I get it now: those Wall Street whiz kids were practicing alchemy
When I started learning about the underpinnings of the present financial debacle, I kept wondering how they could they have been so stupid.
There was a lot of stupidity to go around, but the “they” in this case were not the consumers who thought house prices would always go up, or who maxed out their credit to get the latest consumer trinkets. Although that is indeed stupid, I could understand how people could do it and fail to understand or appreciate the consequences, although I never participated in either practice. I’m one of those people who pays off my entire credit card every month—at least, so far.
No, the people who puzzled me were the financial “experts” who made bad loans (only some of which were at the behest of the government) and especially the wizards who bundled them and derivatived them and tranched them and turned them inside out and upside down in such a way that the lousy investments now somehow managed to earn great ratings from other wizards at financial institutions such as Moody’s who should have known better.
This was the stupidity that astonished me. On reflection, though, I realize that one reason they may have been not all that stupid was if they were in it just for the short-term gain. Perhaps a great many of these people got out while the going was good and pocketed the profit, a tidy sum.
But it still seemed awfully odd to me that anyone could believe that it would last indefinitely, if they understood the history of the markets—which I expected them to know—or the math of these things.
Early on, when I asked a relative of mine (someone who had spent most of his working life in the banking industry but had retired in 2001) to explain what had happened with these people, he said that during the last ten years or so the “math guys” came in with a bunch of computer-generated proofs that demonstrated all would be well. It didn’t make sense to him, or to many others in the older generation. But the math seemed irrefutable, and the computer number crunchers were supposed to be the experts on that.
And so the previously conservative bankers were persuaded that this was the wave of the future. And it was. Except they forgot the crest-and-trough nature of the wave. Now we’re in the trough.
The whole thing is explained quite nicely, I think, in this article by Niall Ferguson (my relative’s “math guys” are referred to as the “quants”—quantitative analysts—by Ferguson).
This is how Ferguson describes what happened. After presenting a formula that was used by these folks to calculate the value of options, he writes:
Feeling a bit baffled? Can’t follow the algebra? That was just fine by the quants. To make money from this magic formula, they needed markets to be full of people who didn’t have a clue about how to price options but relied instead on their (seldom accurate) gut instincts. They also needed a great deal of computing power, a force which had been transforming the financial markets since the early 1980s.
Math is math, but it can also a case of garbage in garbage out. And just what did the quants forget to factor in? A little thing called common sense, with a generous helping of history. They relied on the idea that diversification would protect them:
Diversification was all about having a multitude of uncorrelated positions. One might go wrong, or even two. But thousands just could not go wrong simultaneously.
Oh, no? Where people and psychology are concerned, they sure can. And financial markets are rife with people and psychology, not just numbers.
The quants were instrumental in the formation of a highly successful hedge fund of the 90s called Long-Term Capital Management. For four years it worked amazingly well. Then in 1998 it all came tumbling down. Ferguson reports:
The problem lay with the assumptions that underlie so much of mathematical finance. In order to construct their models, the quants had to postulate a planet where the inhabitants were omniscient and perfectly rational; where they instantly absorbed all new information and used it to maximize profits; where they never stopped trading; where markets were continuous, frictionless, and completely liquid…When things began to go wrong, there was a truly bovine stampede for the exits. The result was a massive, synchronized downturn in virtually all asset markets. Diversification was no defense in such a crisis.
How could the quants not know this was the way people behave in crises? After all, it’s not as though it was the first time. The answer is not a reassuring one:
The quants’ Value at Risk models had implied that the loss the firm suffered in August 1998 was so unlikely that it ought never to have happened in the entire life of the universe. But that was because the models were working with just five years of data. If they had gone back even 11 years, they would have captured the 1987 stock-market crash. If they had gone back 80 years they would have captured the last great Russian default, after the 1917 revolution. Meriwether himself, born in 1947, ruefully observed, “If I had lived through the Depression, I would have been in a better position to understand events.” To put it bluntly, the Nobel Prize winners knew plenty of mathematics but not enough history.
Not only did they not know history, it seems that no one even understood what was happening in 1998. After this debacle you might think their sort of reasoning would be discredited (pun intended). Instead, hedge funds and derivatives using the same calculus (love these puns!) skyrocketed. Until they fell.
As I was reading all of this it begin to remind me of alchemy. Alchemists were attempting to do many magical things with their pseudo-scientific machinations, but one of the main dreams they had was to find a way to turn base metals into gold. Ah, the riches and the glory that would ensue!
The alchemists had other aims; they were looking for the secret of eternal life, as well. And they can be forgiven their ignorance about basic chemical processes, because such functions hadn’t yet been discovered and studied. In fact, alchemists invented many techniques that were ultimately used in true science, so you might say alchemy was a sort of proto-science.
The quants, on the other hand, were just looking for money. And they found it, for a while. Until people started behaving like people instead of numbers. And there’s no alchemy that can change that.
This is why economics is not an exact science. It’s like philosophy or psychology.
But people have free will and especially in a capitalist country (capitalism defined = the people choosing who gets what resources), people can change their behavior in large numbers.
It isn’t logical to sell low but people are still divesting and selling. They are spooked.
People have to learn that money is earned over and over again and that money doesn’t come easy. Each generation has to learn it.
My ex-wife’s family members said something over and over that home values would always go up. I hope they remember me telling them “no” that isn’t true. They were a product of the Bay Area (San Francisco area).
In a robust economy it is true that tax rate increases ‘actually’ could be aborbed.
But Obama’s stated proposals in my opinion (and I’m economically literate) have people divesting and trying to tighten their belts and brace themselves for what is coming. It’s a double-whammy that ripples out in large waves as people tightening their belts create a self-fulfilling prophecy. People buying less cars, homes and goods make for people buying less goods and services and when that happens less people need to be employed.
For the auto manufacturers there is one truth we’ve discovered. There is only going to be a certain total of cars sold in this next year or two or three. Either you are a manufacturer that can survive those numbers or not. If GM ceases to make cars then that helps Ford, Toyota, and Honda plants because that total car pie is divied up between less manufacturers.
But it WON’T work that way. GM can file bankruptcy and reorganize and write new contracts. Unions would have less power to dictate labor costs and creditors would have new deals with GM. GM if they file bankruptcy could shed costs quickly.
That IS the ANSWER for GM. Giving $$$’s to GM is NOT the answer. THe goal should be for a stronger and more sound GM for the future. GM is not a jobs program that needs $$$’s this year and next and next until the total number of cars sold equal a number GM can sustain itself.
My prediction!
Democrats in Congress have shown that they do not understand what the goal should be and they will make the wrong choices for GM and the country.
