Yet more on Lord Lawson's speech (wonkish)

Oh dear, I can't let go of this Lawson thing. I find when I start exploring numbers like the HADCRUT3 dataset, it's difficult to stop.

In yesterday's post I confirmed what Lord Lawson said in his recent speech, that the temperature record for the past fifteen years shows no warming trend. I then suggested that this was not a very meaningful measure because movement within a period of ten or fifteen years tends to be dominated by noise in the system.

The trend I calculated was a global warming rate of 0.004 degC per year, or 0.4 degC over a century which I thought low enough to be deemed insignificant. Curiosity then led me to try the same - a calculation of the 15-year warming trend - for the periods ending in each of the previous 30 years. This is what I got:-

Past 15-year warming trends for periods ending between 1982 and 2011 Source: HADCRUT3 dataset

Has global warming ground to a halt?

Last week I did a long posting about a recent speech by Lord (Nigel) Lawson. There was one bit I didn't comment on. He said:

"The fact that there has been no recorded global warming trend for the past 15 years or so, during which CO2 emissions have grown very rapidly indeed, thanks in large part to remarkable economic growth in China, suggests that the climate sensitivity of carbon is in fact less than is incorporated in the models on which, for example, the IPCC relies."

The opening phrase of that quote surprised me. I was under the impression that global warming had continued, albeit with a brief downward trend in the mid noughties. Figure 1 is a graph of the raw figures, from the HADCRUT3 dataset, for the past 15 years with the trend line shown in orange. As you can see, the trend line has only a very shallow slope, probably insignificantly different from zero.

Figure 1 - Source: HADCRUT3 dataset

Why I disagree with Lord Lawson

In August 2012, Nigel Lawson presented a paper to the Erice conference entitled Rational climate economics.

Early in the paper he goes in for some political knockabout at the expense of climate scientists:-

"There is now a new religion – the AGW [anthropogenic global warming] religion, of which scientists are the new priesthood, preaching their dogma with precisely the same claim to authority as the mediaeval catholic church."

He goes on: "The truth is, as the best scientists recognise, that the greenhouse effect is a highly complex phenomenon, and the scale of the climate sensitivity of carbon is hugely uncertain."

In spite of what he says about the uncertainties, towards the end of the paper he displays his confidence that we need take no action to reduce the risks of seriously harmful climate change. He says we can rely exclusively on adaptation to global warming as the most cost-effective response. There appears some inconsistency here between the alleged hugeness of the uncertainty and his confidence that global warming will be mild enough for us to cope with through adaptation.

Some thoughts on the welfare state - continued from the FT website

What follows originated as posting to the FT website (see previous post here). It got removed from the FT website, perhaps justifiably in view of its length and remoteness from the FT article that prompted the commentary. The rest of the FT commentary can be seen here:- http://www.ft.com/cms/s/0/f972de76-61e2-11df-998c-00144feab49a.html This posting was a response to one by Thornton on 27 May, 6.18pm.

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Yes, my points about giving at Christmas were not directly in response to your point about what some great people have given to the world. Incidentally, I am also something of an admirer of Bill Gates - sometimes grudgingly as I frequently curse Microsoft, perhaps a little unjustly. As for Churchill, by coincidence, the last volume of Martin Gilbert's biography of him is currently my bed-time reading. A fascinating, larger-than-life character.

The welfare system is problematic in all sorts of ways. Most of my working life has been in the field of social housing which is closely related. Though most of my work has been with looking after the financial welfare of housing associations (not entirely with success - one had to be taken over to avoid going bust), I have had occasional forays into national policy.

One major issue is the poverty trap. You can't focus welfare provision on the most needy without also creating a big disincentive to work. I said in an earlier post that I wasn't in favour of very high tax rates - eg 80% - 90% - but taking taxes and benefits together, that is the sort of marginal rate that people on benefits face. Try a gentler taper so that recipients face a lower marginal rate of tax and benefit withdrawal, and a much wider range of people become eligible for benefits and the cost to the public purse becomes prohibitive. The intrinsic problems look intractable.

I remember recently being at a gathering addressed by an ageing former Labour MP. He had known some of the people involved in setting up the post-war welfare state. He said that no-one anticipated then that we would now be finding people who were third-generation welfare-dependent. Another sad case of unintended consequences.

You make an interesting point about how you think the welfare system also saps the generosity of people. I can't say I have personal experience of this. Wilkinson and Pickett's work suggests that in more equal societies people tend to be more generous (as revealed, for instance, by the scale of foreign aid) but that's a separate issue from the generosity of people in supporting those nearest to them. I'm going to have to leave it on one side for the moment while I think about it further.

