’s preferences. Without a free market — and since 2008 when the banks were bailed out and markets became junkiefied intervention-loving zombies, it is highly dubious that there is such a thing as a free market in the West — planners will just end up guessing at how to allocate resources, labour and capital, and producing monstrous misallocations of capital.

The political nature of such reallocation is irrelevant; whether the centralists call themselves communists or socialists or environmentalists, their modus operandi is always the same: ignore society’s true economic preferences, and reallocate resources based on their own ideological imperatives (often for their own enrichment).

My view is that the greatest threat to the planet’s ecology is from the centralists who wish to remove or pervert the market mechanism in order to achieve ideological goals. It is not just true that removing the market mechanism retard society’s ability to evolve into new forms of production, resource-allocation, and capital-allocation based on society’s true preferences. The command economies of the 20th Century — particularly Maoist China and Soviet Russia — produced much greater pollution than the free markets. Under a free market, polluters who damage citizens or their property can be held to account in the market place, and through the court system.There is no such mechanism through the kind of command of economy that the centralists seem to wish to implement.

The answer is not central planning and government control. The answer is the free market. 

What Peak Oil?

Is peak oil imminent? Lots of people seem to think so.

The data (released by BP a company who have a vested interest in oil scarcity) don’t agree. Proved reserves keep increasing:

The oil in the ground will run out some day. But as the discovery of proven reserves continues to significantly outpace the rate of extraction, the claims that we’re facing immediate shortages looks trashy.

Some may try to cast doubt on these figures, saying that BP are counting inaccessible reserves, and that we must accept that while there are huge quantities of shale oil in the ground, the era of cheap and readily accessible oil is over. They might cite the idea that oil prices are much higher than they were ten years ago. Yet this is mostly a monetary phenomenon resulting from excessive money creation beyond the economy’s productive capacity. Priced in gold, oil is still very cheap — almost as cheap as it has ever been:

The argument that the vast majority of counted reserves are economically inaccessible is fundamentally flawed. In the long run there is only one equation that really matters in determining whether oil is extractable, and that is whether there is a net energy gain; whether energy-in exceeds energy-out. If there’s a net energy gain, it’s feasible. Certainly, we are moving toward a higher cost of energy extraction. Shale oil (for example) has a lower net energy gain than conventional oil, but still typically produces five times as much energy as is consumed in extraction.

But the Earth’s extractable hydrocarbons will eventually dry up, whether that’s in 500 years or 200 years. If we want humanity to have a long-term future on Earth, we need to move to renewables; solar, hydroelectric, thorium, synthetic hydrocarbons. And the market will ensure that, eventually — as the cost of renewable energy continues to fall, more and more of us will adopt it. I don’t buy the myth that markets are stupid — if humanity needs renewable energy (I believe we do) the market will see to it (I believe that is slowly happening). Markets are just the sum of human preferences.

According to the International Renewable Energy Institute:

Power from renewable energy sources is getting cheaper every year, according to a study released Wednesday, challenging long-standing myths that clean energy technology is too expensive to adopt. The costs associated with extracting power from solar panels has fallen as much as 60 percent in just the past few years.The price of  from other renewables, including wind, , concentrating solar power and biomass, was also falling.

So no. I’m not lying awake at night worrying about imminent peak oil. There’s plenty of extractable oil, and renewable energy will eventually supplement and replace it. But will politics get in the way of energy extraction? The United States has huge hydrocarbon reserves, yet regulation is preventing drilling and shipment, leaving America dependent on foreign oil. And the oil companies themselves are largely to blame — after Deepwater Horizon, should anyone be surprised that politicians and the public want to strangle the oil industry?

If there’s an imminent energy crisis, it will be man-made. It will come out of the United States’ dependency on foreign oil. Or out of an environmental catastrophe caused by mismanagement and graft (protected cartels like the energy industry always lead to mismanagement). Or out of excessive red tape. Or war.

Keynesianism & Eugenics

The theory of output as a whole, which is what The General Theory of Employment, Interest and Money purports to provide, is much more easily adapted to the conditions of a totalitarian state.

John Maynard Keynes

In looking at and assessing the economic paradigm of John Maynard Keynes — a man himself fixated on aggregates — we must look at the aggregate of his thought, and the aggregate of his ideology.

Keynes was not just an economist. Between 1937 and 1944 he served as the head of the Eugenics Society and once called eugenics “the most important, significant and, I would add, genuine branch of sociology which exists.” And Keynes, we should add, understood that economics was a branch of sociology. So let’s be clear: Keynes thought eugenics was more important, more significant, and more genuine than economics.

