Data Watch: UAH Global Mean Temperature, June 2015 Release

On July 6th, Dr Roy Spencer released the University of Alabama-Huntsville (UAH) global average lower tropospheric temperature anomaly as measured by satellite for June 2015 (here). The anomaly refers to the difference between the current temperature reading and the average reading for the period 1981 to 2010 as per satellite measurements.

June 2015: Anomaly +0.33 degrees Celsius This is the 3rd warmest June temperature recorded since the satellite record was started in December 1978 (36 June observations). The warmest June to date over this period was in 1998, with an anomaly of +0.56 degrees Celsius. Full data set available here (click for larger image).

UAH Global Temp July 2015 jpeg

The El Nino Southern Oscillation (ENSO) cycle is the main determinant of new temperature records over the medium term (up to 30 years) . The U.S. government’s Climate Prediction Centre currently has an El Nino advisory in effect and is forecasting that the current El Nino event is set to continue through into 2016 (update 9 July 2015 here):

Overall, there is a greater than 90% chance that El Niño will continue through Northern Hemisphere winter 2015-16, and around an 80% chance it will last into early spring 2016.

Given this background, I would expect the UAH anomalies to remain elevated for some time.

As background, five major global temperature time series are collated by different international agencies: three land-based and two satellite-based. The terrestrial readings are from NASA GISS (Goddard Institute for Space Studies), HadCRU (Hadley Centre/Climate Research Unit in the U.K.), and NCDC (National Climate Data Center). The lower-troposphere temperature satellite readings are from RSS (Remote Sensing Systems, data not released to the general public) and UAH (Univ. of Alabama at Huntsville).

The most high profile satellite-based series is put together by UAH and covers the period from December 1978 to the present. Like all these time series, the data is presented as an anomaly (difference) from the average, with the average in this case being the 30-year period from 1981 to 2010. UAH data is the earliest to be released each month.

One of the initial reasons for publicising this satellite-based data series was due to concerns over the accuracy of terrestrial-based measurements (worries over the urban heat island effect and other factors). The satellite data series have now been going long enough to compare the output directly with the surface-based measurements. All the time series are now accepted as telling the same story (for a fuller mathematical treatment of this, see Tamino’s post at the Open Mind blog here). Note that the anomalies produced by different organisations are not directly comparable since they have different base periods. Accordingly, to compare them directly, you need to normalise each one by adjustment to a common base period.

Greedy Greeks?

The shock referendum announcement by Alexis Tsipras over the Troika’s austerity demands has radically increased the chance that Greece will fall out of the eurozone.

I am surprised that the markets, and indeed the Greek people themselves, did not give more credence to this outcome over the last few weeks. The received wisdom of most market pundits is that an 11th hour agreement would be reached.

Meanwhile, Greeks have been pulling money out their banks, but at a very leisurely pace. To me, this nonchalance appears bizarre. The chart below shows Greek bank private-sector deposits falling from 160 billion euro prior to Syriza’s election victory to around 130 billion euro at end May. The chart is made to look more spectacular by having the y-axis commence at 100 billion euro.

Even if last week you had only assigned a 5% probability to a return to the drachma, such an outcome would result in a 30-50% decline in the value of your savings when denominated in euro. Risk equals probability times effect. The probability might have been assessed—wrongly as it turns out—as small, but the impact should have been deemed as large. The prudent man or woman would have parked their money abroad until a deal was sealed and then repatriated the money once confidence was restored. And for small accounts that couldn’t justify the hassle and fees of an inter-country transfer, you could always stash cash under the bed. Yet relatively few have followed such a simple risk control strategy (Chart from Bloomberg here).

Greek Bank Private Sector Deposits jpeg

At this point, it appears improbable that the banks will open on Monday, and the Greek authorities will have to introduce capital controls and bank deposit withdrawal limits. If this is indeed the case, the likelihood of avoiding a return to the drachma looks remote.

