Climate Change – We Know Zero

Parasol Lost: new mindset needed

20. January 2026 · Write a comment · Categories: Actuarial, Climate Change, Economics, Media & Politics, Pensions, Professions, Regulation, Risk

I have spent many days in rooms with groups of men (always men) anxious about their future income, where I advised them on how much to ask their companies for. Most of my clients as a scheme actuary were trustees of pension schemes of companies which had seen better days, and who were struggling to make the necessary payments to secure the benefits already promised, let alone those to come. One by one, those schemes stopped offering those future benefits and just concentrated on meeting the bill for benefits already promised. If an opportunity came to buy those benefits out with an insurance company (which normally cost quite a bit more than the kind of “technical provisions” target the Pensions Regulator would accept), I lobbied hard to get it to happen. In many cases we were too late though, the company went bust and we moved it into the Pension Protection Fund instead. That was the life of a pensions actuary in the West Midlands in the noughties. I was often “Mr Good News” in those meetings, the ironic reference to the man constantly moving the goalposts for how much money the scheme needed to meet those benefits bills. I saw my role as pushing the companies to buy out funding if at all possible. None of the schemes I advised had a company behind them which could sustain ongoing pension costs long term. I would listen to the wishful thinking and the corporate optimism, smile and push for the “realistic” option of working towards buy out.

Then I went to work at a university, and found myself, for the first time since 2003, a member of an open defined benefit pension scheme. It was (and still is) a generous scheme, but was constantly complained about by the university lecturers who comprised most of its membership. I didn’t see any way that it was affordable for employers which seemed to struggle to employ enough lecturers, were very reluctant to award anything other than fixed term contracts, and had an almost feudal relationship with their PhD students and post docs. Staff went on strike about plans to close the scheme to future accrual and replace it with the most generous money purchase scheme I had ever seen. I demurred and wrote an article called Why I Won’t Strike. I watched in wonder when even actuarial lecturers at other universities enthusiastically supported the strike. However, over 10 years later, that scheme – the UK’s biggest – is still open. And I gained personally from continued active membership until 2024.

Now don’t get me wrong, I still think the UK university sector is wrong to maintain, unique amongst its peers, a defined benefit scheme. The funding requirement for it has been inflated by continued accrual over the last 8 years and therefore so has the risk it will spike at just the time when it is least affordable, a time which may soon be approaching with 45% of universities already reporting deficits. However the strike demonstrated how important the pension scheme was to staff, something the constant grumbling before the strike had led university managers to doubt. And, once the decision had been made to keep the scheme open to future accrual, I had no more to add as an actuary. Other actuaries had the responsibility for advising on funding, in fact quite a lot of others as the UCU was getting its own actuarial advice alongside that the USS was getting, but my involvement was now just that of a member, just one with a heightened awareness of the risks the employers were taking.

The reason I bring this up is because I detected something of the same position as my lonely one from the noughties amongst the group of actuaries involved in the latest joint report from the Institute and Faculty of Actuaries and the University of Exeter about the fight to maintain planetary climate solvency.

It very neatly sets out the problem, that the whole system of climate modelling and policy recommendations to date has been almost certainly underestimating how much warming is likely to result from a given increase in the level of carbon dioxide in the atmosphere. Therefore all the “carbon budgets” (amount we can emit before we hit particular temperature levels) have been assumed to be higher than they actually are and estimates for when we exhaust them have given us longer than we actually have. This is due to the masking effects of particulate pollution in the air, which has resulted in around 0.5C less warming than we would otherwise have had by now. However, efforts to remove sulphur from oil and coal fuels (themselves important for human health) have acted to reduce this aerosol cooling effect. The goalposts have moved.

An additional reference I would add to the excellent references in the report is Hansen’s Seeing the Forest for the Trees, which concisely summarises all the evidence to suggest the generally accepted range for climate sensitivity is too low.