Eugenics — or the control of reproduction — is a very old idea.

In The Republic, Plato advocated that the state should covertly control human reproduction:

You have in your house hunting-dogs and a number of pedigree cocks. Do not some prove better than the rest? Do you then breed from all indiscriminately, or are you careful to breed from the best? And, again, do you breed from the youngest or the oldest, or, so far as may be, from those in their prime? And if they are not thus bred, you expect, do you not, that your birds and hounds will greatly degenerate?  And what of horses and other animals? Is it otherwise with them? How imperative, then, is our need of the highest skill in our rulers, if the principle holds also for mankind? The best men must cohabit with the best women in as many cases as possible and the worst with the worst in the fewest,  and that the offspring of the one must be reared and that of the other not, if the flock is to be as perfect as possible. And the way in which all this is brought to pass must be unknown to any but the rulers, if, again, the herd of guardians is to be as free as possible from dissension.  Certain ingenious lots, then, I suppose, must be devised so that the inferior man at each conjugation may blame chance and not the rulers and on the young men, surely, who excel in war and other pursuits we must bestow honors and prizes, and, in particular, the opportunity of more frequent intercourse with the women, which will at the same time be a plausible pretext for having them beget as many of the children as possible. And the children thus born will be taken over by the officials appointed for this.

Additionally, Plato advocated “disposing” with the offspring of the inferior:

The offspring of the inferior, and any of those of the other sort who are born defective, they will properly dispose of in secret, so that no one will know what has become of them. That is the condition of preserving the purity of the guardians’ breed.

In modernity, the idea appears to have reappeared in the work first of Thomas Malthus, and later that of Francis Galton.

Malthus noted:

It does not, however, seem impossible that by an attention to breed, a certain degree of improvement, similar to that among animals, might take place among men. Whether intellect could be communicated may be a matter of doubt: but size, strength, beauty, complexion, and perhaps even longevity are in a degree transmissible. As the human race could not be improved in this way, without condemning all the bad specimens to celibacy, it is not probable, that an attention to breed should ever become general.

Galton extended Malthus’ thoughts:

What nature does blindly, slowly and ruthlessly, man may do providently, quickly, and kindly. As it lies within his power, so it becomes his duty to work in that direction.

Margaret Sanger — the founder of Planned Parenthood — went even further, claiming that the state should prevent the “undeniably feeble-minded” from reproducing,  and advocated “exterminating the Negro population”.

And these ideas — very simply, that the state should determine who should live, and who should die, and who should be allowed to reproduce — came to a head in the devastating eugenics policies of Hitler’s Reich, which removed around eleven million people — mostly Jews, gypsies, dissidents, homosexuals, and anyone who did not fit with the notion of an Aryan future — from the face of the Earth.

Of course, the biggest problem with eugenics is that human planning cannot really control nature. Mutation and randomness throw salt over the idea. No agency — even today in the era of genetics — has the ability to effectively determine who should and should not breed, and what kind of children they will have.

As Hayek noted:

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Keynes’ interest in this topic appears to have descended from his contempt for the individual, and individual liberty. He once wrote:

Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these.

The common denominator in all of these examples — and in my view, the thing that brought Keynes toward eugenics — is the belief that the common individual is too stupid to be the captain of his own destiny. Instead, the state — supposedly equipped with the best minds and the best data — should centrally plan. Eugenicists believe that the state should centrally plan human reproduction, while Keynesians believe that the state should centrally engineer recovery from economic malaise through elevated spending. Although it would be unwise to accuse modern Keynesians of having sympathy for eugenics, the factor linking both of these camps together is John Maynard Keynes himself.

Keynes’ description of an economic depression — that a depression is a fall in the total economic output — is technically correct. And many modern Keynesian economists have made worthwhile contributions — Hyman Minsky, Steve Keen, Michael Hudson, and Joe Stiglitz are four examples . Even the polemicist Paul Krugman’s descriptive work on trade patterns and economic agglomeration is interesting and accurate.

The trouble seems to begin with prescriptions. Keynesianism dictates that the answer to an economic depression is an increase in state spending. And on the surface of it, an increase in state spending will lift the numbers. But will momentarily lifting the numbers genuinely help the economy? Not necessarily; the state could spend millions of dollars on subsidies for things that nobody wants, wasting time, effort, labour and taxes and thus destroying wealth. And the state can push a market into euphoria — just as Alan Greenspan did to the housing market — creating the next bubble and the next bust, requiring an even bigger bailout. State spending creates additional dependency on the state, and perverts the empirical market mechanism — the genuine underlying state of demand in a market economy — which signals to producers what to produce and not produce. Worst of all, centralist policies almost always have knock-on side-effects that no planner could foresee (causality is complicated).