I hope they prove me wrong. It is imperative that everybody quit thinking that the total GDP has to remain high and ever growing. There are cycles and this is why it was wrong for the federal spending and CA state spending to be a percentage higher than incoming revenues for more than a decade.
It was morally wrong and financially unsound.
The numbers simply didn’t add up and the time for leftist government spenders to realize this once and for all.
The same thing happened with the LTCM fiasco: hypersophisticated models that made a fatal mistake of assuming that buy / sell events are typically uncorrelated (independent). It’s actually a very common cognitive error as well: we tend to think statistical events are uncorrelated, independent, but there are times when there can be a huge macro-correlation, which is what happened with subprime mortgages and what happened with LTCM:
http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm
The subprime fiasco happened because the risk pricing strategy assumed subprime defaults would be uncorrelated. This is something that some modellers correctly noted was a mistake:
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VCY-4B3MTRT-5&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=01137742c8f375a45383a948f5c39e64
but this wasn’t factored into the models. What the derivatives market turned into, as a result, was nothing new: a pyramid scheme, without underlying value to prop it up. Pyramid schemes are very old, and of course they always fail in the end.
Neo, the metaphor that comes to mind for me is not “alchemy,” but rather “Ponzi scheme.” Some of the quants may have been acting in good faith, but I have to think there were also people who realized it was a house of cards, and they just planned to get out before it collapsed.
Hmmmmm….computer programs that predict a certain outcome while ignoring certain variables that didn’t fit well with the theories underlying the calculations themselves.
Reminds me of the AGW debate.
Well, in my view, the AGW debate is the evidence of the same mistake, but in the opposite direction. With all of these, people tend to assume stability over the long term that is unwarranted. Global warming is a long-term trend that is hard to notice on a year to year level, so we discount it as a possibility cognitively. Big market collapses happen in the long term, but in the short term everything looks fine. Human beings in general have a hard time dealing with long-term predictions.
the models break down when things are more abnormal.
if you look at history, we have had about 10 down turns, two of them credit ones…
so in all their modeling data, there had only been one other credit crunch.. so how could they model for such things?
[and think. the quants models are better and smaller and more confined than global warming models…]
the worst part is that we dont have a free market bank system… since we do fractional reserve.
and that alone could make things very clear to you neo. withot a lot of hulla balloo
if you did banking the old way, you could only lend 100 if you had 100. also, you had to match up loans with terms… so if you wanted a 20 year loan for a lot of dough, you had to have someoen willing to not touch their money for 20 years.
when this happened, loans made economic sense. short loans cost less, long loans costed a lot more… and so on.
now add fractional reserve… (which has a lot of other names, but basically time shifts).
now a bank can loan out 200 for every 100 it has…
but also, the rules now say that the bank could finance that 20 year loan with 20 1 year loans.
the two together CAN be a recipe for a disaster since other operations have to happen in order for them to work.
for instanve… you can see if the terms of loans and such are not the same as the lenders, then a form of bundling has to happen. so that aggregates can be worked with to cover others.
now… the kick comes in when the state adds to it.
the bankers are lending 300 for each 100…
but the state says… you only need to keep 20% to be legal…
do the banks stay at the natural level in which they feel safe to operate? or do they move to the new level which the state says its ok?
they move… which is why the state becomes social law on top of legal law once it gets to this… this is a social law… the bank should be able to figure out what the right risk spot is. but the state giving then the number creates a problem for policy people in the banks. how can they justify lower loan quantities against competitors to mitigate risk?
and when you look at CRA loans… you will find that they were 10cents on a dollar… that is that the bank could write 10 loans for each unit they had…
so for every 100 they had they could write 1000 in loans.
as you can see… the state interferes by setting these rates arbitrarily. why not 30%, why not 1%… the result is arbitrary since its not designed for good banking, but to win votes, support, etc.
so the people who write the laws dont have people lending for 30 years… so loans get bundled…
meanwhile… since this has to do with false reality by the state… each time the state changes the rules, what effect does that have on loans made prior to that?
ah… the state capriciously changes the risks at random… what was a good loan before, is now bad.
for the dems, and the communists… its always been a case of peddle to the metal, run it into the groudn… and failing to do so over and over again because its really that adaptive and clever…
in other words if the capitalist system wasnt so robust, the whole thign woudl hav collapsed in the 70s..
but even now… with all there bad meddling.. or without… the system is self correcting itself and ironing out the problems with no help or rather despite it.
if it was centrally planned… it would hav failed and they could move in on us. but its a living organic natural thing. (something mitsu and others dont get. one doestn have to teach capitalism to ahve a capitalist system. one only has to not force alternatives at the point of a gun and accept outcomes as natural)
its not really these quants…
yeah.. everyone is effectd… and the quants software does fail during sudden bad times they cant model… but they are not the cause… they are a victim..
liek dominoes… teh cause is not the dominoe behind you… its the force that tipped the first one way back when… and the force taht arranged them this way so that that tipping force works more.
Kirk Peterson: Yes, I was referring to those people when I wrote “On reflection, though, I realize that one reason they may have been not all that stupid was if they were in it just for the short-term gain. Perhaps a great many of these people got out while the going was good and pocketed the profit, a tidy sum.”
I’m talking here about the others, the ones who believed their own figures and thought the free ride would never end.
Let me make a small suggestion: we have to rehabilitate the word “capitalism.” For many people, it is an abstract idea in disrepute. Instead speak of “free enterprise” and find other synonyms to express the basic principle: let people put themselves and their money to work in the best way they can find. (Sound–not safe–investment, family business, building a nest egg … there is a whole industry that specializes in this. It’s called advertising and right now it’s the handmaiden of the Left.)
While we do that, we start scraping the Leftist tar off the name of capitalism, if we can. Most “ism”s are dangerous, after all. So are most ideologies and most sets of principles. Only those that accord with reality are in any way safe, are in any way reliable. And we try hard not to call the good ones ideologies, or the bad ones principles. So why do we let free enterprise and productive finance get lumped in with all those harmful isms? That lets the other side “level the playing field” between the true and the false, the trustworthy and the faithless, the sound and the failed.
This is precisely the lesson from Nicholas Nassim Taleb’s The Black Swan which also notes similar assumptions by other experts in other fields.
Highly recommended.
I would respectfully disagree with the idea of “rehabilitating” the word capitalism.
That’s what I’ve seen the left try to do with the word “liberal”, by calling it “progressive” and such.
