Iran, Climate Change and Prediction Error

Mark Twain is famous for saying that "it is difficult to make predictions, especially about the future." My mother often predicted that I would become a bum.  She was right. As a happily retired guy I am sure that Betty would agree with my mom’s vision. 

Predicting the future is both necessary and humbling. Squirrels don’t have spreadsheets and mathematical models, but they gather nuts in anticipation of the coming winter. The playboy squirrels who don’t predict so well lose a lot of weight after winter arrives.  Clearly we learn from squirrels and we predict lots of things that improve our lives. But predicting the future is not an easy thing since the future by definition is unknowable. Those who take actions in anticipation of a specific future often make mistakes – sometimes very damaging ones.

Yet we predict and forecast. I grew up in Florida. During hurricane season we all become forecasters. Will that storm turn into a hurricane? Will that hurricane hit land? If so when will it hit? Where will it bring the most disastrous winds and lightning? Weather forecasters are almost always wrong when it comes to predicting these critical facts about hurricanes.Maybe that is an extreme example but I don’t think so. We modern folks with our math and models forecast a lot of things. It is important to do so. And we do so knowing that we are often wrong.

If you are still awake your mind might be wondering and thinking about all the ways we predict the future. My reason for writing today arises because of what I see as a very inconsistent approach by our present leaders with respect to forecasting some very important things.

The Obama administration is VERY sure that climate change is coming and that without major policy changes and a lot of investment, we and the rest of the world will be threatened. I think he said that climate change is our most important future challenge. There are some very important people and very sophisticated models supporting the urgent need to spend trillions of dollars to change and prepare for things that will happen in the distant future – some expected to arrive more than 50 years from now.

Despite the fact that the future is hard to predict and despite the huge sums of money involved, the president is laser focused on attending to these challenges immediately. In his and his supporters’ minds, this expenditure is worth the risk. His policy makes us all invested bettors on future climate.

Compare this aggressive approach to another important future challenge – nuclear weapons. The world is already in accord that countries will not produce more nuclear weapons. And that accord is for good reasons. While it seems highly irrational that any nation, even a rogue nation, would fire nuclear weapons at another country, we worry that all nations are not always rational. It is like the idea of someone yelling fire in a crowded movie theater. It seems quite irrational to yell those words – yet we have laws to prevent crazy or mean people from doing such things. The world has agreed to control nuclear weapons for similar reasons.

Yet the same administration that worries about climate change wrecking our countries is willing to predict that Iran and North Korea can be trusted to not yell fire in a crowded movie theater – or to not unload a nuclear weapon on one of the rest of us. Obama can vividly see water levels rising and shorelines being over run despite knowing that all this future information is model-driven and about the future 50 years from now. Yet the same Obama cannot imagine a religious zealot or a desperate dictator shooting a nuclear weapon. He cannot see those countries most threatened by nuclear Iran and North Korea arming themselves. He seems to minimize any real threat from a world with increasing amounts of nuclear weapons in the most unstable places. 

Kerry and Obama repeatedly say that the recent accord with Iran will prevent them from obtaining a nuclear weapon yet they also agree that within 10 years Iran will be able to manufacture such weapons freely. They publicly agree that after those 10 years it will take only one year to be ready to aim and fire. So why are we not aggressively trying to prevent that outcome? My grandson Nolan will not be 13 yet in 10 years. I am not particularly crazy about him having to worry about Iran or North Korea or some other despotic place. Clearly this is at least as important as the impacts of climate change on him. Right? 

So here is my question. In the case of global warming, President Obama is willing to forecast the absolute worst. In the case of Iran and North Korea his “models” assume the absolute best. Most economic forecasters that I know (who are not ideologically motivated) bring a “show me” attitude to forecasts. They are always skeptical about their model’s predictions. They always discount the certainty of what we think we know. They always follow their forecasts with a list of caveats longer than a drug company’s list of side-effects in a television commercial.

Why is Obama so sure about the intensity of climate change and so sure that Iran and North Korea will turn into the cutest and sweetest puppies? Why can't we apply conservative and consistent forecast approaches to policies related to climate and national defense?