The news this morning is sobering: over twenty million Americans lost their jobs in April, causing the unemployment rate to jump to its highest level in post-War history.
To the extent that is natural, biological processes came together to create the coronavirus that causes COVID-19, you might be tempted to view the economic destruction wrought by the disease as a natural occurrence.
However, after watching Bill Gates’s TED Talk from 2015, it is clear to your correspondent that the destruction COVID-19 has inflicted on human civilization is almost entirely man-made – the result of policy short-sightedness leading to a lack of commitment to sensible, easily executed preparatory steps.
These political shortcomings are inextricably linked to the human tendency to inappropriately allocate resources to predictable events outside personal experience because of a systematic underestimation of their probability of occurring.
Through this crisis, pundits have discussed the possibility that the relatively low mortality rates of COVID-19 have given human civilization the chance for a dress rehearsal for “The Big One” – the outbreak of a communicable disease that would remain asymptomatic in carriers for several weeks before being suddenly fatal to a much higher percentage of sufferers.
While COVID-19 may indeed be a dress rehearsal, may I suggest that it may not be one for another pandemic, but for another “natural” disaster – a disaster that is at once as predictable as to occurrence and as uncertain as to timing as COVID-19 has proven.
Members of the academy and of industry first started to sound data-driven warnings regarding anthropogenic global warming (AGW) caused by the combustion of fossil fuels in the 1970s. Despite what tinfoil hat-wearing revisionists might try to get you to believe, even the earliest climactic models have proven to quite accurately forecast the observed atmospheric CO2 and temperature increases.
Throughout all the COVID-19 news coverage and the televised loops of an American president suggesting people coat the backs of their throats with Lysol (Don’t do this!), you will have been forgiven for missing the reporting that the first quarter of 2020 is the second warmest on record.
The astounding fact about this news is that this record was made during a neutral El Niño / La Niña cycle. The only warmer first quarter on record – the first quarter of 2016 – was recorded in a year with a Super El Niño event.
Most sobering, however, is that current global temperatures are running at or above the level projected by the generation of climate models featured in the 2013 Intergovernmental Panel for Climate Change (IPCC) fifth assessment report (AR5).
I live in Chicago – which is 25 degrees cooler than average temperatures for this time of year right now – so the extreme global temperature anomaly does not have immediate personal resonance for me. However, the aggregation of my and all my Midwestern neighbors’ anecdotes is just that – a collection of anecdotes – it does not constitute scientific proof and is thus valueless as a basis for public policy decisions.
I would invite any economist to look at today’s unemployment figures and consider the current economic displacement these figures manifest and the future economic displacement these figures likely presage. After that, I would like them to explain to me – slowly, so even I can understand – why we should wait for the observable effects of climate change to get even worse before taking policy action.
The paradigm on which we organize our society and base our investment decisions must change if our civilization is to thrive and survive. Intelligent investors take note.