So Hayek’s view on the insuperable limits to knowledge applies as much to the economic planner as it does to the central planner of human reproduction.

While eugenicists and Keynesians make correct descriptive observations — like the fact that certain qualities and traits are inheritable, or more simply that children are like their parents — their attempts to use the state as a mechanism to control these natural systems often turns out to be drastically worse than the natural systems that they seek to replace.

As Keynes seems to admit when — in the German language edition of his General Theory — he noted that the conditions of a totalitarian state may be more amenable to his economic theory, the desire for control may be the real story here.

Keynesianism brings more of the economy under the control of the state. It is a slow and creeping descent into dependency on the state. As we are seeing in Europe today, cuts in state spending in a state-dependent economy can cause deep economic contraction, providing the Keynesian more confirmation for his idea that the state should tax more, and spend more.

That is, until nature intervenes. Just as a state-controlled eugenics program might well spawn an inbred elite suffering hereditary illnesses as a result of a lack of genetic diversity (as seems to have happened with the inbred elite Darwin-Galton-Wedgwood clan), so a state-controlled economy may well grind itself into the dirt as it runs out of innovation as a result of a lack of economic diversity. Such a situation is unsustainable — no planner is smarter than nature.

The Face of Genocidal Eco-Fascism

I am not exaggerating.

This is Finnish writer Pentti Linkola — a man who demands that the human population reduce its size to around 500 million and abandon modern technology and the pursuit of economic growth — in his own words.

He likens Earth today to an overflowing lifeboat:

What to do, when a ship carrying a hundred passengers suddenly capsizes and there is only one lifeboat? When the lifeboat is full, those who hate life will try to load it with more people and sink the lot. Those who love and respect life will take the ship’s axe and sever the extra hands that cling to the sides.

He sees America as the root of the problem:

The United States symbolises the worst ideologies in the world: growth and freedom.

He unapologetically advocates bloodthirsty dictatorship:

Any dictatorship would be better than modern democracy. There cannot be so incompetent a dictator that he would show more stupidity than a majority of the people. The best dictatorship would be one where lots of heads would roll and where government would prevent any economical growth.

We will have to learn from the history of revolutionary movements — the national socialists, the Finnish Stalinists, from the many stages of the Russian revolution, from the methods of the Red Brigades — and forget our narcissistic selves.

A fundamental, devastating error is to set up a political system based on desire. Society and life have been organized on the basis of what an individual wants, not on what is good for him or her.

As is often the way with extremist central planners Linkola believes he knows what is best for each and every individual, as well as society as a whole:

Just as only one out of 100,000 has the talent to be an engineer or an acrobat, only a few are those truly capable of managing the matters of a nation or mankind as a whole. In this time and this part of the World we are headlessly hanging on democracy and the parliamentary system, even though these are the most mindless and desperate experiments of mankind. In democratic coutries the destruction of nature and sum of ecological disasters has accumulated most. Our only hope lies in strong central government and uncompromising control of the individual citizen.

In that sense, Linkola’s agenda is really nothing new; it is as old as humans. And I am barely scratching the surface; Linkola has called for “some trans-national body like the UN” to reduce the population “via nuclear weapons” or with “bacteriological and chemical attacks”.

But really he is just another freedom-hating authoritarian — like the Nazis and Stalinists he so admires — who desires control over his fellow humans. Ecology, I think, is window-dressing. Certainly, he seems to have no real admiration or even concept of nature as a self-sustaining, self-organising mechanism, or faith that nature will be able to overcome whatever humanity throws at it. Nor does he seem to have any appreciation for the concept that humans are a product of and part of nature; if nature did not want us doing what we do nature would never have produced us. Nature is greater and smarter than we will probably ever be. I trust nature; Linkola seems to think he knows better. As George Carlin noted:

We’re so self-important. Everybody’s gonna save something now. Save the trees. Save the bees. Save the whales. Save those snails. And the greatest arrogance of all, save the planet. What? Are these fucking people kidding me? Save the planet? We don’t even know how to take care of ourselves yet. We haven’t learned how to care for one another and we’re gonna save the fucking planet?

There is nothing wrong with the planet. The planet is fine. The people are fucked. Difference. The planet is fine.

Linkola and similar thinkers seem to have no real interest in meeting the challenges of life on Earth. Their platform seems less about the environment and more about exerting control over the rest of humanity. Linkola glories in brutality, suffering and mass-murder.

