Monday, May 07, 2007

No time for the pain

Today's must-read is by Michael Barone on "Prioritizing our problems"

Sometimes politicians get things upside down. They ignore problems that are plainly staring them in the face, while they focus on dangers that are at best speculative.

Consider two long-range issues that are not pressing matters this year but pose, or are said to pose, threats a generation or two away. One of them you don't hear much about: Social Security. The other you hear about all the time: global warming. Yet this gets things upside down. We have an unusually precise knowledge of the problems that Social Security will cause in the future. But we don't know with anything like precision what a continuation of the current mild increase in temperatures will mean.
Politicians love to be green because it's an accessible, feel-good religion to so many Americans that doesn't require any real sacrifice. But Social Security reform requires sacrifice now and later, therefore it's best to leave the problem to future legislatures:

The politicians resist fixing Social Security because the short-term costs are well understood by voters and the long-term benefits, while clear to actuaries, are invisible to voters because no one is decrying them with religious intensity. The politicians sprint to address global warming because the short-term costs are unknown to voters and the long-term benefits, while unclear in the extreme to those who rely on science, are portrayed in apocalyptic terms by the prophet Al Gore. Democracy isn't perfect.
That's just pouring salt in the wound, Barone, by mentioning Al Gore and the defects of democracy. Ouch.

7 comments:

Anonymous said...

Lovely to hear what a conservative analyst like Barone has to say about the raving prophet Al Gore.

Meanwhile, Lloyd's of London... whose entire business only exists to correctly assess risks like this... disagrees:

NEW YORK (Reuters) - Lloyd's of London, the world's oldest insurer, offered a gloomy forecast of floods, droughts and disastrous storms over the next 50 years in a recently published report on impending climate changes.

"These things are fact, not hypothesis," said Wendy Baker, the president of Lloyd's America in an interview on Monday. "You don't have to be a believer in global warming to recognize the climate is changing. The industry has to get ready for the changes that are coming."

In a report on catastrophe trends Lloyd's is disseminating to the insurance industry, a bevy of British climate experts, including Sir David King, chief scientist to the British government, warn of increased flooding in coastal areas and a rapid rise in sea level as ice caps melt in Greenland and Antarctica.

Northern European coastal levels could rise more than a meter (3 feet) in a few decades, particularly if the Gulf Stream currents change, the report says.

Floods, which now account for about half of all deaths from natural disasters, could multiply and become more destructive, with annual flood damages in England and Wales reaching 10 times today's level, according to some studies.


Ouch.

Anonymous said...

The prestige of the Llyods name wears off very fast for anyone actually in the insurance industry. They tow the Brit party line like good subjects.
I bet Wendy Baker's dire predictions have'nt changed their actuarial tables.

Anonymous said...

Correctly assess?

It is in Lloyds interest to overstate the risks. The more risk the higher the premiums.

But in any case, the insurance companies do serve to spread the costs of risk. Thank you Lloyds.

Anonymous said...

And if Lloyd's overstates the risk, or assesses it incorrectly, their competitors in the industry will pick up their business. And yet there they go.

But as a very young and untested company, surely Lloyd's of London has to go through some growing pains here.

Seems like you can't have your "market solutions" and "global warming mythology" too.

Anonymous said...

Seems like you can't have your "market solutions" and "global warming mythology" too.

Yet that's what you're going to get. The insurance market will reflect the situation on the ground. The insurance companies just see this as an opportunity to sell more policies. Lloyds has been pushing their Earthquake and Flood policies for years, now they have some 'science' to push it some more.

Anonymous said...

I've got it! The insurance companies are actually CAUSING global warming!

JorgXMcKie said...

"These things are fact, not hypothesis". Well, when you start with an idiot statement like that, why consider what follows.

The 'fact' is that all these predictions are based on very complicated models which, by necessity, are over-simplified and contain fudge factors. Pressed, even the modelers will admit this, they just attempt to justify the particular over-simplifications and fudge factors they chose to use. I have no problem with that, since I model some other less complicated processes and I have to do the same.

The difference is that I don't claim my models are the end-all and be-all of Truth. They are *models* and suggestive of some truth and hopefully indicators of where to search for more.

"Lloyd's of London... whose entire business only exists to correctly assess risks like this..." is wildly incorrect. Lloyd's of London's business exists only to make a profit. They don't have to "correctly assess risks" so much as charge enough to pay off and have profit left over. Not really the same thing, especially if you can stampede people into buying high cost insurance for a low probability of loss. Much like Al Gore, they're attempting to replace reason with fear, to their own benefit.

One might check to see how Lloyd's (the business) and its members/associates 'insures' its own potential losses and how much they're cutting back their CO2 'footprint'. My guess is about as much as those other Learjet liberals.