It didn’t change what they wanted to do, it was only an effort to camouflage what was truly meant in using the word liberal in the sense it had come to mean within the general public. “Progressive” was only an attempt to confuse the average person due to the disdain that had been generated toward the word “liberal”.
I would instead prefer to educate the general public on exactly what “capitalism” really means, both the advantages as well as the disadvantages – and I would want to compare it favorably to all of the other systems that have been tried before and what the end results of those other systems were and why those other systems ultimately failed so miserably.
Only education will change people’s perceptions. Once they realize just how bad the other systems are, and that no system is perfect, THEN we can begin to discuss how capitalism should be conducted within our society.
Right now, there are too many (very young and very naive) useful idiots who have no clue just how badly socialist societies have historically performed, and our educational system has failed them horribly by not educating them to these facts in the first place.
I would also like to note that the word “capitalism” occurs exactly the same number of times as does the word “democracy” in our US Constitution.
The Founding Fathers were quite educated AND intelligent – a combination we seem to be short supply of these days in our leadership – they knew exactly what words meant and used them elegantly.
Capitalism was the system in effect at the time of the Founding Era, and as such is the kind of system the Founding Fathers would have envisioned society operating within.
However, it would be impossible to go back to a completely capitalistic society now, as it existed back then, as the general population would be both uncomfortable with such a level of freedom as well as unwilling to give up their perceived security.
The question now is how much of a capitalist system we can manage to save over at least the next 2 years.
Baklava Says:
“This is why economics is not an exact science. It’s like philosophy or psychology.”
It’s also why economics departments do human behavioral research you’d expect to be done by psych departments. To do realistic economic models, you have to consider human behavior.
Mitsu Says:
“Well, in my view, the AGW debate is the evidence of the same mistake, but in the opposite direction.”
Well, the wonderful thing about such models is you can test them. Type in data inputs from the past… where we know what happened… and see how the model lines up or not…
Wait, I thought the whole mess was caused by poor black people and Jimmy Carter.
Now you’re telling me it was rich white men?
WHHHHHHHHHHHHHAAAAAAAAAAAAAA???
sassafras…
its a confligration and convergence of those things AND how people (the rich white men) reacted to them and the false information.
imagine shooting with a rifle whose site is off one degree… looks good short distance… but in the long run, if you dont know how to compensate for the false part, your going to miss your targets.
Artfldgr Says:
“its a confligration and convergence of those things AND how people (the rich white men) reacted to them and the false information.”
Well that and congressional dems and lefty groups (like acorn) protrayed it as a black thing… and/or cracking down on the GSE’s was anti-black / anti-poor… considering that, I can see his confusion…
The credit crisis is, at it’s base, a loss of confidence.
What created that loss of confidence was the lack of transparency in mortgage backed securities (MBSs) and the wholesale destruction of capital created by an irrational accounting rule coupled with the Fed takeover of Fannie and Freddie.
When a lender loans money on real estate the real estate is the security for the loan. Most real estate loans are for 15 to 40 years, so the lender is not looking to get his money back quickly. When the quants came up with the idea of buying loans from lenders and bundling them into income securities, it had three effects: 1. It freed up more money to lend. 2. It provided what appeared to be AAA income securities that institutions (banks, insurance companies, municipalities, pension funds, investment banks, etc) could tuck away in their portfolios and count in their capital structures. 3. The quants employers could make some money off the process. So far, so good.
The loans put in these MBSs were diversified by region, size, and quality. Some defaults were inevitable and expected. Still, so far, so good. However, what they did not forsee was a sudden collapse in the housing market resulting in an unforseen or unexpected high rate of foreclosures. Basically, none of this should have been a problem if each institution had been allowed to work with the mortgage servicers and gradually take their losses in the MBSs over a period of a few years. This had all been done before during the savings and loan crisis. But that was not what happened. When some of the defaults began to occur, the question arose as to how institutions should value the MBSs in which there were defaults. The SEC and FASB insisted that they must be “marked to market.” This was on its face a ridiculous ruling because there had never been, and still isn’t, an auction market for MBSs. When a few institutions tried to sell some of their MBSs, the best offer they could get was 20 cents on the dollar of original cost. because the rumor was that these were filled with “toxic” loans. That value then became the “market.” All these institutions began to write down their MBSs by 80%
Banks and insurance companies have to maintain a certain level of capital in order to be legal. Many went into the equity markets to sell common and preferred stock to increase capital. Once the details of this began to get out, the shorts went to work on these companies, driving their share prices lower, further eroding their capital base. Then the Feds took over Fannie and Freddie, which destroyed billions in common and preferred equity in those two GSEs. That shook the financial marketplace to its core and created the loss of confidence we now see. Now no one wanted to own bonds, preferred, or common stock in any company that MIGHT have MBSs in its portfolio. Since many of these companies were major global players, the problems soon became global. The threat of Mmssive failures and further destruction of capital was coming at us at a rapid pace. The Fed and Treasury stepped in to try to stop the snowballing effect of all this.
I hoped that the TARP would inject some confidence back into the system, but so far it seems to have only slowed the snowball somewhat. I think it is probable that there will have to be some kind of program set up whereby the companies holding MBSs will be allowed to revalue them to 50% or so of their original cost and a period of time, say two years, for them to work through them and discover what they are really worth so they can take rational writeoffs. A worst case scenario would be for 25% of all mortgages to default. That means that 75% of the mortgages in the MBSs are good and performing. Also, the 25% represent houses, condos, etc. that have some resale value. Because of that the total losses from the defaults will probably be on the order of 12.5% of all the MBS securities. This is a manageable loss and should not, IMO, have created a global financial crisis.
One way to help stabilize the real estate market would be to cancel capital gains taxes on investment real esate for the next five years. That would encourage investors to buy up foreclosed homes with the goal of making a profit when the market recovers. The other thing that would help the real estate market would be loans at 5% or less. With the Fed at 1% and the 10 year treasury at 3.52% there is no reason why lenders couldn’t lend at those rates and make good money if they do due diligence on qualifying their buyers. But the mortgage loan market is stuck near 6% or greater right now because of fear and that isn’t helping new home sales.
So, yes the MBSs dreamed up by the quants have caused this problem, but it isn’t entirely their fault. They should have figured out a way to revalue an MBS when a mortgage in the security defaulted. They didn’t and now here we are.
All credit crisis’ are at heart about either dollar inflations or dollar deflations.We see the results of the prolonged changes in the monetary standard,which always distort consumption and investment and savings,ironically in response to the incentives put in place by the Federal Reserve.This is a cycle that has repeated frequently since 1971, and we have gone full circle with two dollar cycles of deflation followed by inflation, all in the span of 12 years.One caused a huge increase in the capital stock of the high tech companies,leading to a crash when there was no more capital to invest in that trend.
