[slackline]

The original! too many others to read through

The "Quote" button (top right above each post) helps avoid such ambiguities 

[andy popp]

Generally forecasting needs to be as dispassionate as possible, but for most people it becomes muddied by prejudices

Walter Friedman at Harvard Business School is doing some very interesting work on the (extremely error strewn - see the run up to 1929, which forecasting not only failed to predict but probably compounded) history of economic forecasting. The forecasters are little less prone to prejudice than the rest of us ...

Most of his stuff is currently internal HBS working papers but here's one reference: Friedman, Walter. "The Harvard Economic Service and the Problems of Forecasting." History of Political Economy 41, no. 1 (2009).

I think there's a book due soon, which should be very good.

[slackline]

The certainty could simply be poor language/phrasing.

I'm finding this thread educational more than anything else.


Out of curiosity in your job of making projections, what proportion are borne out successfully and what proportion are incorrect (roughly, I appreciate it's unlikely to binary in outcome)?

Do people look at historical data (Andy's post suggests they do) on which to base predictions, and how often are these predictions beyond the range covered by the available data?

[andy popp]

As far as I'm aware all economic forecasting relies to some extent on discerning patterns in historical data and projecting forward (what else is there to go on?)

1929 is an interesting case, not only did most of the forecasting agencies, of which there were several by then, fail to predict it but they provided a neat illustration of that famous scientific dictum (I can never remember the bloody name) whereby you can't observe something without inadvertently altering it. So people, 'the market' whatever, began behaving on the basis of forecasts, behaviour which the forecasters had failed to factor in to their models, rendering them redundant. Simple lesson, human behaviour is extremely complex.

[slackline]

I'll rephrase then, how far beyond the available data are predictions made?

Extrapolating much beyond observed data is dangerous because you've no idea if the relationship seen within the observeable data range (e.g. linear) holds outside of the data range.  It could be that the available data is a sub section of a non-linear relationship that observed in isolation appears to be roughly linear.

Humans/behaviour/markets are indeed extremely complex, in biology this is fairly well recognised, but it doesn't seem to be the case in economics where people risk huge amounts of money on models/theories that can't be demonstrated to be any more accurate than competing ones except in hindsight. 

Isn't the scientific dictum along the lines of Schrodingers cat and/or Heisenbergs Uncertainty principle?

[slackline]

Out of curiosity in your job of making projections, what proportion are borne out successfully and what proportion are incorrect (roughly, I appreciate it's unlikely to binary in outcome)?

You have over-inferred about my job: thankfully I am not a forecaster or an economist, so I can't answer that the way you want. I am a professional investor. I do have lots of performance data associated with that - which amazingly suggests I am quite competent - but it's not really relevant: in investing you can often be right for the wrong reasons, or you can be right over one time period but wrong over a longer one, or vice-versa ... you get my drift. However, I am pretty sure I spend more time having to think about broad economic and business trends than most people, and  -  more importantly - reflect on the forecasting and decision-making process itself. Which is why I am opinionating more forcefully on this thread than on, say, recommended restaurants in Sheffield or the beta for Tetris.

Sorry for the over-interpretation, certainly not looking for an argument or to critique yourself or anyone else, like I said its educational for me to find out more.

As an investor though aren't you using the predictions of forecasters/economists to make said investments?

[Johnny Brown]

More than anything I am surprised by the certainty with which people make statements about the future, especially when linked with the notion that we are at some major inflection point, for example, the end of the fossil-fuel era, right now.

Because, I think, you are assuming that certainty is based on fossil-fuels running out or getting too expensive. We are at the end of the fossil-fuel era because we've suddenly realised we can't afford to burn any more of them. But that's not 'afford' as in too expensive to buy, its too expensive to deal with the consequences. Significant climate change is already happening, 'runaway' warming looks likely if the fossil-fuel era is allowed to continue. (Since we're laying out qualifications, my degree was in Environmental Geoscience).

I find much of what is posted above pretty irrelevant in that context.

[Johnny Brown]

Well I don't know much about economic forecasts but my impression is that climate modelling will prove to be more reliable.

1. is the inflection point now or in several decades?.

For 'runaway' warming? Its hard to say, but I think unless serious changes are implemented now in the west it will become unavoidable.

2. is the tractory of depletion steep or shallow?

Not sure what you mean? Records suggest catastrophic climate change can occur over short timescales (<100 years). Warming over the last 50 is already very steep compared to natural fluctuations sonce the last ice age.

3. (most importantly) is there some as yet unknown innovation around the corner that renders the issue irrelevant.

No. Even if such were discovered, we couldn't implement it fast enough. The rate of population growth and industrialisation is far outstripping the little progress being made. I think the short term direction should be to invest heavily in a) reducing demand and b) nuclear. Long term efficiency and solar.