Very soon the blame game will begin. However, from my perspective there is a certain inevitability about the outcome, which rests on long-term economic and political factors that are rarely raised by most commentators. After a political tour to Greece two years ago, I blogged about these issues here, here and here.

Front and centre of the factors driving Greece toward its current predicament is the country’s terrible demographics. Let’s look at its current and projected old-age dependency rate, which I took from Eurostat. Currently, the ratio of the elderly (65+) to working age (15-64) is 1:3. However, this ratio is rapidly moving toward 1:2 (click for larger image).

Greek Dependency Ratio Comparative jpeg

Not surprisingly, such demographics are putting a huge burden on the state with respect to pensions. Even the right-of-centre Wall Street Journal goes beyond the stereotype of greedy Greeks in recognising this fact (source: here). So while the aggregate Greek pension burden is very high in a European context when compared with GDP, it is not so high when we put pension spending on a per person basis.

Greek Pensions % of GDP jpeg

Greek Pension Spending per 65+ jpeg

With demographics like this, the only way a country can maintain living standards is through securing high productivity growth. And to do that, in a global economy, a country needs a comparative advantage in industries that exhibit high productivity growth.

Unfortunately, since entering the euro at what proved to be the wrong rate, Greek growth has been concentrated on just a few industries such as tourism, real estate, shipping services and infrastructure projects benefitting from EU regional development funding. Many of these industries got savaged in the wake of 2008/09 financial crisis, and those that have remained reasonably robust, such as tourism, are not great engines of productivity growth.

As Japan amply demonstrates, when a country enters a steep demographic transition, it is very difficult to secure high rates of economic growth. But that doesn’t mean that you can’t maintain full employment, social  cohesion and well-being. Japan has partially done this through accepting declines in real wages and a depreciation of its currency. Indeed, the Japanese middle class tourist, once king of Bloomingdales and Harrods in the 1980s, is now relegated to factory outlets.

For the IMF, Greece has been pushed toward reformimg its soft infrastructure: land registry, tax collection, business licensing system, closed shops and so on and so forth. These are all noble causes—and in the course of time should bring some productivity improvements. But the IMF‘s second critical goal, internal devaluation, has proved a disaster. Adjusting wages and prices downwards without producing an economic slump is an almost impossible task. Moreover, the key demographic segment that is critical to future productivity gains—highly educated young adults—have reacted to austerity by flocking to the UK and Germany in droves. The Guardian reported on this depressing brain-drain in January this year (here)

If you are struggling with adverse demographics and poor competitiveness, the last thing a country needs is for its actual economic output to be substantially below its potential output. But this is what you get if you implement a vicious policy of austerity within the context of a lack of effective demand and a fixed exchange rate. Far better is to adjust prices through maintaining a flexible exchange rate and allowing a modicum of inflation. And the only way for this to occur is for Greece to leave the euro and return to a freely floating drachma.

 

Climate Change Will Make ISIS Look Like Amateurs

The destruction by ISIS (Islamic State) of the ancient Assyrian city of Nimrud in Iraq and potential destruction of Palmyra in Syria has shocked the world—almost as much as the organisation’s previous beheadings of its captives.

Nimrud jpeg

Unfortunately, an article in this week’s New Scientist on sea level rise titled “Five Metres and Counting” (apologies print or paywall access only) suggests that climate change has already committed the world to the destruction of human heritage many orders of magnitude greater than anything ISIS is capable of doing.

You may be familiar with the Intergovernmental Panel on Climate Change (IPCC)‘s end of century sea level rise forecast (here, page 11 in the report). This pegs the upper sea level rise outcome at just below one metre (click for larger image).

IPCC Sea Level jpeg

What is less well-known is that this is just the preliminary phase of sea level rise. Given the extent of warming to date plus the warming guaranteed by current levels of carbon dioxide in the atmosphere, we are committed to barrel through one metre. In the words of Michael Le Page from The New Scientist:

Whatever we do now, the seas will rise by at least 5 metres. Most of Florida and many other low-lying areas and cities around the world are doomed to go under. If that weren’t bad enough, without drastic cuts in global greenhouse gas emissions–more drastic than any being discussed ahead of the critical climate meeting in Paris later this year—a rise of 20 metres will soon be unavoidable.