As you will have gathered by now, as I gradually became aware of the enormity of the threat from global warming, I found myself looking in a fundamental way at how our economy operates. Developed countries are market economies in which, broadly speaking, spending power is distributed to people according to the perceived value of the work they do. I remember looking at the case for the third runway at Heathrow being made by one of the interested parties. Along with claptrap such as "In a competitive world, standing still is not an option", there were some examples of businesses that benefited from their proximity to Heathrow. One was marketing computer games and another was distributing Japanese-made contact lenses.

It occurred to me that we don't really need people flying round the world marketing computer games and contact lenses. This reinforced my feeling that much of the work that people do is work that simply doesn't need to be done. A few people are producing and distributing the goods and services we need. The rest of us work partly because it's generally considered more acceptable to pay people for work done, even if it's useless work, than to dish out money to layabouts. To disguise the uselessness of the work, we spend heavily on marketing and advertising to help create demand for goods and services we don't need.

The system seems to work quite well until we look at environmental costs and risks and natural resource constraints. Briefly, what we are now doing is paying people to help make our planet less capable of supporting us. Arguably we should now be generously dishing out money to layabouts rather than encouraging people to work for a living. However, I don't suppose you relish that idea and neither do I. Work, even if its usefulness is more apparent than real, is psychologically important. I am semi-retired but I get a real kick out of doing paid work. As well as the sheer joy of being able to ply my trade, which these days is mainly financial modelling, I get from the payment a warm feeling that someone, rightly or wrongly, thinks my work is useful. But whether paid or not, purposeful activity is a key to happiness and robust mental health.

In any case, even in a resource-constrained world, there is no reason to encourage anybody to be idle. For a start, limited energy supplies will probably mean that much essential work, such as growing food, will become more labour-intensive and there may be a revival in demand for relatively unskilled labour. I hope we never reach a point when all work needs to be directed to the bare essentials of survival. However, if we did, we would be justified in expecting everyone to do their fair share of work and there would be no need for welfare payments for unemployment alone - though they would still be needed for disability, chronic illness and old age. I am certainly not of the view that these things can be left to the voluntary generosity of individuals.

I would expect there will always be scope for work directed at quality of life rather than mere survival. Now suppose there was a near-complete economic collapse in the developed world that meant widespread bankruptcies and governments defaulting on their obligations. I see this as improbable but eminently possible some time over the next thirty years. We would then have to rebuild our fiscal, monetary and welfare systems from scratch. This could give us a chance to think from first principles about how we want to organise our affairs. What emerged might possibly be something like a social credit system where every citizen received, as of right, an income just big enough to survive on, or perhaps slightly less. Suppose also that only part of the potential labour force was required to provide food and other essential goods and services and that limited supplies of energy and raw materials were available to allow some non-essential goods and services to be provided. There would be no need for a minimum wage because the social credit payment would cover basic living costs. Wages for the easiest or most popular and agreeable work might be close to zero. Given a well-managed money supply, other wages would find their level according to the demand for the work and the supply of willing workers.

This is how I am currently thinking about the conundrum of welfare though I'm not yet convinced that I have a workable answer. Social credit means a very radical restructuring of how we organise our financial affairs, including how money is created and the money supply managed. I think some form of financial (but not necessarily human) catastrophe would be needed to cut through the Gordian knot of sovereign debt, pension commitments, going rates of pay and expectations that the we can go on living the way we live now.

These are not original ideas of mine and I am currently away from the books where I have read about them. I will try and supply some references in a later post.

Long time no post

It's a long time since I posted anything to this blog. Lots has happened since. For as start, I've just about finished converting the winter's harvest of coppiced wood to a couple of piles of logs which should be ready for burning the winter after next.

Apart from doing a spot of paid work (my speciality is financial modelling in Excel, should anyone out there be interested in my services) , my writing effort over the past week has been directed to the FT website, where responses by myself and others to an article by Dick Olver, the Chairman of BAE Systems, have developed into an interesting (and perhaps largely private) triologue.

In the interests of making the triologue less private, here is a link to the article and the ensuing correspondence:-

http://www.ft.com/cms/s/0/f972de76-61e2-11df-998c-00144feab49a.html

Support for local currencies?

What follows is something I posted today on the Transition Horsham Forum.

I often get the feeling that mainstream economists are living on a different planet from the ecologically-aware thinkers who inspire the Transition Movement. However, occasionally one sees signs of convergence and there is one, very faint sign in today's FT.

I reckon that Sam Brittan is about our most respected economics columnist. His column today is entitled Greek light on an over hasty project. It is about the way the financial crisis in Greece (too much debt) suggests that the euro was launched prematurely - perhaps 20 or 30 years ahead of its time. Now Greece's participation in the euro is restricting its ability to find a way out of the financial mess that it's in. Italy, Portugal and Spain have similar difficulties and if Greece fails to find a way out of its difficulties, there could be a domino effect that forces a messy demise of the euro and a return to national currencies.