So far, so “Mr Good News”. And for those who say this is not something actuaries should be doing because they are not climate experts, this is exactly what actuaries have always done. We started the profession by advising on the intersection between money and mortality, despite not being experts in any of the conditions which affected either the buying power of money or the conditions which affected people’s mortality. We could however use statistics to indicate how things were likely to go in general, and early instances of governments wasting quite a lot of money without a steer from people who understood statistics got us that gig, and a succession of other related gigs over the years ahead.

The difficult bit is always deciding what course of action you want to encourage once you have done the analysis. This was much easier in pensions, as there was a regulatory framework to work to. It is much harder when, as in this case, it involves proposing changes in behaviour which are ingrained into our societies. If university lecturers can oppose something that is clearly not in the long term financial interests of their employers and push for something which makes their individual employers less secure, then how much more will the general public resist change when they can see no good reason for it.

And in this regard this feels like a report mostly focused on the finance industry. The analogies it makes with the 2008 financial crash, constant comparisons with the solvency regulatory regimes of insurers in particular and even the framing of the need to mitigate climate change in order to support economic growth are all couched in terms familiar to people working in the finance sector. This has, perhaps predictably, meant that the press coverage to date has mostly been concentrated in the pension, insurance and investment areas:

However in the case of the 2008 crash, the causes were able to be addressed by restricting practices amongst the financial institutions which had just been bailed out and were therefore in no position to argue. Many of those restrictions have been loosened since, and I think many amongst the general public would question whether the decision to bail out the banks and impose austerity on everyone else is really a model to follow for other crises.

The next stage will therefore need to involve breaking out of the finance sector to communicate the message more widely, perhaps focusing on the first point in the proposed Recovery Plan: developing a different mindset. As the report says:

This challenge demands a shift in perspective, recognising that humanity is not separate from nature but embedded in it, reliant on it and, furthermore, now required to actively steward the Earth system.
To maintain Planetary Solvency, we need to put in place mechanisms to ensure our social, economic, and political systems respect the planet’s biophysical limits, thus preserving or restoring sufficient natural capital for future generations to continue receiving ecosystem services…

…The prevailing economic system is a risk driver and requires reform, as economic dependency on nature is unrecognised in dominant economic theory which incorrectly assumes that natural capital is substitutable by manufactured capital. A particular barrier to climate action has been lobbying from incumbents and misinformation which has contributed to slower than required policy implementation.

By which I assume they mean this type of lobbying:

And this is where it gets very difficult, because actuaries really do not have anything to add at this point. We are just citizens with no particular expertise about how to proceed, just a heightened awareness of the dangers we are facing if we don’t act.

But we can also, as the report does, point out that we still have agency:

Although this is daunting, it means we have agency – we can choose to manage human activity to minimise the risk of societal disruption from the loss of critical support services from nature.

This point chimes with something else I have been reading recently (and which I will be writing more about in the coming weeks): Samuel Miller McDonald’s Progress. As he says “never before have so many lives, human and otherwise, depended on the decisions of human beings in this moment of history”. You may argue the toss on that with me, which is fine, but, in view of the other things you may be scrolling through either side of reading this, how about this for a paragraph putting the whole question of when to change how we do things in context:

We are caught in a difficult trap. If everything that is familiar is torn down and all the structures that govern our day-to-day disintegrated, we risk terrible disorder. We court famines and wars. We invite power vacuums to be filled by even more brutal psychopaths than those who haunt the halls of power now. But if we don’t, if we continue on the current path and simply follow inertia, there is a good chance that the outcome will be far worse than the disruption of upending everything today. Maintaining status-quo trajectories in carbon emissions, habitat destruction and pollution, there is a high likelihood of collapse in the existing structure anyway. It will just occur under far worse ecological conditions than if it were to happen sooner, in a more controlled way. At least, that is what all the best science suggests. To believe otherwise requires rejecting science and knowledge itself, which some find to be a worthwhile trade-off. But reality can only be denied for so long. Dream at night we may, the day will ensnare us anyway.

One thing I never did in one of those rooms full of anxious men was to stand up and loudly denounce the pensions system we were all working within. Actuaries do not behave like that generally. However we have a senior group of actuaries, with the endorsement of their profession, publishing a report that says things like this (bold emphasis added by me):

Planetary Solvency is threatened and a recovery plan is needed: a fundamental, policy-led change of direction, informed by realistic risk assessments that recognise our current market-led approach is failing, accompanied by an action plan that considers broad, radical and effective options.

