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There’s not much future in predictions

By Tom Quirk - posted Friday, 1 December 2006


Is it possible to make useful economic predictions spanning 100 years? World climate change forecasts require it.

The report to the British Government by Sir Nicholas Stern takes this for granted. Sir Nicholas was asked to examine the economics of climate change just one month after the Select Committee on Economic Affairs of the House of Lords wrote an elegant and subtle report questioning some of the assumptions used to project future temperature movements. Their lordships noted that they were unable to deal with technology shifts over 100 years. Further they suspected that the arising uncertainty might be important.

Climate change predictions are made to cover a span of 110 years from the year 1990 to 2100. These rest on future world economic activity, described by scenarios that in turn give rise to energy use that puts carbon dioxide in the atmosphere. World carbon emissions were 7 billion tonnes in 2004. Projections for 2100 are in the range 15 to 30 billion tonnes that give rise to a global temperature increase from 2C to 6C.

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The economic scenarios used to calculate the carbon dioxide depend on a number of key assumptions, including the present world economy, the forecast growth, the convergence of rich and poor countries and hence the carbon dioxide produced as a function of population and technology.

Economic growth and convergence, that is faster growth of less developed economies, depends on a multitude of conditions that cannot be predicted.

Growth often requires changes in economic management and political structures and is not subject to arithmetic extrapolation. Examples of differences in next-door neighbours, such as East and West Germany, Mexico and the United States, shows the importance of these structures but there are no guides or timetables for the development of economic systems.

The development of technology is a significant uncertainty.

The most extraordinary contemporary example is the invention of the transistor in 1948 and the integrated circuit in 1959. The revolutionary effects are still being felt. For instance, in the 1950s computer circuits used valves. Each valve had a filament to produce electrons and used about 5 watts of electrical power. The first production-line machine, the UNIVAC, had 5,000 valves and overall would consume 125 kilowatts. The present Pentium processor has some tens of millions of transistors, each roughly the equivalent of a valve and consumes 20 watts.

This enabling technology has found wide application initiating or transforming industries and habits. There is no way this could have been predicted at the start of the 20th century or at mid-century and it is not possible even now to forecast the further economic influence of this technical revolution.

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The economic scenarios are intelligent guesses at the future world economy but because they deal with the unknowable, must contain large inherent uncertainties. It is very likely that the uncertainty in economic convergence and technology development will completely overwhelm the deliberately chosen differences among the future scenarios. If this is the case, the differences in the derived temperature changes provide no useful guide for policy makers.

It may be possible to usefully project forward 10 or maybe 20 years, given the long lifetime of many energy assets, but 100 is an heroic timescale.

The Club of Rome Limits to Growth resource exhaustion and Paul Ehrlich’s The Population Bomb world famine were models of a future that has not come to pass. Both were defeated at least partly by a contemporary lack of knowledge and an inability to predict the impact of technology.

Even the Royal Society, which has recently been speaking severely to Exxon-Mobil about climate change, had a president, Lord Kelvin who tried his hand at predictions. Lord Kelvin, in 1895, calculated that so much coal was being burnt that all the free oxygen in the atmosphere would be gone in about 300 years. This calculation caused some distress at the time but here we are over 100 years later burning ten times as much coal and carbon in other forms. More knowledge of our living planet has removed this concern.

Most attention and debate has focused on the science of climate change where uncertainties may ultimately be understood. But attention should be directed at whether useful policy could be developed given the unknowable future of economic convergence and technical development.

We simply do not have useful certainty with 100-year forecasts of our impact on climate.

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About the Author

Tom Quirk is a director of Sementis Limited a privately owned biotechnology company. He has been Chairman of the Victorian Rail Track Corporation, Deputy Chairman of Victorian Energy Networks and Peptech Limited as well as a director of Biota Holdings Limited He worked in CRA Ltd setting up new businesses and also for James D. Wolfensohn in a New York based venture capital fund. He spent 15 years as an experimental research physicist, university lecturer and Oxford don.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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