The way I look at it is this - over hundreds of millions of years carbon was scrubbed out of the atmosphere and sequestred underground to give the current low atmospheric concentration. Over perhaps 200 years we're putting most of it back...

[petejh]

Interesting thread.

Now that we've moved on to climate change....
As some background - I worked in the Canadian oil sands projects for just over three years, at all of the major sites North of Fort Macmurry - Suncor, Syncrude Mildred Lake, Horizon, Albion and also Fort Saskatchewan near Edmonton. I carried out inspections on the end of a rope, getting intimate with the insides of various plant involved in the the oil-from-tar-process. In the minus twenty five of winter in northern Canada it was nothing but joyous.

The scale of the oil sands project is awe-inspiring: the open cast mines where the 10% of easily-accesible tar is strip-mined from the ground are visible from space (90% of the tar is deeper down), the upgrading plants, refineries and storage areas are city-scale and the logistics supporting the whole project are immense. Industrial nirvanna, wanna earn a small fortune? - go there, but be prepared for a shock to your sensibilities.
Likewise the scale of of the environmental damage is equally awe-inspiring and profoundly saddening to anyone who gives a shit about such things as the Athabasca River, Athabascas Lake and the artic tundra of northern Alberta/Saskatchewan. It also provides some perspective when reading/listening to debates by 'climate change campaigners/greens/hippy-at-the-crag types' about how we should be trying to reduce our carbon-footprint.

For anyone who believes they should be trying to reduce their personal CO2 footprint (I think we should - because of the leverage on demand described in the Kazzoom-Brookes Postulate) I recommend understanding how many megatonnes (million tonnes) of CO2 are emitted by the combined operations of somewhere like the Canadian oil sands project, and once this is known, to understand that this accounts for one industrial operation amongst hundreds globally. The figure for 2007 was 40 megatonnes - 40 million tonnes of CO2.
The forecasted figure for 2020, for Oilsands CO2 emmisions, is 125-140 megatonnes...... for one industrial area in Northern Canada.
The UK emitted a total of 495 megatonnes of CO2 in 2010, according to government stats released this month.

That 2020 forecasted carbon emissions for oil sands is higher than the total amount of carbon emitted by a number of european countries (Austria, Portugal, Ireland, Finland, Bulgaria, Hungary, Denmark).

I find it useful to have this in mind for when I'm feeling guilty for flying to Spain to clip bolts, or for when in a 'green' debate with the occasional pious hippy you come across at the crag/coffee shop. Sure try to reduce your individual carbon footprint but know that if everyone in the UK did (which they won't) it would still be analagous- if the goal is to reduce the level of CO2 in the world's atmosphere down to below the 350 ppm  it is estimated is required to halt runaway climate change - to trying to reach the moon by walking.
The leverage effect of decreasd fossil-fuel demand resulting in the decreased output from Syncrude et al. however is more significant (maybe more analogous to an airplane instead of walking?). I do think it's worth trying to do something on a personal level but I find some of the attitudes to do with carbon-useage a bit misguided when looked at in context of what's happening in the bigger picture.

It's the ignorance of the problem (as usual) and what's needed to fix it that bugs me   

Interesting background story going on right now to do with the EU climate minister trying to introduce a 'dirtyness' grading for fuels used throughout the EU, which could result in a significant decrease in demand for oil sands product. The Canadian goverment are lobbying the UK to help fight the EU legislation. Time for Cameron to show where his loyalties lie.

The smart money's in sun-tan lotion and flood defenses.

Kazzoom-Brookes Postulate:  http://en.wikipedia.org/wiki/Khazzoom-Brookes_postulate
Oil Sands scare-monger/truth: http://books.google.co.uk/books?id=3Z7wC7daVh4C&pg=PA133&lpg=PA133&dq=syncrude+megatonne+co2&source=bl&ots=MJVfqpD1W_&sig=6-92KlPr12Xx1o4qhZkYOVufWEU&hl=en&sa=X&ei=OgZOT_LZFuGj0QXBgvidBQ&ved=0CC4Q6AEwAA#v=onepage&q=syncrude%20megatonne%20co2&f=false
Canadian Goverment's oil sands stats: http://www.energy.alberta.ca/oilsands/791.asp
Latest UK government CO2 stats: http://www.decc.gov.uk/en/content/cms/statistics/climate_stats/gg_emissions/uk_emissions/2010_final/2010_final.aspx

[Johnny Brown]

I've heard similar arguments about size of our output compared to China's. I don't agree it makes our actions irrelevant.

