This is more or less a vacation week for the markets. They were open, however most of the trading on world markets is done by large institutions, and they are largely closed this week. So this week's results are on very low volume and do not very accurately reflect the real money in the market. I could put up my normal graphs of what happened, but this week those graphs would be more than just their normal misleading, they would be more or less meaningless. So I won't. In any case, the market continues to trade with the S&P between about 860 and 915; nothing huge is happening right now. This week we're going to go with J.P.Morgan's quote - when asked what the market will do, he replied "It will fluctuate."
Instead, I'm going to talk about something I find interesting - capitalism, social theory, and global warming. Capitalism is the main structuring theory in the world today, since its main modern competition, Socialism, has been all but abandoned on the earth. Capitalism has some serious defects in terms of organizing societies. Capitalism is inherently unstable with periodic booms and busts (I think we're all very well aware of this basic fact right now.) Capitalism has a few winners and a lot of "losers." Losers in this context means both individuals in rich countries that earn substantially less than the average income, and also countries where the average income is substantially less than that in the US or Europe. More importantly, although it's claimed in this country that capitalism is a meritocracy, implying that anyone with merit can become a winner, it's well known that there are large easily identifiable groups in our country that are consistent winners, and other groups that are consistently unable to fully participate in the top rewards of capitalism. The winners are people with science, medical or technology backgrounds, people with MBAs or law degrees, and entrepreneurs. These people are most frequently white or Asian males. The groups that win only infrequently notably include Blacks, Latinos, lesbians, women, and liberal arts majors. Together these seemingly excluded groups make a strong voting majority, so there is a certain tension between democracy and capitalism.
Social theory is a relatively new field which includes feminist and black studies, and is perhaps most notably represented by something called "Post-Modernism." Briefly, post-modernism is called a "deconstructionist" theory which asserts that there is no such thing as objective fact or truth, that all "facts" or "truths" are just cultural artifacts. These "truths," which include religion, capitalism, science and western enlightenment, are believed to be forcefully imposed on other cultures which are less economically successful and therefore vulnerable. This leads to the self-imposed "deconstructionist" label: post-modernism is interested in tearing down Western society and replacing it with something more "fair," something that lets downtrodden groups like liberal arts majors get their turn at the steering wheel.
In the last ten years, by far the most successful attack on western technological society has been "global warming." Global warming posits that technologists and average citizens are oblivious to the state of the planet, thinking only of short term gain and their desire to haul their excessive numbers of kids around in a Cadillac Escalade. The point of global warming is to force technology and consumption to be dramatically reduced by imposing huge taxes on energy production and consumption, especially coal and oil. In the resulting deconstruction of the western economies, it is thought that there will be a chance to bring the capitalist winners down to earth and elevate the losers to positions of greater equality.
There are several serious problems with this program. There is substantial agreement that population pressures on the earth have reached an untenable level, however the birth rate among westerners is below the replacement level and the highest rates of population increases and greatest environmental disasters are in the non-technological under-developed parts of our planet, notably Africa, Asia, and the rain forest areas of South America. North America and Europe, by contrast, have very little air or water pollution, and more forest land today than they did 100 years ago. It's the third world that's breeding like flies, burning down forests, and polluting their air and water.
Another serious problem is that the evidence for global warming is highly questionable, and the idea that this effect is due to man's activities is completely unproven. For the last 3 million years the earth has had a climate that results in ice ages that last about 100,000 years on average, punctuated by brief interstitial warming periods that last about 10,000 years on average. We're roughly 10,000 years into the current warming period. Based solely on geologic history we would expect another 100,000 year long ice age sometime in the next few hundred years, a couple thousand years at most. Current global temperatures are not unusual compared to temperatures near the end of previous interstitial periods.