The arithmetic is pretty depressing (chart from New Scientist article): 0.4 metres for mountain glaciers, plus 0.8 metres for ocean thermal expansion, plus 3.5 metres for the West Antarctic ice sheet (the areas in orange in the chart below, click for larger image). If we go past 2 degrees Celsius of warming and get to 4 degrees, then we add all the blue bars as well.

NS Meltdown Imminent jpeg

Since the IPCC’s Fifth Assessment Report (AR5) was published, fresh evidence has emerged relating to West Antarctic ice sheet instability. Moreover, two large basins, the Aurora and the Wilkes, that form part of the East Antarctic ice sheet also appear vulnerable. In short, if we push up to 4 degrees Celsius of warming, then we are likely committing ourselves to 20 metre sea level rise.

So we’ve seen what ISIS had done in Nimrud, this is what we will do to Venice with 20 metres of sea level rise (source: here):

Venice jpeg

And New York:

New York jpeg

These projections are Old Testament in terms of the scale of the catastrophes they portend; indeed, ISIS could only dream of unleashing such wanton destruction. Yet, in our failure to tackle climate change, such wanton destruction appears to have been accepted by the G20 elites and, frankly, ourselves.

Addendum: 

Had a request for the background papers quoted by New Scientist. Most of these are behind paywalls but the authors frequently make pdfs available on their personal web sites or the web sites of their institutions:

Link to Science article on collapse of West Antarctic ice sheets
http://sumnerscience.com/wp-content/uploads/2014/05/Science-2014-Sumner-683.pdf

Link to Nature Geoscience article on Aurora Basin (East Antarctic): http://www.nature.com/ngeo/journal/v8/n4/full/ngeo2388.html

Link to Nature Climate Change article on Wilkes (East Antarctic):
http://www.nature.com/nclimate/journal/v4/n6/full/nclimate2226.html

Link to Earth and Planetary Science Letters on overall East Antarctic melting (total 15 metres):
http://www.sciencedirect.com/science/article/pii/S0012821X14007961

Link to Nature Climate Change Letter on Greenland
http://www.nature.com/nclimate/journal/v2/n6/full/nclimate1449.html

The EIA Sees Our Energy Future – Which Doesn’t Look That Much Different from Today

Exams finished (I’ve been exercising my brain cells by doing some data analysis and computer courses with the UK’s Open University), so I have at last had a chance to blog.

Let’s kick off with a report I usually try to catch each year: the US government’s Energy Information Administration (EIA)‘s “Annual Energy Outlook 2015“, which looks out to 2040.

If you keep up with media reports, the backdrop to the 2015 Outlook would be something like this:

US oil production has pushed up toward 10 million barrels per day (bpd) and is a whisker away from overtaking Saudi Arabia; five LNG export terminals have been approved and are under construction because the US is so awash with natural gas (due to the fracking boom) that it needs to export it; solar PV panel price falls coupled with efficiency gains have brought the levelised cost of solar PV down so substantially that solar energy is now making a major contribution to electricity generation in an ever-growing number of American states; Texas has become a wind-energy king second only to Denmark; and Elon Musk is bringing power to the people (literally) in the form of a new generation of home super batteries.

Wow, sexy stuff! So I guess we are going to see the EIA predicting radical changes to the energy mix in 2040, especially as many of the trends I just highlighted are only getting started. Right? Let’s look at EIA’s flagship chart (page 17 of the report, click for larger image on all charts):

US Primary Energy Consumption jpeg

Continue reading

Utopia, Dystopia, Uncertainty and Our Psychological Selves

I have just finished reading Dylan Evans’ book “The Utopia Experiment“, which chronicles the author’s doomed attempt to found a self-sufficient community in rural Scotland as a post-collapse prototype for others to learn from.