The other trend created a boom in real estate,basic industries and energy, and this too has burst.Still, after both these ruinous events, the Fed still sticks to it’s failed methods and ideologies, and never, ever admits it’s complicity in the mess it creates.If this subject interests you, Neo, seek out the work of Robert Mundell.
Joe and Mary’s baby boy ain’t no economics wiz. But just like it doesn’t take me long to touch something and tell if it’s hot, I can pull up in front of a house just about anywhere that has a for sale sign in front of it, and tell in two seconds flat if it is worth the asking price. There are a lot of dumb buyers and dumb sellers. I am, however, having difficulty figuring which of the two, as it stands now, was the dumber.
And I will remain pissed that my great grandson will be paying for it still. Why we have not cleaned house on capital hill in D.C. – and every capital hill in every state – is so far beyond me, it makes me vibrate.
neo, I just a few hours ago picked up a copy of Niall Ferguson’s most recent book after seeing it on Instapundit and thinking it looked interesting.
I think the “quant” problem reflects hubris, namely, that things must work a certain way, because their model calls for it to do so. In particular, while the efficient market hypothesis provides the intellectual figleaf to justify use of calculus, that hypothesis seems to be more wishful thinking than anything else.
This attitude is commonly found among theoreticians in the sciences, to the frequent exasperation of experimentalists. Physical scientists all encounter people who have mathematical skills but no physical intuition, and so happily generate completely non-physical nonsense.
Apparently the same thing happened in the financial world. Both crews succumbed to hubris, and thought that the world should fit their models, rather than the other way ’round. Or, as has often been pointed (but apparently not often enough), nature bats last.
Kirk P. (2:31pm) is right:
It’s a Ponzi scheme, which is the taking on of more debt to meet current obligations while gambling your assets will grow enough to dicharge those debts in future. Ponzi schemes always fail, given enough time; the longer they run, the worse the crash. Ponzis are pyramids; the base pays but only the apez benefits (until the shebang collapses).
The USA personal savings rate has been ZERO for at least 5 years now, and was trivial for years before that. We’ve been borrowing obscenely for decades to fund entitlements, more recently for Iraq ( not that I minded taking Saddam out). Social Security was a Ponzi at inception in its assumption that demographics wouldn’t change: eligibility set at age 65 when male life expectancy was 62. Not foreseen were the amazing advances in medicine that started soon after, so male life expectancy is now 78 or so.
If the American taxpayer isn’t saving, or cannot save, but the government is borrowing more and more, that’s a Ponzi. Incurring debt on behalf of taxpayers who can’t retire the debt is what Paulson and Congress are doing. It’s not Amore, it’s a Ponzi, to paraphrase an old Dean Martin song.
We’re just gonna borrow our way outa this mess, right?
NOPE. That’s what the markets are telling us.
Ah, but Tom, they might lose on each transaction, but they’ll make it up on volume…/g
This downturn is shaping up to possibly be one like none of us have ever experienced. There is nothing about Barak Obama or a democrat congress that even remotely tackles the positive psychology needed to bounce back up from this.
The quants should have been required to view Michael Crichton’s speech on complexity theory before they got out of school.
Jimmy J,
that was excellent…
Oops. I thought the idea seemed familiar.
one thing i have to point out…
the quants work with the results of aggregate reports. there is absolutely no way for them to know things other than that artificial view.
this is the problem with socialism too. all aggregates are summaries and simplefications, and so dont actually reflect whats happening.
one thing i have noticed here and elsewhere as a general thing is that people imagine that others who are ‘responsible’ have more information than they do or even can.
the leader of a company of 30,000 people only knows what he can read in reports, and what summaries people below them give them (with their own bias, interests, and plots embedded in them). so ultimately the big picture guys are not in any way knowing whats happening below. they can divert rivers, and move boulders, but they have no idea what the crayfish in the hole on the third bend is doing.
the quants, sit in offices. i did some modeling a few years back.. my software made money… but it had computation speed problems and was just a side thing.. ultimately though the quants were like me, a guy with a certain level of summaried data that appears in a certain time frame. theirs is in high speed connections near the building to shave milliseconds, mine was daily to weekly…
there was no way to model crisis… because the VAST majority of data is not crisis.
the point is that beyond the smart stuff we have all been putting in here, there are some real world mechanics things too that we tend to forget…(this is where i make my money, thinking what everyone else cant or doesnt think).
structurally the idea of doing the loans this way resulted in a disconnect or shorting of the feedback loop. the people selling were able to pass the buck as to the responsbility, and they were being pressured to oversell what they didnt want to sell to for too high risk. add to that the state allowing fannie and freddie to work holding less capital for fractional banking, among other things, like the quants working on what they are being told the values of these things are…
i think we are also missing something else… for weeks before this kicked off the world bank and other places had been broken into many times. some hints were given in speeches, and then the oil popped suddenly (which can happen if suppliers restrict or play games. the countries that control the actual oil we buy have what political systems?)
so we are also forgetting that this was also fired off with a starter. something to tip it over that wasnt natural. (people are not really saving so much and cutting back to drive the price down that far -the group over produced trying to grab as much of the high pop as possible, while tipping things over)
on top, the wishy washy back and forth and obamas FDR promises have everyone either sitting, divesting, or moving things if they can to other areas.
no one wants to do a damn thing since the ones that make money and are good at it, dont know what he will do or not do, and until they do, they cant choose what to do.
even i am waiting… after all… dont want to drop some savings to find out the state nationlized it next week.
and that kind of talk is also very irresponsible, since their BS conversations.
one they had and could be why so many are just sitting still is the talk of 401k buy out with treasury bonds by the state.
which would in one swoop, nationalize the country as all those pensions, and other retirement accounts hold a large percentage of a lot of large company assets.
no one wants to own stock in a nationlized company… and so no one wants to buy anything if suddenly the state is their business partner.
[and the other oddities like priming the fall with a temp oil game, and breaking into the world bank over and over]
its scary…
The “Ponzi schemes” get more sophisticated all the time. Oh well, suckers going down at least raises my relative credit rating.
Economics isn’t just like philosophy or psychology, it pretty much *is* psychology, only tokenized and implemented on a massive scale using statistical analysis. Things have value because we think they have value, and the study of all branches of economics is, at heart, the study of how we are convinced things have enough value to be worth giving something up in exchange for them.
Sorry, I should have said “implemented on a massive scale for a limited purpose.”
Artfldgr,
Thanks!