This is not a normal situation. We should act accordingly.

AI Knows Zero

21. November 2025 · Write a comment · Categories: AI, Climate Change, Economics, Media & Politics, Professions

A couple of weeks ago I wanted to find an article I had written about heat pumps to check something. So I Googled weknow0 and heat pump. This did give me the article, from December 2022, I was after, but also an “AI overview” that I hadn’t requested. The above is what it told me.

Now this is inaccurate on a number of counts. Firstly, I have published 226 articles over the more than 12 years I have been writing on weknow0.co.uk and I have only mentioned heat pumps in two of these. These articles did focus on the points mentioned in 3 of the 4 bullet points above and in one of them I also set out how the market at the time (December 2022) was stacked against anyone acquiring a heat pump, a state of affairs which has thankfully improved considerably since. However to claim that my blog “provides a consumer-focused perspective in the practicalities and challenges of domestic heat pump adoption in the UK” is clearly hilarious.

In fact anyone seeing that would assume I talked about little other than heat pumps, so I decided to do a search on something else that I talk about infrequently and see what I got (I searched “weknow0 science fiction”):

This seems a considerably better summary of the recent activity on the blog, which is also unrecognisable as the blog summarised in response to the previous search.

Right at the end, it suggests a reason for the title of the blog which isn’t an unreasonable guess from a regular reader. But guess it still is, and it does not appear to have processed the significant number of blog posts with variants of we know zero in the title to fine tune its take.

So someone using the AI overview as a research tool would get a completely different view of what the blog was about depending upon which other word they used alongside weknow0. Perhaps that doesn’t matter too much to anyone other than me in this case, but it is part of a broader issue. It is not summarising the website it is suggesting it is summarising.

Of course many of you will now be shouting at me that I need to give the system more focused prompts. There is now a whole area of expertise, lectured in and written about at considerable length, called “prompt engineering”. There are senior professionals who have rarely given their juniors the time of day for years, giving the tersest responses to their completely reasonable queries about the barely intelligible instructions they have given for a piece of work, suddenly prepared to spend hours and hours on prompt engineering so that the Metal Mickey in their phone or laptop can give them responses closer to what they were actually looking for.

At this point, perhaps we should perhaps hear from Sundar Pichai, the Google CEO:

https://www.bbc.co.uk/iplayer/episode/m002mgk1/the-interview-decisionmakers-sundar-pichai-running-the-google-empire

As part of Faisal Islam’s slightly gushing interview with Pichai, we learn that the AI overview on Google is “prone to errors” and needs to be used alongside such things as Google search. “Use them for what they are good at but don’t blindly trust them” he says of his tools which he admits to currently investing $90 billion a year in. This is of course a problem, as one of the reasons people are reluctantly resorting to the AI overview is because the basic Google search has become so enshittified.

And that kind of echoes what Cory Doctorow has said about Google. Google need to maintain a narrative about growth. You will have picked this up if you watched the Pichai interview above, from the breathless stuff about “one of the most powerful men in the world” “perhaps being one of the easier things for AI to replicate one day” to:

You don’t want to constrain an economy based on energy. That will have consequences.

To the even more breathless stuff about us being 5 years from quantum computing being where generative AI is now.

The reason for all the growth talk, according to Doctorow, is that Google needs to be growing for it to be able to maintain a price earnings ratio of 20 to 1, rather than the more typical 4 to 1 of a mature business. So it’s all about the share price. As Doctorow says:

Which is why Google is so desperately sweaty to maintain the narrative about its growth. That’s a difficult narrative to maintain, though. Google has 90% Search market-share, and nothing short of raising a billion humans to maturity and training them to be Google users (AKA “Google Classroom”) will produce any growth in its Search market-share. Google is so desperate to juice its search revenue that it actually made search worse on purpose so that you would have to run multiple searches (and see multiple rounds of ads) before you got the information you were seeking.