We hear a lot about greenhouse gases, and it's indicated to us that these primarily come out the exhaust pipes of our cars and up the smokestacks of our power plants. The number one greenhouse gas in the Earth's atmosphere is water. Second is carbon dioxide, whose sources include volcanoes, decaying vegetation, and human activities. Humans are responsible for no more than a third of the carbon dioxide, and probably less. The third is methane, which comes from livestock, coal mining, and burning natural gas. Methane has not particularly increased since we started measuring it in 1978. If you include the effect of water, human activity has increased the total greenhouse gases in the atmosphere by about a quarter of a percent. If you exclude water, which is stupid unless you want to scare people into coming to see your movie and giving you a Nobel prize, then human activity has increased greenhouse gases by about five percent.
Other possible causes for global warming include the increased sunspots we have had in the past few decades, and the solar system's orbit in our galaxy taking us through a cloud of hydrogen gas. Support for these ideas includes that all the planets in the solar system have been warming up lately. Most scientists reject the idea that cars on Earth effect the temperature on Mars.
Another problem is that the Earth is not exactly warming up. 2007 was a very cold year, wiping out the temperature gains of the previous decade all in one year. It was also a year of almost no sun spots, setting a modern record for low sun activity. The final numbers for 2008 are not in yet, but this year seems to have been intermediate between 2007 and 2006. As I write this, all over the northern US new records for December snowfall are being set.
If the new Democratic majority government in the US decides to place heavy taxes on coal and oil, refuses to allow construction of new power plants, and institutes some kind of carbon trading scheme, we will find our economic growth choking on these new taxes and rules, all to do our part to contain one quarter of one percent of the problem. On the plus side, liberal arts, feminist studies, and black studies PhDs will likely get more respect, and perhaps we'll start hearing jokes about law school graduates asking "Do you want fries with that?"
The final problem is that ice ages are not at all well understood, and it's possible we are right on the edge of a new ice age. This would mean that global warming is a good thing. The interstitial periods are marked by very sharp changes in global temperature - ice ages start and end with fierce changes and little warning. In the chart below, the warm periods on the earth are the narrow upwards spikes at present (the left), and about 125,000, 250,000, 350,000, and 425,000 years ago. The rest of the time most of Russia, Canada, and Northern Europe has been covered by ice averaging two miles thick.
In the chart above, we also see that this interglacial period looks different than the previous four. Instead of a sharp spike at the high temperature, there's several thousand years of slightly oscillating high temperatures. The cause of this is not known with any certainty, but there is some evidence for a recent theory that eight thousand years ago when humans started cutting down the forests in Europe and growing rice in Asia, enough carbon dioxide was released to stave off a new ice age that had been "scheduled" to begin at about that time. The temperature data seems to support this, but as we've seen carbon dioxide is not the most significant greenhouse gas, hence the controversy.
In a geologic sense, this ice age stuff is quite new. There is no evidence of a single ice age during the couple hundred million years that dinosaurs tromped the Earth, nor for the first sixty million years after they died out. The ice ages started about three million years ago, then changed about one million years ago when they became colder and longer.
If we do enter an ice age in the next few years, the onset will be fast and brutal, and the cries about global warming will most certainly change overnight to a call to do something, anything to warm the planet. Since we don't currently understand what starts or ends glaciation, no one has any idea of what we might try to restore the environment and then hold it at a suitable point. In fact, as I've noted in this article, it's very unobvious that humans currently have the means to strongly effect the Earth's temperature.
During an ice age, Canada, New England, and the Great Lakes states would be completely under ice. Puget Sound off Seattle and Vancouver would be iced over. Great Britain, Ireland, Iceland, Scandinavia and much of Russia would be under ice. Toronto, Vancouver, New York, Cleveland, Chicago, Seattle, Moscow, Berlin, Stockholm and London would all be lost. During the winter, the ocean would freeze as far south as San Diego, North Carolina and Portugal. The ocean levels would drop as much as 300 feet, exposing the continental shelves all over the world. You will be able to walk from Thailand to Australia, and snow shoe or ski from Alaska to Russia or Japan. The map below is centered on the North Pole and indicates the details. You can click on the map repeatedly to see a larger and larger version.