Taterdemalian said, “Things have value because we think they have value,”
Exactly! The fact that we believe a piece of plastic is money shows exactly why a financial system cannot work properly without confidence. When I was a kid, even checks were looked at askance. Money was the only thing that inspired real confidence. I would not have believed the credit card thing would catch on. Shows what I know. It only works because the issuer and the merchant have confidence that they will get their money. So, it is as you say – “things have value because we think they do.” The most important thing is that there is CONFIDENCE in whatever it is that we value. Humans have been constructing systems to exchange goods and services since hunter-gatherer days. They aren’t ponzi schemes unless the instigators know full well in the beginning that they will never make good on the promises. When we went off the gold standard, it appeared there was no store of value, but that store of value had been replaced by the productivity of American industry and the taxing powers of the government. Enough people had confidence in that so, it worked.
The Depression was the result of massive destruction of capital, which led to deflation that was made worse by keeping money tight, raising taxes, and unwise tariffs. It took the massive deficit spending of WWII to get the economy moving again. Much of that spending was done on building our industrial plant, which put us in a very good position when the war ended. Use of debt has allowed our economy to grow beyond anyone’s fondest dreams back in 1945, but there is no doubt that we have overdone it several times and have paid for it through periodic recessions and inflation. We humans are prone to overreaching and hubris, which, barring any other factor, probably causes the business cycles that seem as unchangeable as the seasons.
We are in a similar situation now as at the beginning of the Depression. I believe we can restore confidence and come out of this poorer but wiser and stronger. Or we can do what was done in the thirties: raise taxes, curtail free trade, and spend money on feel good programs rather than building up our energy capabilities and encouraging more entrepeneurship through low taxes.
Neo, student of narrative and metamorphosis, secret refugee who loves the ballet of thought, are you leaving a story in your trail of breadcrumbs?
* A mother poisoning her child’s mind
* A new trahison des clercs and the peasants rising
* The old ones disappearing, and with them the accusing voice of the past
* The repressed memory of horror and guilt
* The return of Loki
* The harlots in the temple
* The false messiah
* The utopian death cult
* The childish excess that becomes difficult to escape
* les enfants sauvages
* A gram is better than a damn
* The body snatchers
* The Sorcerer’s Apprentice in the place of the Masters of the Universe
Are we living backwards through time? First it was 1935, with Clinton in the role of Stanley Baldwin. Now it’s 1932.
Is this the dawning of the Age of Aquarius? Or is some rough beast somewhere slouching?
Wake me up. I’m afraid. Where did the grown ups go?
“Where did the grown ups go?”
Gated communities…
Mitsu says: “Global warming is a long-term trend that is hard to notice on a year to year level, so we discount it as a possibility cognitively.”
I would refer you to “The Deniars”, Lawrence Solomon, illustrating the questionable methodology and basis for the “scientific modeling” of GW, in some respects not unlike some wall street “math”. As Neo says, “The quants, on the other hand, were just looking for money. And they found it, for a while.”
\”imagine shooting with a rifle whose [sic] site is off one degree… looks good short distance… but in the long run, if you dont [sic] know how to compensate for the false part, your [sic] going to miss your targets.\”
Those poor Wall Street bankers! First, they issued subprime loans that would never be paid back, and they had no idea! Then, they took those loans, sliced them into tranches and securitized them, accidentally hiding their worthlessness by selling off worthless subprime loans as AAA rated bonds to buyers who had no idea they were worthless! All for an instant profit! Then, when they ran out of poor people to whom to issue subprime loans, they shorted their own loans (for some magical reason, since they clearly had no reason to believe the loans would fail and therefore had no good reason to short them), issued credit default swaps on the short trades, and then issued worthless (but also AAA rated) bonds based on the credit default swaps based on short trades based on subprime loans they had no idea would never be paid back!
So, it\’s just like they were trying to shoot straight but didn\’t know the sights were slightly off. They had no idea they were scamming investors! They had no idea they were making huge sums of money very quickly off selling worthless assets before people realized they were worthless and their values collapsed! They had no idea their short trades and credit default swaps were based on worthless loans, even though the only reason someone would short the bonds was their likelihood of default! It\’s just like they were straight-shooters with the best of intentions! Those poor rich people!
The major difference between modeling finance and modeling weather is that weather is not subject to impulsive human behavior.
Assistant Village Idiot Says:
November 19th, 2008 at 3:28 pm
There’s more than one lesson in that book. The current pair of messes (unwinding/deleveraging bad loans and the UAW-Detroit meltdown) actually qualify as white swans. They were predictable — in particular, the former because the notion that loans would be uncorrelated is and was utterly unfounded: the “ludic fallacy” and Mediocristan of which Taleb speaks. The latter, because the Big Three having to pay something like $2000 per car in extra compensation but meet leaner competitors’ prices and quality is an obvious millstone.
The black swan, whatever it is, probably hasn’t even hit yet.
“Hyman Rosen” says: “The major difference between modeling finance and modeling weather is that weather is not subject to impulsive human behavior.”
But the “modeling” is, and becoming pernicious as political idealogues use it to justify the manipulation of surrogate and direct taxation, as well as a contrived rationale for government control and power; Particularly pervasive in the politics of the left.
Modelling of complex non-linear systems is not a science, it is an art, which can impress laymen because it use advanced mathematics and computers; but this alone does not make it science. The most important thing is robustness of models, that is, to which extent such models are sensitive to simplifying assumptions whithout which no model can be built or used. Generally we have no idea about it, and nothing except long practice can assure us that models are robust. For some types of systems no robust model can exist; in this case we deal with chaos (a mathematical concept). It is still unknown is underlying dynamics of financial markets chaotic or not; the same about climate system. If it is chaotic, no long-term prediction is possible, however complicated models are and how much computing power is used. This is theoretical, not technical limitation: it is not surmountable.
Bankers are greedy? Surprise, surprise! Is the Pope Catholic? All banking industry is about maximizing short-term gains, because long-term gains are not predictable. That is why there is need for regulation to ensure liquidity and stability. Under present globalisation and computer-assisted optimization schemes, this regulation turned to be inadequate. Nobody knows exactly what should be done to make it adequate during downside phase of investment cycle. It looks like escalating deflation, as in 1929.