Investors have metabolized the story that AI will be a gigantic growth area, and so all the tech giants are in a battle to prove to investors that they will dominate AI as they dominated their own niches. You aren’t the target for AI, investors are: if they can be convinced that Google’s 90% Search market share will soon be joined by a 90% AI market share, they will continue to treat this decidedly tired and run-down company like a prize racehorse at the starting-gate.

This is why you are so often tricked into using AI, by accidentally grazing a part of your screen with a fingertip, summoning up a pestersome chatbot that requires six taps and ten seconds to banish: companies like Google have made their product teams’ bonuses contingent on getting normies to “use” AI and “use” is defined as “interact with AI for at least ten seconds.” Goodhart’s Law (“any metric becomes a target”) has turned every product you use into a trap for the unwary.

So here we are. AI isn’t meant for most of you, its results are “prone to errors” and need to be used alongside other corroborating material or “human validation”. It needs you to take a course in prompt engineering even if you never did the same to manage any of your human staff. It is primarily designed to persuade investors to keep the share price up to the levels the Board of Alphabet Inc have become accustomed to.

War Games

27. August 2025 · Write a comment · Categories: Climate Change, COVID-19, EIOPA, Health, Media & Politics, Risk

I watched The War Game this week, as it had suddenly turned up on iPlayer and I had not seen it before. It was the infamous film from 1966 on the horrors of a nuclear war in the UK that was not televised until 1985. It has been much lauded as both necessarily horrifying and important over the years, but what struck me watching it was how much it looked back to the period of rationing (which had only ended in the UK 12 years earlier) and general war-time organisation from the Second World War. It would be a very different film if made now, probably drawing on our recent experiences of the pandemic (when of course we did dig huge pits for mass burials of the dead and set up vast Nightingale hospitals as potential field hospitals, before the vaccines emerged earlier than expected).

But what about the threat of nuclear war which still preoccupied us so much in the 1980s but which seems to have become much less of a focus more recently? With the New START treaty, which limits the number of strategic nuclear warheads that the United States and Russia can deploy, and the deployment of land and submarine-based missiles and bombers to deliver them, due to expire on 5 February 5, negotiations between Russia and the United States finally appear to be in progress. However China has today confirmed that it does not want to participate in these.

In Mark Lynas’ recent book Six Minutes to Winter, he points to the Barret, Baum and Hostetler paper from 2013 which estimated the probability of inadvertent nuclear war in any year to be around 1%. This is twice the probability of insolvency we think acceptable for our insurance companies under Solvency II and would mean, if accurate, that the probability of avoiding nuclear war by 2100 was 0.99 raised to the power of 75 (the number of years until 2100), or 47%, ie less than a fifty-fifty chance.

That doesn’t seem like good enough odds to me. As Lynas says:

We cannot continue to run the daily risk of nuclear war, because sooner or later one will happen. We expend enormous quantities of effort on climate change, a threat that can endanger human civilisation in decades, but ignore one that can already destroy the world in minutes. Either by accident or by intent, the day of Armageddon will surely dawn. It’s either us or them: our civilisation or the nukes. We cannot both survive indefinitely.

The Treaty on the Prohibition of Nuclear Weapons (TPNW) was adopted at the UN in 2017 and came into force in 2021. In Article 1 of the Treaty, each state party to it undertakes never to develop, test, produce, possess, transfer, use or threaten to use nuclear weapons under any circumstances. 94 countries have signed the TPNW to date, with 73 full parties to it.

The House of Commons library entry on TPNW poses a challenge:

It is the first multilateral, legally binding, instrument for nuclear disarmament to have been negotiated in 20 years. However, the nuclear weapon states have not signed and ratified the new treaty, and as such, are not legally bound by its provisions. The lack of engagement by the nuclear weapon states subsequently raises the question of what this treaty can realistically achieve.

It then goes on to state the position of the UK Government:

The British Government did not participate in the UN talks and will not sign and ratify the new treaty. It believes that the best way to achieve the goal of global nuclear disarmament is through gradual multilateral disarmament, negotiated using a step-by-step approach and within existing international frameworks, specifically the Nuclear Non-Proliferation Treaty. The Government has also made clear that it will not accept any argument that this treaty constitutes a development of customary international law binding on the UK or other non-parties.