Now Linkola is just one fringe voice. But he embodies the key characteristic of the environmental movement today: the belief that human beings are a threat to their environment, and in order for that threat to be neutralised, governments must take away our rights to make our own decisions and implement some form of central planning. Linkola, of course, advocates an extreme and vile form of Malthusianism including genocide, forced abortion and eugenics.

But all forms of central planning are a dead end and lead inexorably toward breakdown; as Hayek demonstrated conclusively in the 1930s central planners have always had a horrible track record in decision making, because their decisions lack the dynamic feedback mechanism present in the market.  This means that capital and labour are misallocated, and anyone who has studied even a cursory history of the USSR or Maoist China knows the kinds of outcomes that this has lead to: at best the rotting ghost cities of China today, and at worst the mass starvation of the Great Leap Forward resulting in millions of deaths and untold misery.

Environmentalists should instead pursue ideas that respect individual liberty and markets. There is more potential in developing technical solutions to environmental challenges than there is in implementing central planning.

If we are emitting excessive quantities of CO2 we don’t have to resort to authoritarian solutions. It’s far easier to develop and market technologies (that already exist today) like carbon scrubbing trees that can literally strip CO2 out of the air than it is to try and develop and enforce top-down controlling rules and regulations on individual carbon output. Or (even more simply), plant lots of trees and other such foliage (e.g. algae).

If the dangers of non-biodegradable plastic threaten our oceans, then develop and market processes (that already exist today) to clean up these plastics.

Worried about resource depletion? Asteroid mining can give us access to thousands of tonnes of metals, water, and even hydrocarbons (methane, etc). For more bountiful energy, synthetic oil technology exists today. And of course, more capturable solar energy hits the Earth in sunlight in a single day than we use in a year.

The real problem with centrally-planned Malthusian population reduction programs is that they greatly underestimate the value of human beings.

More people means more potential output — both in economic terms, as well as in terms of ideas. Simply, the more people on the planet, the more hours and brainpower we have to create technical solutions to these challenges. After all, the expansion of human capacity through technical development was precisely how humanity overcame the short-sighted and foolish apocalypticism of Thomas Malthus who wrongly predicted an imminent population crash in the 19th century.

My suggestion for all such thinkers is that if they want to reduce the global population they should measure up to their words and go first.

Mining the Skies

In August last year I wrote:

Concerned about resource scarcity? There’s plenty more up there. Last year, scientists confirmed that there was water on the moon. And there are metals and hydrocarbons abundant in asteroids. Metallic asteroids  possess copper, silver, gold, and all other such elements as well, though not in abundances anywhere near as large as those of their primary constituents.

It’s an age old trope, going back to John S. Lewis’ book on the subject, and one of my greater interests.

I know that Earth is finite. I know that in some limited sense Malthus — my great intellectual nemesis, albeit one who has been proven wrong and wrong again and again — could be proven right. Earth’s resources are limited simply by the fact that Earth is a limited space. If we don’t leave Earth behind, and we continue to expand we will hit Earth’s limits, if not by the end of the century (unlikely, in my view) then by the end of the millennium.

But my key message on this subject is this: Malthus will only ever be proven right if we screw up. It’s a big expansive universe, and we are smart, flexible, ingenious creatures. We don’t know how big, but the amount of resources out there seem far, far beyond the scope of the human imagination. Malthus will always be there with us, a shackle around our necks, forewarning us not to be too gluttonous, or to expand too far too fast, and to maintain an awareness of our access to resources, particularly water and sustenance. Forewarning us, I might add, of the dangers of our own arrogance. But resource pressures are something we can always conquer without resorting to any kind of nasty authoritarianism.

For just as I expected — and not a moment too soon — a cohort of the wealthy are putting their economic weight behind the idea of going out and getting more resources.

From the Telegraph:

Power players including Eric Schmidt, the Google chairman, and James Cameron, the film director, are planning to mine the final frontier: space.

They are among the backers of a new venture that will reach for the riches lying elsewhere in the solar system. Planetary Resources will be a “space exploration company to expand Earth’s resource base” according to scant information released ahead of the start-up’s launch in Seattle on Tuesday.

“The company will overlay two critical sectors – space exploration and natural resources – to add trillions of dollars to the global GDP,” was the bold claim. “This innovative start-up will create a new industry and a new definition of ‘natural resources’.”

Mr Schmidt and the internet giant’s co-founder Larry Page are listed alongside Mr Cameron, the director of Titanic and Avatar, among the venture’s investors and advisers.

The company was founded by Eric Anderson and Peter Diamandis. “Since my childhood I’ve wanted to do one thing, be an asteroid miner,” Mr Diamandis told Forbes earlier this year. “So stay tuned on that one.”

