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Saturday, September 28, 2013

Britain Bucks E.U.on Banker Bonuses

Not long after the passage of an E.U. law limiting bonuses for bankers in the E.U., one state government (the usual suspect) filed a lawsuit in federal court (the ECJ) to contest the new law before it even went into effect. Perhaps it could have been said that 'banker-bonus caps is to Britain as "Obamacare" is to Texas.' Although federal overreach was an element in both complaints, we can still ask what was the true basis of Britain's suit.

Friday, September 27, 2013

Are Science and Human Nature at Odds in Climate Change?

“Climate change is the greatest challenge of our time,” says Thomas F. Stocker, co-chairman of the Intergovernmental Panel on Climate Change, the United Nations-sponsored group of scientists who presented their rather definitive report on September 27, 2013. “In short,” Stocker observed, the anticipated change “threatens our planet, our only home.”[1] Not only are the stakes painfully high; human nature itself must come through, perhaps beyond its very nature, for homo sapiens species to make it through the twenty-second century.

The natural human proclivity to seek a (schizogenic) maximum rather than be content with sustaining an equilibrium steady-state had been all too evident in production management alone during the industrial revolution. So too was the human approbation of instant gratification, including attempts to obviate the costs incurred. Accordingly, the 2013 report provides the rather unwelcome news that “(h)uman influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes in some climate extremes.”[2]

                                                     The red and purple areas saw increases in avg. temps. Image Source: IPCC

In fact, the report claims, “It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.”[3] Reflecting advances in the science (e.g., the models), the report “finds a 95 to 100 percent chance that most of the warming of recent decades is human-caused, up from the 90 to 100 percent chance cited in the last report, in 2007.”[4]  Even as the confidence in these findings is improved by 5 percent, such clarified empirical knowledge does not necessarily translate into a brighter future.

The likely consequences, according to the report, is a range of potential warming of between 2.7 and 8.1 degrees Fahrenheit, should the carbon dioxide level double from the amount in already in the atmosphere in 2013. According to the Potsdam Institute for Climate Impact Research in the E.U. the 2013 report is more conservative in its underlying assumptions than the previous report in 2007.

“To stand the best chance of keeping the planetary warming below an internationally agreed target of 3.6 degrees Fahrenheit (2 degrees Celsius) above the level of preindustrial times, . . . no more than one trillion metric tons of carbon can be burned and the resulting gas released into the atmosphere,” according to the 2013 report.[5] Just over half that amount had already been emitted since the beginning of the Industrial Revolution, and at the rate energy consumption was growing, the trillionth ton would be released somewhere around 2040.

That as of 2013 more than three trillion tons of carbon were still left in the ground as fossil fuels set the human species up for a confrontation with its own nature along the following lines: Can we keep our paws off the cookies freely within our reach that would make us sufficiently obese that we could die from our overeating? Moreover, just how strong is the species’ self-discipline as against the lure of the pleasure garnished from additional albeit baleful consumption? That 2012 saw record carbon emissions into the earth’s atmosphere suggests a rather dramatic disconnect between what the scientists report and how policy-makers, business practitioners, and consumers react. Incredibly, the two were going in opposite directions!

The flaw is likely in human nature itself. Specifically, the disproportionate worsening of an on-going, un-rectified situation receives too little weight in the human decision-making process on whether to engage immediate correctives (or even damage-control). “Continuing rapid emissions now is kicking the climate can down the road, leaving climate change for our children and grandchildren,” said Christopher B. Field, a scientist working at the time on another intergovernmental study on climate impacts. He added that the can “gets to be bigger, heavier and harder to move with each kick.”[6] Why would rational human beings kick the can nonetheless?

The answer could simply be that for the homo sapiens species through roughly 60,000 years, natural selection favored those humans who focused on the next meal or running away from the tiger closing in. Cognition and perception being limited, attention to solving problems that would turn harmful only much later could be expected to suffer. Put another way, for the vast majority of the species’ existence, societal problems inflicting only or primarily long-term harm did not exist because complex social living arrangements did not exist beyond the intimate relations of a small clan. We cannot expect natural selection to “turn on a dime.” After tens of thousands of years, suddenly humans live in large nations and work in big corporations. Our very design, while being well-adapted to the hunter-gatherer “stone age” human existence, has not sufficiently adapted (yet) to the radically changed agricultural and urban ways of life.

The sapiens name of our species means “knowledge” or “wisdom” in Latin. Such a prideful label notwithstanding, it is worth pondering whether human reason can compensate sufficiently for the lag in adaption. Does reason discount long-term costs (especially those that are low-probability but severe), or is human desire, still oriented to hunter-gatherer needs, as if still going forward even though the species only recently quickly turned left, performing the task? Nietzsche would likely point out that reasoning is simply contending instinctual urges striving to overcome each other. Unfortunately for modern man, the urges have been born and raised in a very different context and are behaving as though they were still in it. It could be that the quick (reckless?) development of complex social arrangements (politically, socially, and economically) will turn out to be our species’ undoing. That is to say, the sheer magnitude of the discounted long-term harm of our own doing could easily come about well before the process of natural selection will have had sufficient generations to effect enough adaptation to rid us of the tyranny of an antiquated human nature.

[1] Justin Gillis, “U.N. Climate Panel Endorses Ceiling on Global Emissions,” The New York Times, September 27, 2013.
[2]Climate Change 2013: The Physical Science Basis,” The IPCC Fifth Assessment Report.
[3] Ibid.
[4] Gillis, “U.N. Climate.”
[5] “Climate Change 2013,” IPCC Report
[6] Ibid.

Tuesday, September 24, 2013

AIG’s Benmosche on Bonuses amid the Bailout

Robert Benmosche, former CEO Of American International Group (AIG)—one of the biggest corporate recipients of government bail-out (TARP) funds—likened the resistance by the American public and some government officials to partial bonuses being paid to hundreds of employees in the ill-fated financial products unit as akin to a racial lynching. Rather than debating the merits of the bonuses, I want to dissect Benmosche's statements for clues to his underlying mentality.