When a country with its own national currency finds itself with too much debt, it has a couple of safety valves. It can print money and so inflate some of the debt away. It can also devalue its currency and so make its exports cheaper and its imports more expensive - so stimulating local production. With a common currency like the euro, it can't do this. In order to remain creditworthy it has to go for more painful and politically difficult measures, such as increased taxes and major cuts in public expenditure - measures which could simply lead to an uncontrolled spiral of economic decline leading to social breakdown. This is the prospect that Greece faces.

At the end of the article Brittan writes:-

Countries in the Middle Ages often operated with two or more currencies: an international one such as the ducat or florin, and local currencies with more restricted use. Could not such a local currency, whether or not called the drachma, emerge in this way with or without the sanction of the Greek government? It would surely be better than being crucified by the international financiers.

This, of course, is an idea that Transitioners in Totnes, Lewes and Brixton have already put into practice, except that they are operating on a more local level than a country the size of Greece. Moreover, the local currencies launched by Transitioners are aimed at making local economies more self-contained - in effect, de-globalising. De-globalisation is not yet a project dear to the hearts of mainstream economists, who have yet to grasp that resilience is at least as important as efficiency. Nevertheless, it is good to see even faint signs that others will eventually follow where Transitioners lead.

Moral obligations

One of the difficult issues for small-time campaigners such as myself is how to deal with the moral issues involved with climate change. There are two big issues here: firstly what is moral or immoral in how we deal with climate change; secondly when and whether it is wise or productive to draw attention to the moral issues. This second issue is particularly tricky. The literature on the psychology of dealing with climate change suggests that we will not get very far by stressing to people a moral obligation to make the necessary sacrifices. Guilt is not a great motivator. Although I see enormous moral issues around climate change, the literature suggests that, to be an effective campaigner, I should keep thoughts about them to myself. However, I'm not going to.

Briefly, as suggested in my recent post about aviation, I think we have a moral obligation to seize what opportunities we reasonably can to reduce our greenhouse gas emissions and so reduce the risk that global warming renders the lives of our great-grandchildren nasty, brutish and short. That raises some awkward questions, such as what is a moral obligation and how do we strike an equitable balance between our own interests and those of future generations.

I am ill-read on the subject of morality so my comments from now on will no doubt seem naive or banal to anyone who has studied moral philosophy. I don't believe in a concept of absolute right and wrong. On the other hand, if we can agree on a few axioms, then we can have a rational discussion on what is moral or immoral. A typical axiom might be that if we treat other people the way we would wish to be treated ourselves, we are acting morally. However, I prefer to fall back on the idea of "moral sentiment". Most of us have some sense of what we regard as moral or immoral and we can at least share with others what that sensibility suggests.

When I look at the way so many people carry on as though global warming was not an issue, I am tempted to condemn them as immoral. Some people attempt to rationalise their unconcern. There seem to be many non-scientists prepared to take sides in a scientific argument and claim that the mainstream science on climate change is wrong. The argument will sometimes rely on a conspiracy theory - such as that the message on global warming is merely an excuse to raise more tax. This approach ignores the risk, which must be virtually undeniable, that the mainstream science may be right. Therefore I see no scope for an intelligent, moral non-scientist to take this line, though a ignoramus, with insufficient intelligence to recognise the limits of his or her understanding, might do so and escape the charge of immorality on the grounds of diminished responsibility.

Others are silent on the science but claim that there's no point in trying to do anything about it because any efforts we make will be swamped by growing emissions in China. Hence, the argument goes, we shouldn't feel obliged to make any sacrifices ourselves until the Chinese show some willingness to do so also.

Some attempt no rationalisation but quietly carry on as normal, while perhaps regarding as eccentric any serious attempts by other people to reduce their carbon footprint. Yet others appear almost to take pride in their immorality and laugh off their unconcern.

I have reached a number of tentative conclusions. Firstly, though most of us are endowed with some moral sentiments, those sentiments vary greatly from person to person and often have to compete with other sentiments - such as the urge for oneself or one's country to be a winner rather than a loser, or to be "cool" rather than a nerd or a prig (I'm probably both). Being moral isn't a short-cut to being popular - the amiable rogue is often a more attractive character than the obviously moral person. I'm reminded of Alan Clark, whose diaries I am enjoying reading at the moment. He writes for Boxing Day 1994: "We went to midnight carol service... it was pleasing. All the good tunes, and perfectly sensible message of reassurance about the resurrection .... and not one mention, from start to finish, of the Third World or the need to 'combat' racism or homelessness or poverty or any of that [expletive deleted]."

Secondly, what seems moral can be very much conditioned by what is normal - and I am reminded that the Latin word "mores" means "customs" rather than "ethics". In other words, if people behave as we expect most people to behave, we accept their behaviour as moral, or at least not immoral. The threat posed by global warming is unlike any other threat we have faced. For most adults living in countries like the UK, global warming is a threat to others - future generations and people living in vulnerable locations - not to themselves. The notion that we may need to make sacrifices for the benefit of future generations is novel - and so falls outside any ready-made framework of accepted morality.