While the costs of space travel are high, the hope is that riches contained in asteroids would make the sums worthwhile. Studies suggest that gold and other metals in the earth’s crust originated from asteroids that collided with the planet during its early life.

This is not the end of the road, but the start.

In any new industry there will be failures, some dramatic. Solar energy is a wonderful principle, but Solyndra was a terrible company.

But it is a pleasing start. Human civilisation just took a step in the right direction. And the ghost of Malthus just took another crashing blow.

Two Kinds of Black Swans

The black swan is probably the most widely misunderstood philosophical term of this century. I tend to find it being thrown around to refer to anything surprising and negative. But that’s not how Taleb defined it.

Taleb defined it very simply as any high impact surprise event. Of course, the definition of surprise is relative to the observer. To the lunatics at the NYT who push bilge about continuing American primacy, a meteoric decline in America’s standing (probably emerging from some of the fragilities I have identified in the global economic fabric) would be a black swan. It would also be a black swan to the sorry swathes of individuals who believe what they hear in the mainstream media, and from the lips of politicians (both Romney and Obama have recently paid lip service to the idea that America is far from decline). Such an event would not really be a black swan to me; I believe America and her allies will at best be a solid second in the global pecking order — behind the ASEAN group — by 2025, simply because ASEAN make a giant swathe of what we consume (and not vice verse), and producers have a historical tendency to assert authority over consumers.

But black swans are not just events. They can also be non-events. To Harold Camping and his messianic followers who confidently predicted the apocalypse on the 21st of May 2011 (and every other true-believing false prophet) the non-event was a black swan. Surprising (to them at least) and high impact, because it surely changed the entire trajectory of their lives. (Camping still lives on Earth, rather than in Heaven as he supposedly expected).

To true-believing environmentalists who warn of Malthusian catastrophe (i.e. crises triggered by overpopulation or resource depletion), history is studded with these black swan non-events.

From the Economist:

Forecasters of scarcity and doom are not only invariably wrong, they think that being wrong proves them right.

In 1798 Thomas Robert Malthus inaugurated a grand tradition of environmentalism with his best-selling pamphlet on population. Malthus argued with impeccable logic but distinctly peccable premises that since population tended to increase geometrically (1,2,4,8 ) and food supply to increase arithmetically (1,2,3,4 ), the starvation of Great Britain was inevitable and imminent. Almost everybody thought he was right. He was wrong.

In 1865 an influential book by Stanley Jevons argued with equally good logic and equally flawed premises that Britain would run out of coal in a few short years’ time. In 1914, the United States Bureau of Mines predicted that American oil reserves would last ten years. In 1939 and again in 1951, the Department of the Interior said American oil would last 13 years. Wrong, wrong, wrong and wrong.

Predictions of ecological doom, including recent ones, have such a terrible track record that people should take them with pinches of salt instead of lapping them up with relish. For reasons of their own, pressure groups, journalists and fame-seekers will no doubt continue to peddle ecological catastrophes at an undiminishing speed. These people, oddly, appear to think that having been invariably wrong in the past makes them more likely to be right in the future. The rest of us might do better to recall, when warned of the next doomsday, what ever became of the last one.

Critics will note that Malthusians only have to be right once to provoke dire consequences; deaths, famines, plagues. Of course, that is the same logic that has led governments to spend trillions, and trample the constitutional rights of millions of people in fighting amateurish jihadis, when in reality more Americans — yes including the deaths from 9/11 — are crushed to death by furniture than are killed by Islamic terrorism.

But it is true, the scope of the threat posed by Malthusian catastrophe is probably an order of magnitude greater than by jihadis with beards in caves. And of course, groups like the Club of Rome and individuals like Paul Ehrlich will keep spewing out projections of imminent catastrophe.

So what were the real threats to humanity following Malthus’ predictions? Was it overpopulation? Nope. Imperial warfare killed far, far more than any famine or resource crisis in the 20th Century. To the overwhelming majority of the population, World War I — both in its origins (the assassination of an obscure archduke), its scope, its death toll, and its final ramifications (i.e. the Treaty of Versailles, the rise of Nazism and World War II) was the great black swan event, the great killer, the great menace.

Black swan events defined the 20th Century; the black swan non-events of Malthus did not. The true story of the early 20th Century was the decline of a heavily indebted, consumptive and overstretched imperial power (Britain), and the dangers to peace and international commerce as its productive and expansionistic rivals (especially Germany, but also America) rose and challenged her (in vastly different ways).

