Climate Risk and Risk Management

don't let the gubmint mess things up

Climate billionaire Ben Goldsmith has a tweet out that takes climate change “doubters” to task.

Climate change ‘doubters’ share one thing in common: they lack any understanding of risk. There is a not-insubstantial risk that the world’s climate scientists (and pretty much the entire scientific community) are right, and we are now facing a civilisation-ending threat. Any reasonable risk management strategy would be to do whatever it takes to mitigate that risk.

Let’s accept his premise, that there is a real risk of “civilisation-ending” climate change. What then would a “reasonable risk management strategy” be?

Guess what: humans conducted two civilizational experiments closely related to this. A deep thinker, Karl Marx, based on his study of classical economics, predicted that the workers would be “immiserated” because of the operation of the market system as understood by classical economics. So, a couple of talented political leaders, Vladimir Lenin in Russia and Mao Zedong in China, transformed their economies to implement Marx’s ideas. The result was a disaster, involving at least a hundred million human deaths, and very likely more. In both countries, subsequent leaders eventually abandoned the Marxist economic “management strategy” and decided to let the market system work its will with a much lighter touch from the political leaders and their administrators.

Can anyone doubt that the same would be true on the climate front? Suppose the oceans do rise, and the food-growing areas move, and CO2 increases. You think that government and politically connected corporations and activist groups will help the transition?

We can already see what to expect, as the wind-power industry is in a complete funk because prices for raw materials are way up, and even with big subsidies they can’t make any money.

Look, if we are really facing a climate apocalypse, then it’s everyone to the lifeboats, in the knowledge that most people won’t make it. Only the folks that, purely by accident, move to the right place and create the right technology for the new era, only they will survive. And the survivors will probably not be you and me.

Unless I mistake it, this is how the official science of Darwinism and adaptation works. There are all kinds of species out there, all of which have adapted to a particular ecological niche. If things change then the species either adapts or it dies out.

Right now, as far as I can make out, our cultural leaders are backing wind power and solar. And batteries to store electrical power. This strategy may work or it may not. But if we put all our marbles into the one strategy, that’s a recipe for disaster, because chances are, based on our understanding of history and economics and the management ability of governments, the strategy will be, at the very least, not quite successful. And most likely, given the record of government economic plans, especially in the 20th century, it will be a complete disaster.

The record of government economic management is that, socialism — detailed government supervision of the economy — absolutely fails; and the welfare state — government intervention in the credit system and industrial policy and provision of benefits to old people and the unemployed— is subject to hiccups like the Long Depression in the late 19th century, the Great Depression in the 1930s, the Great Recession in 2008, and most likely the COVID screwup of the last three years.

It is perfectly obvious to me that if we are really “facing a civilisation-ending threat” the only thing to do is to get government and politicians and activists and politically-connected corporations out of the loop. Because the record is that they Make Things worse.

What politicians and government managers are good at is using the credit system to focus all national resources on powering the engine of war for a nice big World War. Usually, it takes about ten years after the end of the war to recover from the economic meltdown.

And by the way, the chaps that really excelled at post-war recovery were the Germans and their Wirtschaftwunder after World War II. Even La Wik notes that the miracle was made possible by a monetary reform to stop inflation, a tax cut for moderate incomes, and an end to price controls. The manager of this success was Ludwig Erhard, influenced by Wilhelm Röpke.

Any questions?