See wiki on liquidity trap and deflation spiral. The most pertinent to the present situation:
“Economists of the Austrian school challenge the idea that Japan experienced a liquidity trap, instead contending it suffered from the bust portion of a business cycle brought on by monetary inflation, which could only be cured by allowing the bust to liquidate the malinvestments made during the boom. Austrians contend that busts are necessary corrections to booms and that artificial credit expansion or other government interference will only make the bust longer or delay an even bigger bust. Thus, they blame Japan’s rigorous government interference in the market for causing the bust to last throughout the decade. [3]”
I’m not qualified to judge the validity of models, but I understand the folks over at RealClimate are experts at hashing out the arguments – you can check there. I do know that people who say that some particular piece of data has been overlooked and thereby invalidates all global warming research are wrong – they’re the same sort of people who think they’ve disproved evolution or that HIV causes AIDS.
In any case, my argument stands – the underlying system that weather models emulate is not subject to the vagaries of human behavior. No matter how many people become depressed tomorrow, they’re not going to make the sky turn gloomy.
Like everything else, it boils down to human behavior. What we witnessed in the financial industry could commonly be described as the “bandwagon effect”. Quants merely justified the actions of the leadership that was struggling to find new product revenue streams to replace the obsolete financing model that was quickly fading. The same pseudo-science modeling consensus is observable in the AGW justification crowd. Bad assumptions and analysis is not challenged very hard when everyone wants to believe the answer is required for survival.
It’s subject to the same human failings: oversight, miscalculation, prejudice, systematic bias, and ignorance that any human endeavor is.
A model is just that: a model. It’s an abstraction that is distinct from the thing being modeled; whether those differences are relevant or not depends on the model, the thing being modeled, and the question being asked.
Even in planetary astronomy, which is largely governed by Newtonian mechanics that have been known for centuries, calculations are often in error. See this and this.
How much more likely is it the climatological models are substantially wrong, when a) we don’t necessarily know all the variables, and therefore b) have no shot at guessing their interactions? I’d put the likelihood of substantial error at 99.999%.
And as for financial modeling, bear in mind that we have access to reams of relevant quantitative information, whereas climatological information is relatively sketchy at best.
The same pseudo-science modeling consensus is observable in the AGW justification crowd. Bad assumptions and analysis is not challenged very hard when everyone wants to believe the answer is required for survival.
yup
out today
Observing Buried Carbon Dioxide
A project proves that millions of tons of the sequestered gas can be safely monitored.
http://www.technologyreview.com/printer_friendly_article.aspx?id=21694&channel=energy§ion=
and go here to keep track of the sun… (which i check every morning)
sohowww.nascom.nasa.gov/data/realtime/realtime-update.html
I recall the term “better red than dead” and wondering if it would have had the same impact if it hadn’t rhymed.
The term “credit crunch” might not be so widely believed if the two words didn’t start with the same two letters.
I see loan advertisements on web pages, I get letters to “small business” person who might need a loan. I get notes from our mortgage company offering to drop our rates if we do something or other.
Perhaps “credit crunch” refers to loan criteria from, say, twenty years ago.
Like I said, there’s no point in having a climate discussion with me – I’m not a climate scientist. The RealClimate blog is the place to go to find discussions of the claims of warming skeptics.
By the way, “you could be wrong so I’ll ignore you” is not a cogent response to a scientific consensus.
Richard, there has been some research on such things… and yes, everything has influence. though humans have a preference for imagining a influence being small being equivalent to not being there… (when the universe doesnt clip decimal points, so EVERYTHING is salient).
on another note…
a very simple physics type question for Mitsu.
Do planets orbit the sun?
Oblio, I’m very much afraid that you have a point.
Does this mean the days of hubby and wifey working at McDonalds and owning a 250K house are over?
Neo,
I’ve been reading your blog for several years,
never commented. I must now…. I don’t know how
much you know about Niall Ferguson but be very
careful here. Have a look at his new revisionist history
series. He is intentionally pulling attention away from
Fannie Mae/Freddie Mac, the BCC, Maxine Waters,
Barney Frank, Chuck Schumer, Chris Dodd, F.D. Raines,
the people who did ‘do it’. He is not on your side or my
side, be very, very careful here.
Hyman, a scientific consensus doesn’t mean squat, because scientific issues are not settled by popular vote. One man with dispositive data trumps 100,000 clowns who all agree with each other.
The history of science is replete with such scientific consensuses (?) being overthrown. It’s what lightweights in business trying to echo Kuhn call a “paradigm shift.”
Also, having been on the inside of such things, no one working in the field is going to stop the gravy train. Competition for grant support is fierce, and so fads and fashions sweep through the research community. Throw cold water on them, and guess what happens to your subsequent grant proposals (which are anonymously reviewed). Grant support goes down the drain, followed by your career. If you play ball, you can get some grant support too. It’s a lot easier – indeed, smarter – to swim with the current rather than against it.
This is especially true in a field such as climatology, a Cinderella story of a research backwater suddenly become the belle of the ball. Those who question the latest fad usually keep such thoughts to themselves, to avoid becoming very unpopular very fast.
You thought scientific research was all about the search for Truth? Nope. The operators prosper there, as in all human endeavors, I’m afraid.
The perfect analogy just occurred to me. Suppose Obama somehow got the impression that neo and all of us on this blog were the fervent supporters, and he was sending Air Force One out to fly us in to DC to sit on the dais behind him during his Inauguration. Then imagine someone pointed out to him that he was mistaken, and he withdrew the invitation. How popular would that guy be?
Sort of the theory the government used opposing “redlining”.
Ahh, but it wasn’t simply due to Wall Street; it was the result of Freddie, Fannie, the CRA, even Obama’s Citibank lawsuits played a small part.
Dan: I know that the Ferguson article focuses on the role of Wall Street. I think that Fannie and Freddie and Democrats such as Barney Frank share a great deal of blame as well. The two thoughts are not mutually exclusive—there’s plenty of blame to go around. But if Ferguson discounts the role of the latter group, it doesn’t mean that he’s not correct about the former group. The problem would not have been so pervasive, nor would it have effected so many financial institutions, without their role in it.
If the government distorts the market, expect widespread market failure sooner or later, and the market isn’t really responsible.
The problem with market distortions is that they turn what would normally be good market behaviour into bad behaviour. So in a sense the market plays a role, allowing our leftist friends to blame the market.
What’s the real key to this?
test
Ah, everyone’s an apostate now. I can’t help recalling the heady days before the first great crack last July, and even for months thereafter, when dumping or shorting shares was mere liberal negativity because America is the greatest country in the world &c., &c. You grow poor because you are political pawns. As long as you affirm predigested slogans to express institutionalized affiliation with your propertied but insecure class, you will be helpless to protect your means. And now the Clear Channel lumpen, paralyzed by dread of cartoon commies, are about to be wrong-footed once again. This is no accident. You are more useful if you’re poor, you see, and angry.