There are 9 nuclear states in the world: China, France, India, North Korea, Pakistan, Russia, Israel, the UK and the United States. Israel recently conducted a 12 day war with Iran to stop it becoming the 10th. Many argue that Russia would never have invaded Ukraine had it kept its nuclear weapons (although it seems unlikely that they would have ever been able to use them as a deterrent for a number of reasons). So the claims of these nuclear states that they are essential to their security are real.

But is the risk that continued maintenance of a nuclear arsenal poses worth it for this additional security? For the security only operates at the deterrence level. Once the first bomb lands we are no more secure than anyone else.

Which makes it all the more concerning when Donald Trump starts saying things like this (in response to a veiled threat by the Russian Foreign Minister about their nuclear arsenal):

“I have ordered two Nuclear Submarines to be positioned in the appropriate regions, just in case these foolish and inflammatory statements are more than just that. Words are very important, and can often lead to unintended consequences, I hope this will not be one of those instances.”

But with a probability of avoiding “unintended consequences” less than fifty-fifty by 2100? That really doesn’t feel like good enough odds to me.

The Redistribution of Space

10. April 2025 · Write a comment · Categories: Birmingham, Climate Change, Health, Media & Politics

My 60th birthday celebrations, a couple of years ago now, centred around train journeys to the South of France and then onto Madrid. The highlight was (pictured above) spending a large part of my birthday, in mid October, on a huge deserted beach at Narbonne and being able to comfortably swim in the sea. So much space.

And the trains also seemed so much more spacious. I travel a lot on trains in the UK, with sometimes comedically little space. And I am not just talking about space in terms of leg room in European trains, but also whenever you want to walk over to the restaurant carriage on the upper floor of a double decker train to improve the views, with a bar and an array of kidney shaped tables dotted around the carriage to eat hot meals at, before ambling back to your seat. Mental space is much greater too, with fewer announcements and partitions between passengers to reduce the amount of conversation bouncing around the carriage. I had several 5-6 hour journeys over the two weeks I was away, and they were without exception very relaxing experiences.

So enough travelogue. What point am I making? It is the importance of space.

I think of other things where my view of it has been affected by the space attached to it. Take swimming, for example. I spent three of my formative years (aged 3 to 6) in Singapore where my father was stationed with the RAF. We swam outdoors at the Singapore Swimming Club every afternoon and lived in flats right next to a beach. Swimming was all about space – on my back staring up at the limitless sky, or mask and snorkels on and face down to explore the depths of the pools.

Back in the UK, it has never been anything like the same experience. I have swum in pools in village schools in Yorkshire, council pools in Cheltenham and Witney, the pools built for the Youth Games in Sheffield, a private school’s tiny pool in Oxford where I did my bronze survival badge. Endless school outings with compulsory swim caps and cold water. I have swum in lakes and spent probably more time in the Cherwell than was strictly healthy, sometimes deliberately, sometimes because the canoes we were given at school were designed to be manoeuvrable rather than stable. I have swum in decaying metal structures in spa towns and pools fed by spring water with no heating in the Peak District. I only discovered body boarding relatively late and the joys of doing it for much longer in colder seas with a wetsuit even later (last year). I also spent a fascinating morning with the Wild Woman of the Wye, Angela Jones, learning how to swim safely in the river in our current polluted times. And it certainly feels like the decline in swimming quality in recent years extends indoors as well as outdoors. The Wyndley or Beeches Leisure Centres near my part of Sutton Coldfield just don’t hold much appeal for me. Sure there are bodies of water there, but nothing to lift your spirit while using them and the constraints, in terms of the narrow time slots and even narrower lanes you are confined to, are the very opposite of my earliest experiences of water. I am lucky enough to be able to afford the local David Lloyd Centre, with much less pressure on their pools, in particular their excellent outdoor pool in Birmingham, which is miraculously underused. On a day with bright sun, with the birds singing and a light breeze rustling the trees just enough to drown out the industrial hum from next door and push back the smell of solvents, I can sometime almost imagine I am back in the Singapore Swimming Club.