There are some real environmental concerns like the dangers posed by nuclear meltdowns, runaway global warming (although I believe a little global warming is probably a good thing, as it will keep us out of any prospective future ice age), tectonic activity, or an exotic solar event like an X-flare, but we have no clue what will hit us, when it will hit, and its branching tree of consequences. We don’t have a full view of the risks. In spite of what unsophisticated mathematician pseudo-scientists in the tradition of Galton and Quetelet may tell us, we cannot even model reality to the extent of being able to accurately foretell tomorrow’s weather.

But once again a heavily consumptive, indebted and overstretched imperial power (America) is coming to terms with the problem of decreasing power in the face of productive and expansionistic rivals (particularly China). That parallel tends to lead me to believe that imperialist warfare will be the greatest menace of the 21st Century, too. But that’s the problem with predicting the future: we simply don’t know what black swan events and non-events nature will deliver (although it would be wise not to place too much trust in politicians or the establishment media, who simply blow their own trumpet and hope for the best).

So what are we to do?

Well, I think it’s important that businesses, governments and individuals think about Malthusian concerns. Malthus’ incorrect theorising touched upon the most significant of human concerns. Quite simply, without food, water and energy we weak and fragile humans are imperilled. It’s important that governments (particularly of importer nations) devise strategies to cope with (for example) breakdowns in the international trade system. Individuals, families, businesses and communities should be aware of where their food, energy and water come from, and of alternatives in case the line of supply is cut. Keeping backups (e.g. solar panels, batteries, wind turbines, storable food and water) is a sensible precaution for all citizens. There will be shocks in the future, just as there have been in the past. We should be prepared for shocks, whatever they may be.

And we should learn to love such volatility. Nature will always deliver it. We evolved and developed with it. It is only in modernity that we have adopted systems procedures and methodologies to subdue volatility. And — as we are slowly learning via the disastrous consequences of every single failed experiment in central planning — volatility suppressed is like a coiled spring.

The Face of Authoritarian Environmentalism

Kari Norgaard

From the Daily Mail:

An Oregon University professor has controversially compared skepticism of global warming to racism.

Sociology and environmental studies professor Kari Norgaard wrote a paper criticising non-believers, suggesting that doubters have a ‘sickness’.

The professor, who holds a B.S. in biology and a master’s and PhD in sociology, argued that ‘cultural resistance’ to accepting humans as being responsible for climate change ‘must be recognised and treated’ as an aberrant sociological behaviour.

Really? Doubters have an illness? Isn’t pathologising dissidents a hallmark of authoritarianism? Weren’t dissidents under the Soviet Union often sent to psychiatric hospitals to be “treated” for their behaviour? Hasn’t Norgaard read Solzhenitsyn’s Gulag Archipelago?

And really “doubters” could mean a lot of things. Does it solely mean those who believe climate change is not happening? What about climate agnostics? Does it mean those who believe that climate change is happening but that it is not man-made? Does it mean those who believe that it is happening, but who disagree with Norgaard’s proposed solutions?:

Norgaard last week attended the annual four-day ‘Planet Under Pressure’ international conference in London, where she presented her controversial paper to delegates on Wednesday.

The scientists behind the event recently put out a statement calling for humans to be packed into denser cities so that the rest of the planet can be surrendered to mother nature.

And fellow attendee Yale University professor Karen Seto told MSNBC: ‘We certainly don’t want them (humans) strolling about the entire countryside. We want them to save land for nature by living closely [together].

And does it include those (including me) who believe that man-made climate change is happening  — and has been happening for thousands of years — but that it seems to broadly be a good thing?

From the BBC:

Human emissions of carbon dioxide will defer the next Ice Age, say scientists.

The last Ice Age ended about 11,500 years ago, and when the next one should begin has not been entirely clear.

Researchers used data on the Earth’s orbit and other things to find the historical warm interglacial period that looks most like the current one.

In the journal Nature Geoscience, they write that the next Ice Age would begin within 1,500 years – but emissions have been so high that it will not.

Certainly, if human emissions keep the Earth warmer than the pre-civilisation cycle (i.e. widespread cyclical glaciation), that would appear to be a good thing in the long run for human civilisation.

And what about my position that an ultra-complex (and arguably stochastic) system like the climate is not meaningfully modellable, and therefore that climate certainty is impossible? While it seems to make sense that higher levels of atmospheric CO2 will produce higher temperatures, and while there are a myriad of simplified models out there that seem to suggest the same thing, there is no substitute for long-term empirical evidence, of which we have very little. In a system as complex as the Earth’s climate, there could be a whole swathe of effects that we have not yet identified that could drastically change the outcome (for better, or for worse). For Norgaard, does an understanding of the limitations of probabilistic modelling constitute a mental illness? Should I be committed to treatment to “cure” me of my beliefs?