Sure, lecture me about how science works, why don’t you? Scientific consensus is the result of experts in the field deciding that a particular interpretation of the evidence is the one most likely to be true. That’s not “popular vote”. And certainly sufficiently disruptive new evidence can cause a paradigm shift, but first the community tries to fit it into the existing framework. Scientists are human and as prone to error as anyone else, but it’s rarely the case that the lone voice crying in the wilderness is the one that’s correct.
Notice how you are driven to conspiracy theory to explain why the world does not seem to agree with your point of view. People who believe that are not noble loners fighting for truth, they’re just paranoid and deluded.
Obviously, consensus is all-important. As the all-seeing David Brooks would have it:
“Already the culture of the Obama administration is coming into focus. Its members are twice as smart as the poor reporters who have to cover them, three times if you include the columnists. They typically served in the Clinton administration and then, like Cincinnatus, retreated to the comforts of private life – that is, if Cincinnatus had worked at Goldman Sachs, Williams & Connolly or the Brookings Institution. So many of them send their kids to Georgetown Day School, the posh leftish private school in D.C., that they’ll be able to hold White House staff meetings in the carpool line.”
And who are we to argue?
Someone has to, because you obviously have no clue. (Btw, I am a scientist, and trained any number of others.)
That’s exactly what it is. A hypothesis stands until it fails to comport with the data, and then it falls. Consensus is not involved. At all.
You’ve set up a straw man by sharpening my position, and then battering it, when I said nothing of the kind. That’s intellectual dishonesty, and you should be abashed to have engaged in it.
My point was that the scientific utility (i.e., ability to predict the results of experiments) of a hypothesis is independent of the opinions (votes, consensus, whatever you want to call it) of others. And that’s true. Who believes what is irrelevant to what is true.
In the unlikely event that one man comes up with dispositive data on AGW tomorrow, that’s it, the debate is over, regardless of how many people fall out for or against his position.
That was my point. So bugger opinions: show me the data (not models; Jurassic Park was created with computer models too). Until then, opinions and $3.50 will get you a latte at Starbucks.
Occam,
Thank you, sir. Much as I recognize schadenfreude to be a base and ignoble emotion, I still must admit what a pleasure it is to see the self-righteous have their asses handed to them.
Like Hyman, I’m not a scientist; however all my experience has taught me to distrust consensus (I believe you and I had a discussion re Jonestown a few days ago). My bias aside, the merest consideration of CO2 levels versus temperature levels IN MY LIFETIME exposes the AlGore-ithm for the fraud that it is.
It’s always fun to notice how often the True Believers’ messages contain the terms “recognized experts”, “paradigm”, “community”, “driven by the conspiracy theory”, yadayadayada. The true depth of original thinking is reached, though, with the phrase “it’s rarely the case that the lone voice crying in the wilderness is the one that’s correct.”
Leaving aside the disturbing implications of feeling so lorn and lost and far from the sheltering arms of 0bama, haven’t any of these people ever heard of Galileo? Words fail me.
But not you, apparently. Grazie.
warbaby,
Prego.
I really don’t know whether AGW is real or not, but the burden of proof lies on the person making the assertion. Furthermore, the more extraordinary the assertion, the heavier that burden. Proponents of AGW have thus far failed to carry that burden, imo.
I don’t oppose the AGW crowd because I think their models are based on faith. I oppose them because they demand that their models be accepted as a matter of faith, despite them frequently being wrong, and unable to even get a reliable over/under. Not to mention their “solutions” never involve actually trying to remove CO2 from the atmosphere, but instead always involve forcing people to adopt a “carbon-neutral” lifestyle that is not sustainable at our current population level.
The first and final principle of all mathematical modeling is, “When the numbers do not match the reality, then it is the numbers that are wrong, not reality.” It’s been this way since the mathematicians of the Dark Ages tried to mathematically model the “epicycles” of Venus, instead of just accepting that it moves around the Sun instead of the Earth, and the same applies now.
There was a reason why I asked if planets revolve around the sun… its a trick question… just as one idea (earth centric) was replaced by another better model (solar centric).. i will say for fun that earth centric is more correct than AGW is (imop)!! its not that earth centric is so wrong, its just that its intractable compared to solar centric.
but the truth is that we are gravity centric. the solar system actually orbits its own center of gravity: Barycentric Orbit. So in truth we moved past solar centric.
This center is not always inside the sun, and they now think that is a major influencer in solar cycles.
to hear another scientist confirm occam:
Dr Sprott writes: It is an axiom of science that if the outcome of an experiment or event does not accord with that predicted by a theory, the theory must be discarded, no matter how attractive it may have appeared initially. That very situation now exists in relation to the projections of world climate as published by the Inter-governmental Panel on Climate Change (IPCC).
basically his work shows that where the barycentre is the output of the sun varies, and so this then in turn causes temperature changes as the energy output of the sun varies and the amount of particles stimulating clouds varies.
The variations in energy correlate with uncanny precision with past vagaries of the Earth’s climate on a cyclical basis, the periodicity being about 179 years. The correlations with recurring periods of very cold weather, as evidenced by historical data, can only be described as irrefutable.
/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\
years ago Fairbridge predicted that the next cooling period would commence in about 2006, and would be evident by 2011; and his prediction thus conforms with recent atmospheric temperature data, i.e. the Fairbridge hypothesis conforms with the observed data, and its predictions conform with the outcome.
there is also this (that occam i think might find interesting if he hasnt read about it).
Magnetic Portals Connect Sun and Earth
http://www.physorg.com/news144677133.html
basically a magnetic portal opens up between the sun and the earth and the sun dumps energy through it.
Several speakers at the Workshop have outlined how FTEs form: On the dayside of Earth (the side closest to the sun), Earth’s magnetic field presses against the sun’s magnetic field. Approximately every eight minutes, the two fields briefly merge or “reconnect,” forming a portal through which particles can flow. The portal takes the form of a magnetic cylinder about as wide as Earth. The European Space Agency’s fleet of four Cluster spacecraft and NASA’s five THEMIS probes have flown through and surrounded these cylinders, measuring their dimensions and sensing the particles that shoot through. “They’re real,” says Sibeck.
There are many unanswered questions: Why do the portals form every 8 minutes? How do magnetic fields inside the cylinder twist and coil? “We’re doing some heavy thinking about this at the Workshop,” says Sibeck.
the AGW models have none of these things in them, and yet these things are key.
about the only good thing that came out of AGW scare is all this REAL science data.. to bad everything is sullied in terms of warming so that real data will be considered wrong eventually (and even if they settle on correct data, the plethora of warming science that then will be wrong in those terms will make everyone even less confident in science)
there are tons of things that are not even in the models, and the models they are using are not good… hansens original models predicted cooling, then it got warm, and he has been twiddling htem to match the data for a long time… with some kind of weird idea that if he gets the system to match prior data it will then map out future data… but thats not a very valid way to do this… again, its more that leftist cargo cult go through the motions and not understand why it doesnt work… all image no substance.