But generally when you attempt to venture outside you find the constraints are even greater than those at Wyndley swimming pool. According to the Right to Roam campaign group we only have access to 3% of rivers in England. Meanwhile the Outdoor Swimming Society are campaigning for swimming access to reservoirs.

On land we have slightly more access, but half of the land area of England is owned by around 1% of the population. As Guy Shrubsole points out:

The aristocracy and landed gentry still own around 30% of England, whilst the country’s homeowners own just 5% of the land. The public sector owns around 8% of England; the country’s 24 non-Royal Dukes own a million acres of Britain.

I can only redistribute some space in my direction, on a train, in a pool of water, by paying more than most can afford for those experiences, and allowing me to behave like a non-Royal Duke for a short time.

This has huge implications for carbon sequestration of course, with, for example, 60% of deep peat owned by just 124 landowners. These landowners are not looking after it very well either, with upland peat being degraded as a result of moorland burning for grouse moors, and lowland peat in the Fens and elsewhere being damaged through drainage for intensive agriculture. As a result, England’s peat soils are now a net source of carbon emissions rather than a sink, leaking around 11 million tonnes of CO₂ annually. The Government has committed to protecting 30% of land in the UK for nature by 2030, but is itself hugely constrained by the concentrated ownership of land.

So our land is like our swimming pools: tightly constrained by the narrow time slots and narrower lanes most of us are allowed access to. We are being stifled by the property rights of a tiny minority.

The Future

20. March 2025 · Write a comment · Categories: Actuarial, Climate Change, Media & Politics, Prediction, Risk, Science Fiction

This is the 200th post from this blog, so I want to talk about The Future.

*The Planetary Solvency Dashboard https://global-tipping-points.org/risk-dashboard/*

No. Not that future. Scary though it is.

I want to talk about The Future by Naomi Alderman. I read it last year, after wandering around the Hay Festival bookshop moaning that they don’t do science fiction and then coming across Naomi’s book and realising I had just missed her being interviewed. Then I watched the interview and bought both The Future and The Power (which I will talk about at some future date, but which is equally terrific).

The book is about Lenk Sketlish, CEO of the Fantail social network, Zimri Nommik, CEO of the logistics and purchasing giant Anvil, Ellen Bywater, CEO of Medlar Technologies, the world’ most profitable personal computing company, and the people working for them, and the people linked with those people. Zimri, Ellen and Lenk are at least as monstrous as Jeff, Sundar, Elon, Tim and Mark. And they are all preparing for the end of the world.

(If you need to remind yourself what Elon, Jeff, Mark and Sundar all look like milling around, below is a link to Trump’s inauguration:

https://apnews.com/video/jeff-bezos-district-of-columbia-elon-musk-inaugurations-united-states-government-486ab2a989e94aaa8c9afec15bebeb51)

Anvil is set up with alerts for signs of the end of the world being reported anywhere: giant hailstones, plague of locusts, Mpox, rain of blood which turned out to be a protest for menstrual equity involving blood-soaked tampons being thrown at Lenk and co as they emerged from a courthouse in Washington. The information Zimri, Ellen and Lenk have on everybody else in the world makes them feel all seeing, all hearing, all knowing. Combined with riches unknown to anyone before in history it makes them feel invulnerable, even to the end of the world, even to each other. Which turns out, of course, to be their decisive vulnerability.

It takes in survivalism, religious cults and wraps it all up in a thriller plot which is absolutely the kind of science fiction you want to be reading now instead of listening out for the latest antics of the horse in the hospital. And it was all written over a year before Elon even started with DOGE. The Future by Naomi Alderman is a fantastic read, particularly if you would like to see someone like Musk get an appropriate end to his story. I obviously won’t spoil it by saying what that is, but I don’t think I would be giving anything away by saying rockets are involved!