Because that is what Norgaard’s words lead me to believe. And that sounds worryingly like Neo-Stalinism.

Environmentalism & the One Child Policy

Could you accept a One Child Policy in America, or your home country?

That’s the suggestion of Roger Short :

As Global Warming makes its presence increasingly felt all around the world, more and more people are beginning to accept it as a reality. But there remains a major credibility gap; people have yet to draw the obvious conclusion that since Global Warming is the result of human activities, too many people will only exacerbate the problem. Thus, the developed world must curb its profligate use of non-renewable energy and the developing world its exponential population growth, if we are to arrest Global Warming in the years to come.

Although [the One Child Policy] has been condemned by most of the Western world for denying couples their reproductive freedom, it has had spectacular benefits for China as a whole. Not only did it halve the birth rate, but there were amazing reductions in maternal and infant mortality. With excellent availability of Chinese-made oral contraceptives, intrauterine devices, no-scalpel vasectomies and condoms, and safe back-up aspiration abortion, China has led by example. If only India, or Pakistan, or Nigeria, or even the United States could follow suit, the world would breathe more easily in future.

The trouble is — once we get beyond the brooding apocalypticism — there is a raft of evidence that anthropogenic global warming — historically, from agriculture, and more recently from industry — has had a flurry of benefits.

From the BBC:

Human emissions of carbon dioxide will defer the next Ice Age, say scientists.

The last Ice Age ended about 11,500 years ago, and when the next one should begin has not been entirely clear.

Researchers used data on the Earth’s orbit and other things to find the historical warm interglacial period that looks most like the current one.

In the journal Nature Geoscience, they write that the next Ice Age would begin within 1,500 years – but emissions have been so high that it will not.

Now, staving off the threat of huge glaciation broadly looks like a good thing. And if we absolutely need to reduce CO2 emissions  — just high enough to prevent another ice age, just low enough to prevent a runaway spiral of global warming — then surely there are much, much better ways to stabilise the CO2 levels in the atmosphere than forcibly reducing population. Carbon-scrubbing trees are one viable solution. Another is biochar. So too is reforestation, and urban forestation.


And if we do ultimately require legislation, surely a law to enforce tree-planting is preferable to a law that obliterates reproductive freedom — surely the most basic of human rights?

Not to mention the various benefits of a higher human population. More people means more potential output — both in economic terms, as well as in terms of ideas. Simply, the more people on the planet, the more hours and brainpower we can put into inventing and producing cleaner technologies. After all, the expansion of human capacity was precisely how humanity overcame the short-sighted and foolish apocalypticism of Thomas Malthus who wrongly predicted an imminent population crash in the 19th century.

Those calling for One Child Policies are simply suffering from a lack of imagination, and an astonishing naiveté. America’s drug laws have disproportionately affected ethnic minorities — four times as many blacks are jailed than whites for drug offences, even though whites use illegal drugs just as much as blacks. Can we honestly expect that a One Child Policy would not be applied in just as racist a way as the drug laws, and just as racist a way as America’s eugenics laws once were? After all, China’s rich and her political insiders routinely flout the One Child Policy. Wouldn’t an American one child policy just be an assault on the reproductive rights of the poor and ethnic minorities?

Yes — we should think about the manner in which we interact with and impact upon our environment. But more restrictions on freedom are not the answer — technology and development is the answer.

America’s Wilting Ambition

Regular readers will be aware that while I generally believe more in private industry and the free market than government largesse — mainly because central planning tends to lead to capital misallocation — there are some projects that need to be undertaken that are simply too big for anyone other than government. Space exploration is one example.

Here’s NASA’s budget as a percentage of GDP:

America went to the moon. Then it stopped caring about space, and started caring about spreading itself about the world in military adventurism.

Instead, other nations began racing ahead:


Why does this matter?

Well, resources on Earth are limited, by definition. As human civilisation expands and expands, we need to use more and more resources just to subsist.

And the only place for us to acquire more resources is off the planet.

Furthermore, a presence in space makes civilisation much more robust. If we’re only on one planet, we could be wiped out by a pandemic, or a nuclear catastrophe, or any such black swan. If we’re spread around the cosmos, it is much harder for us to be wiped out. Now, the International Space Station is a step toward that. But it’s hardly where we need to be: a space-faring, space-resources-acquiring species.