I have come up with a new idea for central air conditioning in the home. Rather than have the unit remove heat (and by default, moisture) from the air inside the home – which evidently doesn’t really work, we just all “think” it does – I wish to develop a system that removes only CO2. We should at least then, be able to reduce, if not eliminate, warming inside the home and commercial buildings. I believe if I can push it hard enough, long enough, I should be able to line up a league of investors.
The laughed at Galileo, but they also laughed at Bozo the Clown (Carl Sagan). Galileo and a handful of others are remembered precisely because worldview-changing paradigms are so rare. For every Galileo there are thousands of cranks. Please find me a scientist who was ridiculed by most other scientists for any length of time and then turned out to be right. Countervailing conspiracy theories of how lone voices are suppressed is the simple fact that overturning some established principle is a guaranteed way to a Nobel prize and is a cherished dream of all scientists.
Hyman Rosen: Find you a scientist who was ridiculed by most other scientists for any length of time and then turned out to be right? Here’s a more recent example than Galilieo, and one of my personal favorites, because I learned of his theory as a very young child (I was very interested in science even in my extreme youth) and wanted it to be true. But it was not accepted at the time. And yet a few years later, I learned to my delight that it now was.
Here is the story (I may write a post about this):
…while [Wegener’s] ideas attracted a few early supporters such as Alexander Du Toit from South Africa and Arthur Holmes in England, the hypothesis was generally met with skepticism. The one American edition of Wegener’s work, published in 1924, was received so poorly that the American Association of Petroleum Geologists organized a symposium specifically in opposition to the continental drift hypothesis. Also its opponents could, as did the Leipziger geologist Franz Kossmat, argue that the oceanic crust was too firm for the continents to “simply plow through”. In 1943 George Gaylord Simpson wrote a vehement attack on the theory (as well as the rival theory of sunken land bridges) and put forward his own permanantist views. Alexander du Toit wrote a rejoinder in the following year, but such was G.G.Simpson’s influence that even in countries previously sympathetic towards continental drift, like Australia, Wegener’s hypotheis fell out of favour.
In the early 1950s, the new science of paleomagnetism pioneered at Cambridge University by S. K. Runcorn and at Imperial College by P.M.S. Blackett was soon throwing up data in favour of Wegener’s theory. By early 1953 samples taken from India showed that the country had previously been in the Southern hemisphere as predicted by Wegener. By 1959, the theory had enough supporting data that minds were starting to change, particularly in the United Kingdom where, in 1964, the Royal Society held a symposium on the subject.
There is also Lister, as well as many of the early pioneers of germ theory, vaccination, and anesthesia.
As I said, I may do some research on this and write a post. Those are just the ones that quickly come to mind. There are many more, I believe, but I don’t have time to look them up right now.
I have some time on science discussion boards where some very agile scientific minds debate the human-generated theory of global warming, as well as the extent of global warming itself. I have been impressed by the quality of the arguments on both sides.
Please find me a scientist who was ridiculed by most other scientists for any length of time and then turned out to be right.
Marshall and Warren, who won the 2005 Nobel Prize in Medicine for proving the heretical theory that H. pylori caused ulcers come to mind.
As does an employee of the Swiss patent office named Einstein whose scientific papers were widely ridiculed for years by the scientific establishment until proven correct.
Sorry for the bad tag. I found your site from Ace’s and obviously picked up my mad html tag closing skilz from him.
Hyman, there’s also a statistician who the Realclimate guys continue to ridicule to this day even though he has been proven right. His name is Steve McIntyre (www.climateaudit.org), and he broke Michael Mann’s hockeystick. Perhaps you’ve heard of him.
Answer Correct + Method Wrong = Bad Science. Mann, Gavin Schmidt and the rest of the Realclimate guys just don’t have the intellectual honesty to admit it to themselves.
Neo, the part of the Wikipedia entry about Wegener that you didn’t quote was that while he found circumstantial evidence for continental drift, he couldn’t come up with a valid theory to explain its mechanism (he did come up with an invalid one). Once a mechanism was worked out, his ideas were accepted.
It took about twelve years from the time Lister started his research for antisepsis to become widely accepted, and his techniques were being used much earlier than that.
That’s the way science works. Bright young hypotheses grow up into solid evidence-based theories when they’re right.
RealClimate does not ridicule McIntyre, they publish papers demonstrating that he is wrong, and that the hockeystick is real.
If you preselect the scientific theory you wish to believe based on your prejudices, you will inevitably be led into error. Just because you hate what liberals make of global warming doesn’t mean it’s false.
Einstein wasn’t generally ridiculed – some his theories were controversial, true, but it took only sixteen years from their first publication for him to receive the Nobel prize.
It took about five years for M&W’s gastritis theories to be somewhat accepted and used as a basis for treatment, and twelve for this to become scientific consensus.
Good work rises to the top. No one is going around suppressing geniuses. Ideas that contradict accepted theory have to earn their respect, that’s all.
As a mathematician who had built and tested mathematical models of natural events for 25 years now, I have no such reverence for them as non-mathematicians usually have. Models are only research tools, not oracles that can predict future. No comprehensive theory of Earth climate now exists, and models should be subservient to theory, not other way round; and models are not enough to produce a theory. The only basis of AGW hypothesis are models, but they are so arbitrary that can prove nothing (because can predict everything).
At this state of art of climate study we all preselect our “theories” (really, hypotheses) on the basis of our prejudices, that is, educated guesses; we have not a common, recognized criteria to do anything else. The field is too immature, the evidence is contradictory and inconclusive.
Hyman Rosen: the idea that people are responsible for global warming is in its infancy, relatively speaking. There is plenty of room for new information to counter it, and some of that information is already there. For Wegener it took decades. The pace of scientific information gathering is greater now, but it can make it harder to sort out, and there is a certain amount of “garbage in garbage out” as well, because some of the data-gathering methods are suspect. This is especially true with global warming, which is much more political than most areas of science and therefore there’s much more room for bias, much of it unconscious but some of it conscious.
In addition, computer modeling is inherently flawed with complex systems such as climate. There is no way that all variables can be included, and predictions be reliably made.
That doesn’t mean that energy conservation and searching for better energy sources shouldn’t be undertaken. But not in a spirit of panic and doomsday.