Thirdly, there is in any case no general consciousness of a need to make sacrifices. The prevailing idea is almost the reverse - that by promoting economic growth, from which we ourselves will benefit, we will also be raising the living standards of future generations. There seems to be a general notion that economic progress, like time, is essentially one-way and unconstrained by any limits posed by our finite planet. Current concerns are about recovery from what is expected to be a temporary economic setback. Ideas of future belt-tightening are more about the need to reduce public sector debt than about the threat of global warming. There is virtually no message from the political sphere that people should be considering serious sacrifices because of global warming. Advice to the public is only about near-painless measures, such as switching to energy-saving light bulbs and not leaving televisions on standby. Government policy still seems geared to enabling rather than resisting the growth in aviation. With this general climate of discourse, combating global warming probably doesn't emerge for most people as a moral issue.

Given that general climate, it's difficult to condemn as immoral the mass of people who are quietly carrying on as normal and doing virtually nothing to reduce their carbon footprint. I do, however, tend to condemn the politicians and journalists who are creating that climate.

Fourthly, there is a rational case for not making sacrifices. Conventional economic theory from the time of Adam Smith has emphasised that by acting in our own best interests, we are generally doing the right thing for others. Except in time of major war (not Iraq or Afghanistan), we are not normally called on to make big voluntary sacrifices for the general good. We generally expect people to act in their own best interests. If people are generally conditioned by conventional economic theory, we shouldn't naturally expect other people to make sacrifices to combat global warming. The Indians and Chinese often confirm to us our expectation that they will not, in the short term, sacrifice economic growth in the interests of combating global warming, while hopes of serious engagement by the US Congress seem to be fading. Hence there is a rational expectation that sacrifices by people in the UK will be rendered futile by failures to make sacrifices elsewhere in the world. Can we condemn as immoral a failure by some people to make sacrifices that can reasonably be expected to be futile?

I have three answers to this fourth concern. My first answer is that the expectation could well be proved wrong. Just as there is no certainty about how devastating global warming is likely to be, there is no certainty that sacrifices we make will be futile. Furthermore, by not making the sacrifices ourselves, we will be helping to ensure that sacrifices will not be made by others. It is potentially a self-fulfilling expectation.

My second answer is that if a number of medium-sized developed countries like the UK make major cuts in their emissions, this alone will reduce the probability of catastrophic global warming and will not be a futile sacrifice. Individually, countries like the UK look almost insignificant in their contribution to global warming, but collectively they are significant. Hence, if there is a reasonable probability that China, India and the USA will at some future point start cutting their emissions, then it makes sense, in the interests of reducing the risk of catastrophe, for blocs such as the European Union to forge ahead and cut their emissions unilaterally.

My third answer is about "fair shares". To get to the point at which we are not adding to the threat of runaway global warming, we need to reduce emissions worldwide to something in the order of one tonne of CO2 per person. In the UK, even by conventional measures, we were on something like 9.4 tonnes per person in 2006 whereas the Chinese were on 4.6 tonnes. It seems natural that the Chinese would look to us to make sacrifices first. This is even before we recognise that the problem of global warming arises mainly because of the accumulation of past emissions, from which it is mainly we, rather than the Chinese, who have benefited economically.

To sum up so far, in my view an intelligent, well-informed person in a developed country has a moral obligation to make some effort to reduce his or her carbon footprint. That leaves a big question: how much effort is required to cross the line between immorality and morality? The answer is that there's no line. The more effort we make, the more moral we can claim to be and that's all we can say.

Personally I have got through the last few years (since 2006) without flying. However, it was exceptionally easy for me to give up flying. I don't have close relatives living on other continents and my flat is half an hour's tube or bus travel from the main Eurostar terminal at St Pancras. I enjoy rail travel and giving up flying was a small sacrifice for me. It would be a bigger sacrifice for most other people. Hence I'm circumspect about condemning other people for the occasional flight but when I hear of people flying off from the UK for a weekend shopping trip to New York or for a week's holiday in Thailand my blood pressure does tend to rise.

Getting rid of my car (ten years ago) wasn't an enormous sacrifice either. I'm a few minutes' walk from two Tube stations and lots of useful bus services and about fifteen minutes' walk from two main-line stations. My car used to stand outside my flat for three weeks at a time without being used and it was something of a relief when I got rid of it.

In my flat, my energy consumption is about a third of the national average per person - but I have neighbours above and below me helping to keep me warm.

Generally speaking, I agree that preaching about the morality or otherwise of different people's carbon footprints isn't going to be productive. But the moral dimension of the global warming issue is hugely significant all the same.