If we are to seriously reduce the output worldwide, it has to start somewhere. A few countries have to provide an exemplar. And within those countries, that will start by a few people and companies doing the same. Ultimately the world is nothing but individuals - cultural change can only come from within.

[petejh]

I've heard similar arguments about size of our output compared to China's. I don't agree it makes our actions irrelevant.
...

Not irrelevant no, but I'd argue that the scale of the problem/task whatever you want to call it isn't understood by the majority of the population. Perhaps if it were more would be done to cut carbon emissions. Or perhaps less, given what could be seen as a hopeless task. What I don't agree with are 'greens', for want of a better word, who are ignorant of the scale of change required asking people to change their personal behaviours on the presumption that small scale changes by themself will alter anything of any significance, they won't. It reeks of being seen to be doing something whist not registering the reality.

[Bonjoy]

It is a bit like saying "I went to a huge quarry the other day and now I don't feel so bad about my chipping." Should scale trump ethics/morals?

[Johnny Brown]

Quite. I don't agree about most being ignorant, I think the scale of the problem is the ideal excuse use for their actions being pointless. A bit of a contradiction to my mind.

[mrjonathanr]

What I don't agree with are 'greens', for want of a better word, who are ignorant of the scale of change required asking people to change their personal behaviours on the presumption that small scale changes by themself will alter anything of any significance, they won't. It reeks of being seen to be doing something whist not registering the reality.

I liked your post and the links, interesting. I would argue though that scale is borderline irrelevant: if you can do something yourself, drop-in-the-ocean comparisions shouldn't change that. Scale does matter in motivation though ie sacrifice vs reward. Obviously we all could all buy a sheepskin coat, turn off the boiler and bin the car. Most wouldn't see the sacrifice as reasonable though - but some steps are, whatever anyone else gets up to.

[petejh]

Just modified my post above.

Scale doesn't trump ethics if you're talking about climbing, where personal actions are still important and climbing isn't faced with a potentially catastrophic scenerio (as far as I'm aware anyway  )

But if by ethics you're referring to personal behavioural choices in the face of catastrophic climate change, and said 'ethics' have been proven beyond doubt to be insufficient in themselves to avert said catastropic event, then yes, I'd say scale has absolutely trumped ethics and a different approach is required to the current, inadequete approach of turn the heating down/telly off/ride to work/driving a bluemotion/buying local.

The only real benefit of adopting the current 'green' norms in the UK are a feeling of 'doing something', and you should only have this feeling if you're blinkered enough to not know the reality.

I'm really arguing against what I believe are completely useless behaviours dressed up by well-meaning people as morally/ethically superior in the current outlook, which I believe don't do anything to address the underlying problem and which might even damage the longer-term chances of ever adopting more environmentally benevolent ways of existing.

[Paul B]

If we hit our current targets for reducing Carbon (as set by the government) for 2015, China alone would make that saving null in just 2 months. If developing countries choose not to heed advice on Carbon etc. then really our actions (however commendable) rapidly become irrelevant (regardless of ethics).

Your lack of chipping (drop in the ocean) means nothing when tarmac roll in with some proffessional quarrying equipment to destroy it all (apart from your ability to cry from the moral high ground).

Reducing emissions needs more joined up thought on a global scale to make real world differences. This doesn't mean I disagree with the need to change lifestyle and generally get the ball rolling in the right direction, without attitude changes there's little chance of joined up thought. We can achieve our targets (see below), but that only becomes relevant if other nations strive for the same thing, which they currently don't.

(BTW Pete - the most carbon effective per £ method for reducing emissions is by reducing the amount you heat your home. These measures have not been shown to be irrelevant, there's a document recently released studying Leeds (including population growth etc.) that shows Carbon targets can be met in the UK, and how this can be achieved. What it doesn't cover is how this might be funded and/or implemented)

[Johnny Brown]

If we hit our current targets for reducing Carbon (as set by the government) for 2015, China alone would make that saving null in just 2 months

Not really. There would still be a reduction in the total production over the period. As I said above, developed countries have to lead on this. The stronger the lead, the quicker China etc are likely to follow.

I'm really arguing against what I believe are completely useless behaviours dressed up by well-meaning people as morally/ethically superior in the current outlook, which I believe don't do anything to address the underlying problem

Well, as you say, there is a growing desperation to do something. I don't agree 'turn the heating down/telly off/ride to work/driving a bluemotion/buying local' are useless, I think they will be a part of a post-carbon society.

and which might even damage the longer-term chances of ever adopting more environmentally benevolent ways of existing.

How so?

[Paul B]

Not really. There would still be a reduction in the total production over the period. As I said above, developed countries have to lead on this.