It is always interesting to find a hidden back story about one of the authors who sit on my book shelf–and boy does Evans have a bizarre back story. Evans is an LSE-trained philosopher and scholar of risk, robotics, artificial intelligence and evolutionary psychology (after many a wayward turn).  I already own his book “Risk Intelligence”, which deals with many of the issues I confront in this blog, particularly ‘decision-making under uncertainty’. Unknown to me, Evans’ interest in risk, combined with his own personal demons, had previously led to a decision to opt out of conventional society, which in turn led to a complete nervous breakdown.

Evans displays a compulsive personality: he pours himself into a particular endeavour for a year or two, then recoils from any further long-term commitment. To launch ‘Utopia’, he sacrifices everything: his house, his job, his relationships. To justify this, ‘Utopia’ becomes more than a mere experiment but rather a lifeboat being made ready for the collapse of civilisation. In a conversation with Oxford academic and scholar of existential risk Nick Bostrom, he is asked this question:

How likely do you think it is that something like the imaginary scenario you are acting out in Scotland might really come to pass in the next ten years?

Evans replies:

I thought a bit longer, and finally declared that I thought that the chance of such a thing happening within the next ten years was about 50 per cent. Nick looked shocked. Not even the most pessimistic scientists thought things were that bad….

….the precision that Nick had demanded of me forced me to own up to my error in a way that vagueness never would. It betrayed the extent to which what had started out in my mind as an exercise in collaborative fiction had already become an insurance policy against a global disaster that I was increasingly convinced was imminent.

Later he frames this decision as more psychological rather than intellectual. A predisposition toward depression coupled with a generalized angst at living within large corporate structures results in a rejection of his existing social and institutional ties. The irony here, as he later admits, is that for one so psychologically fragile discarding structure is about the worst thing he could have done mental health-wise.

Moreover, ever the contrarian, Evans comes to question his own beliefs more rigorously the more advanced the experiment becomes. Intellectually, his certainty is lost and without that comforting narrative ‘Utopia’ become less a personal lifeboat but more of a rip tide dragging him below the waves.

So are there any wider lessons here? I think there are many. First, as behavioural economics teaches us so well, humans and not what the economist Richard Thaler calls ‘Econs'; that is, emotionless calculating machines as opposed to humans. We can only perceive risk and uncertainty within an emotional framework. Humans have an optimism bias partly as an evolutionary means to advertise positive traits that allow us to mate and flourish but partly just to keep us sane. Examining the downside is painful and can lead to isolation, rejection and depression.

Yet perhaps there are those of us who can maintain contrarianism without falling apart. Evans documents how the participants in ‘Utopia’ rapidly progress from viewing the commune as an experiment to one of preparation for real collapse. They need a narrative to inoculate themselves from the outside world. Yet after a time, Evans starts to question all the collapse narratives that the commune volunteers espouse, falls into depression and is eventually replaced as leader by an early volunteer called Agric.

What Agric offers to the remaining volunteers is a narrative of certainty, which Evans could no longer offer. Further, this is a narrative that is immune to any counter-argument since it rests upon an irrefutable theory.

Part of the reason why Agric was so dismissive of any suggestion that civilisation might not be about to collapse was the fact that he had a powerful theory. He was in the grip of Malthus, like many before him. Malthus had shown that population growth must always outstrip food supply, right? He had proved it.

And earlier:

The idea that our civilisation might not only survive global warming but also continue to grow richer had appalled me, and this was perhaps why I had believed so ardently that it would collapse. I had wanted it to. Agric still did.

At this point it would be easy to laugh at the ‘Utopia’ pioneers, painting them as New Age fools. But not so fast. Evans’ story shows how hard it is to disentangle the dispassionate from the emotional when it comes to risk and uncertainty, particularly when it comes to tail risk. But this cuts both ways.

Let’s assign a 1% probability to collapse rather than Evans’ 50% and let’s push out the horizon to five decades rather than one. We are now entering the territory of intellectual respectability. The kind of probabilities that former Astronomer Royal Martin Rees sets out in his book “Our Final Century“.