Space policy can be frustrating. The lunar missions were funded because they achieved a clearly-defined and obvious objective: put humans onto the surface of an alien world. Governments and populations could understand it. Modern day space programs don’t have such clearly-defined and obvious objectives. The kinds of research that goes on on the International Space Station are important, but obscure.

That’s one reason why it’s hard for spacefaring enthusiasts to push space up government agendas.

But the benefits in economic terms are clear. Stephen Dubner set these out in a fantastic article last year.

From G. Scott Hubbard (professor of Aeronautics and Astronautics at Stanford University and former director of the NASA Ames Research Center):

The debate about the relative merits of exploring space with humans and robots is as old as the space program itself. Werner Von Braun, a moving force behind the Apollo Program that sent humans to the moon and the architect of the mighty Saturn V rocket, believed passionately in the value of human exploration — especially when it meant beating the hated Soviet Empire. James Van Allen, discoverer of the magnetic fields that bear his name, was equally ardent and vocal about the value of robotic exploration.

There are five arguments that are advanced in any discussion about the utility of space exploration and the roles of humans and robots. Those arguments, in roughly ascending order of advocate support, are the following:

1. Space exploration will eventually allow us to establish a human civilization on another world (e.g., Mars) as a hedge against the type of catastrophe that wiped out the dinosaurs.
2. We explore space and create important new technologies to advance our economy. It is true that, for every dollar we spend on the space program, the U.S. economy receives about $8 of economic benefit. Space exploration can also serve as a stimulus for children to enter the fields of science and engineering.
3. Space exploration in an international context offers a peaceful cooperative venue that is a valuable alternative to nation state hostilities. One can look at the International Space Station and marvel that the former Soviet Union and the U.S. are now active partners. International cooperation is also a way to reduce costs.
4. National prestige requires that the U.S. continue to be a leader in space, and that includes human exploration. History tells us that great civilizations dare not abandon exploration.
5. Exploration of space will provide humanity with an answer to the most fundamental questions: Are we alone? Are there other forms of life beside those on Earth?

It is these last two arguments that are the most compelling to me. It is challenging to make the case that humans are necessary to the type of scientific exploration that may bring evidence of life on another world. There are strong arguments on both sides. Personally, I think humans will be better at unstructured environment exploration than any existing robot for a very long time.

There are those who say that exploration with humans is simply too expensive for the return we receive. However, I cannot imagine any U.S. President announcing that we are abandoning space exploration with humans and leaving it to the Chinese, Russians, Indians, Japanese or any other group. I can imagine the U.S. engaging in much more expansive international cooperation.

Humans will be exploring space. The challenge is to be sure that they accomplish meaningful exploration.

Keith Cowing (founder and editor of NASAWatch.com and former NASA space biologist) adds:

Right now, all of America’s human space flight programs cost around $7 billion a year. That’s pennies per person per day. In 2006, according to the USDA, Americans spent more than $154 billion on alcohol. We spend around $10 billion a month in Iraq. And so on. Are these things more important than human spaceflight because we spend more money on them? Is space exploration less important?

Money alone is not a way to gauge the worthiness of the cost of exploring space.

NASA is fond of promoting all of the spinoffs that are generated from its exploits, such as microelectronics. But are we exploring space to explore space, or are we doing all of this to make better consumer electronics? I once heard the late Carl Sagan respond to this question by saying, “you don’t need to go to Mars to cure cancer.” If you learn how to do that as a side benefit, well, that’s great, but there are probably more cost effective ways to get all of these spinoffs without leaving Earth.

To be certain, tax dollars spent on space projects result in jobs — a large proportion of which are high paying, high tech positions. But many other government programs do that as well — some more efficiently.

Still, for those who would moan that this money could be “better spent back on Earth,” I would simply say that all of this money is spent on Earth — it creates jobs and provides business to companies, just as any other government program does. You have to spend all of NASA’s money “on Earth.” There is no way to spend it in space — at least, not yet.

Where am I going with this? Asking if space exploration — with humans or robots or both — is worth the effort is like questioning the value of Columbus’s voyages to the New World in the late 1490s. The promise at the time was obvious to some, but not to others. Is manned space exploration worth the cost? If we Americans do not think so, then why is it that nations such as China and India — nations with far greater social welfare issues to address with their limited budgets — are speeding up their space exploration programs? What is it about human space exploration that they see? Could it be what we once saw, and have now forgotten?

As such, my response is another question: for the U.S. in the twenty-first century, is not sending humans into space worth the cost?

Human civilisations throughout history are judged by the power of their dreams. Do we have big enough dreams to spread our lineage, spread our DNA, spread our language, our ideas, and our bodies into space?

I hope so.