Of almost zero worth to global carbon emissions. Thats the whole 'scale' argument, its not significant for anything other than trend setting and hoping that less developed countries come around to our way of thinking sooner rather than later (and i'm yet to hear a convincing argument as to why they'll suddenly do that).

[Bonjoy]

On the issue of scale, surely both the example of the flight to Spain and the tar sands mine should be multiplied/divided by a population size if you are to consider one action against another. A country full of people flying to Spain once a year is quite a lot of carbon and the amount of carbon per person from the population using oil from a tar sands mine might not look so huge. Also worth considering that the oil from the tar sands mine will in large part be used for socially necessary/useful things (fueling trains buses etc.), whereas clipping bolts in Spain is almost totally frivolous.

[petejh]

On the issue of scale, surely both the example of the flight to Spain and the tar sands mine should be multiplied/divided by a population size if you are to consider one action against another. A country full of people flying to Spain once a year is quite a lot of carbon and the amount of carbon per person from the population using oil from a tar sands mine might not look so huge. Also worth considering that the oil from the tar sands mine will in large part be used for socially necessary/useful things (fueling trains buses etc.), whereas clipping bolts in Spain is almost totally frivolous.

I think you're confusing the moral/ethical concepts of 'frivololus/socially useful' with having any relevance with the issue at hand. All that matters for the purpose of climate change is how many carbon atoms there are in our atmosphere and how we might reduce that figure - it's completely irrelevent whether the carbon was emitted by frivolous activities in Siuranna or by rescuing baby seal pups from burning buildings (in the sea-life centre perhaps  ).

That said perhaps morals will come into it one day - I'm sure if someone suggested we needed to eradicate 6 billion of the population in order to halt and reverse a potentially catastophic climate event, it would meet some stiff morally-based opposition.

As for scale - well,  how many people the 40 megatonnes of carbon-per-year refining process is divided amongst is a completely moot point unless it could ever provide the energy needs of a certain percentage of the world's population such that the total energy needs of the world allowed us to use fossil fuels and at the same time the amount of carbon in the atmosphere dropped below 350 parts per million. This it blatantly cannot do, and there isn't any realistic indication of fossil fuel ever being able to provide enough energy for our needs without swamping the atmosphere with carbon. But you're right  in one respect and this is why reducing energy useage is more benficial than increasing energy efficiency - just not beneficial enough to count for squat yet...

[slackline]

I'm sure if someone suggested we needed to eradicate 6 billion of the population in order to halt and reverse a potentially catastophic climate event, it would meet some stiff morally-based opposition.

Its been tried in China (not strictly the 'eradicating' that you are proposing, but an attempt to curb population growth).

[petejh]

I hope it didn't sound like I'm proposing the eradication of 6 billion men, women and children? 

[Bonjoy]

On the issue of scale, surely both the example of the flight to Spain and the tar sands mine should be multiplied/divided by a population size if you are to consider one action against another. A country full of people flying to Spain once a year is quite a lot of carbon and the amount of carbon per person from the population using oil from a tar sands mine might not look so huge. Also worth considering that the oil from the tar sands mine will in large part be used for socially necessary/useful things (fueling trains buses etc.), whereas clipping bolts in Spain is almost totally frivolous.

I think you're confusing the moral/ethical concepts of 'frivololus/socially useful' with having any relevance with the issue at hand.

It was in response to this:

I find it useful to have this in mind for when I'm feeling guilty for flying to Spain to clip bolts

Which with what you went on to say about tar sands seemed to suggest you were holding them up against each other to make yourself feel better. In that context the frivolous/useful question is obviously relevant.

[petejh]

I was merely suggesting, flippantly perhaps, that my awareness of one thing allows a sense of perspective when considering another thing. In this case knowledge of how much carbon gets emitted by a oilsands refinery compared to how much carbon a medium-sized passenger jet emits. And that, in a culture of 'carbon-footprint awareness', this helps obviate any feelings of 'wrongdoing' on my part. Thought that was fairly clear.

I maintain that any question about 'frivolous' versus 'usefull' use of fossil-fuels only becomes relevent when the scale of global carbon emissions reaches a point low enough whereby eliminating 'frivolous use' would tip the balance into a significant reduction in carbon in the atmosphere. I can't see that happening as long as global industry continues as it does.

[Johnny Brown]

Encouraging this slow down may be, it's still likely to mean another 2 billion+ mouths by 2050, all of whom will be looking for a better quality of life likely to be based on increased consumption. Still a massive problem. perhaps Bonjoy and I's interest in natural history gives us a better perspective on what this is doing to life on this planet. I can't help thinking the ongoing biodiversity crisis (already regarded by most as a mass extinction event) will have nasty repercussions for ourselves soon enough.