.

Yet the vast majority of us are repelled at discussing such negative scenarios. Nick Bostrom points out that the academic literature is many times richer when it comes to publishing papers on dung beetles or Star Trek than it is to considering existential threats to humanity (here).

Academic Prioritisation jpeg

I propose that to seriously consider those dark-side scenarios you need either 1) immense psychological detachment and resilience or 2) no psychological detachment at all (a joyful embrace of the collapse narrative). In short, psychology-wise you need to be built differently from the vast majority.

Nonetheless, some true contrarians do exist in a variety of fields, for example, finance, and walk a fine line between delusion and perception. It is such people who populate Gregory Zuckerman’s book “The Greatest Trade Ever” which retells the story of five individuals who made their fortunes from the collapse of Lehman Brothers and the onset of the Great Recession. These are not Thaler’s dispassionate, calculating ‘Econs’ devoid of emotion. These are five individuals with their own rather peculiar character quirks who are naturally uncomfortable with both the status quo and the institutions that support the status quo. In this particular case, they emerge from Zuckerman’s book as prescient heroes. Of course, we never hear of the thousands of similar individuals whose backs are broken on the wheel of markets that go the wrong way.

Perhaps our differing reactions to upside and downside risk is nature’s way of hedging its bets. A few of us are comfortable operating in the super optimistic probability tail of upside risk and fewer still like Agric like to wallow in the pessimistic tail of downside risk. From an evolutionary perspective, most of the tail risk jockeys end up as road kill. But things do change, and perhaps a maladaptive mutation will suddenly becomes a vital survival trait. Those Agric-like fellows who believe they know the future will be the equivalent of bacteria on a petri dish that survive a dose of penicillin. A mutation that may previously have been an impediment becomes a life-saver as circumstances change.

We each have our own view of rationality, but it is our emotional state that keeps us sane when seeing the world. Don’t get me wrong: I am no post-modern relativist. For example, I think there does exist an objective assessment of the likelihood that the globe will experience extreme climate change leading to economic collapse by end century (and a non-negligible one at that). This is certainly not enough risk to make me run off to the wilds of Scotland, but it is a risk nevertheless. But I think that only some people can psychologically live with such a fact. Most can’t. The dominant narrative is: let’s pretend that climate change doesn’t exist as a factor in our or our children’s lives and carry on regardless.

Dylan Evans’ story may perhaps be one of the delusion of a few, but humanity’s inability to tackle climate change is a story of the delusion of the many. So let’s not laugh too long at ‘Utopia’.

GMO and Plant Modification

Apologies for my poor blog post productivity: I am in the midst of Open University exams, which are occupying a lot of my time. Further, I have a number of draft long blog posts on the go that I am having difficulty completing; sometimes blog posts write themselves, sometimes they have to be extracted like an impacted wisdom tooth.

In the meantime, here are a few fabulous infographics. I don’t dare stray into the GMO debate at this time as I haven’t researched it enough. I think, however, that these graphics vividly demonstrate that we have been pretty adept at modifying plant organisms irrespective of GMO technology. We could open a philosophical debate here about what are “natural” plants (but I won’t).

All I will say is that these modern plants are very different from their descendants. They have also been developed to meet human needs.

Hat tip to James Kennedy, a chemistry teacher in Australia, who put these graphics together (here).

Watermelon Development  jpg

Corn  Development jpg

Peach Development jpeg

The Secular Nature of Inequality Growth

The OECD has just published a substantial report on inequality across its member countries (most of the world’s developed nations). To give you a taste of the topic, the OECD’s 2 minute introductary video is here:

Let me pull out some key charts and make some observations. First, aggregate income has been rising, but the elites have been harvesting the majority of the gains (click for larger image):

OECD Inequality jpegIf you were of libertarian disposition, you may look at this chart and say “so what? Everyone is growing richer, but some are just growing richer faster.” I would be very reluctant to adopt such a stance. Continue reading