One must always try to be as radical as reality itself

04. February 2025 · Write a comment · Categories: Actuarial, Climate Change, COVID-19, EIOPA, Health, Risk

The Charybdis is a swirling water feature in the temperate house at Savill Garden. It was designed by Giles Rayner in 2006. https://funandgames.org/web/wp-content/uploads/2020/09/The-Charybdis_Savill-Gardens_9257-2-scaled.jpg

This is a quote attributed to Lenin (courtsey of Branko Milanovic’s X account, where a gentle exchange about whether it was genuine ensued), which seems perfect for the moment we are in.

It was back in 1998 that George Monbiot first pointed out that no sector was as wedded to PFI deals as health. The famous example in Captive State of the Walsgrave hospital in Coventry, knocked down and replaced by a smaller hospital at much greater cost, was just one of many. It didn’t occur to me at the time, but the wider lesson from these early examples, borne out by everything we have seen since, is that privatisation, in whatever form (and, after all, what is PFI but the privatisation of a funding source), always solves a smaller problem than the one you have. The history of privatisation in the NHS has been a series of smaller easier problems dealt with in some cases very efficiently by the private sector (although the efficiency only ever seems to increase the profits of the private companies concerned rather than reduce their price). As it has been in transport (with rail franchises yo-yoing in and out of state control whenever the ask becomes too complex for the train operators taking them on), and utilities, mail services, etc etc.

And the size of the problems that the private sector can take on would appear to be getting smaller.

Take insurance. Ann Pettifor highlights this week what Petra Hielkema, chair of the European Insurance and Occupational Pensions Authority, has to say about the future of the sector in the FT. Apparently he told them that governments and banks will struggle to cope with the soaring costs of natural catastrophes such as floods and wildfires. More households will be unable to insure their homes and the mounting losses from natural disasters could destabilise banks. Two things he said were particularly striking:

“I think it is the biggest risk facing society, frankly” and “Member states — they can’t cope with this.”

There is now talk of an “insurance death spiral“, where insurance premiums shoot up, those least likely to claim drop out, and insurers are left with exclusively “sub-prime” risks on their books (should sound familiar to anyone who has read about the causes of the 2008 crash). In the US, there are obviously problems in the Californian insurance industry which look like causing some degree of financial contagion, but also a particular focus on the health insurance industry as a result of the way Obamacare was implemented.

This contrast between public and private ownership of problems struck me while I was reading the excellent report from the Institute and Faculty of Actuaries and the University of Exeter on climate change: Planetary Solvency. By taking the approach that an insurance company would take in determining its risk appetite and then seeing if its risk exposure matched up to it, it occurred to me that the reason this had never been done before for global climate change was that any insurer would have left such a market years ago on the basis of a brief initial analysis of the problem. Something that a private insurer can always do with any problem.

What if, instead of the NHS being threatened by covert privatisation, the threat is that even the smaller problems private health is currently solving within the system get handed back to the NHS? Because that is the difference. During the pandemic, the threat was that the NHS might not be able to cope with the surge in very ill people and that many would die without care as a result. The reason large parts of NHS operations were repurposed and we were all urged to “flatten the curve” was because, ultimately, there is noone the NHS can hand the responsibility back to and their resources are measured in hours of the right people available to work for them rather than pounds spent and so have a hard physical limit. Although there were significant failures as the Covid Inquiry is currently exploring, the NHS as a whole did not fall over.

However, neither did the US system, because an insurer merely withdraws from a market which might cause it to. It has no responsibility to the system as a whole.

As one MIT researcher responded to being asked about the lessons for the US system of the pandemic:

“The pandemic has revealed the American health care system to be a non-system.”

So it seems to me that arguments about privatisation and nationalisation are a bit beside the point. We have big problems, getting bigger every day, which absolutely have to be solved and limited physical resources with which to do so. Unfortunately His Majesty’s Opposition are still trying to disentangle themselves from the wreckage of Tufton Street’s “thought leadership”, risking a Trumpian climate change denying, health service privatising Reform Party replacing them, and His Majesty’s Government appear to have no idea what they are doing.

So reality does feel pretty radical at the moment. We need to be equally radical in our response to it.

Going nowhere faster

29. January 2025 · Write a comment · Categories: Actuarial, AI, Climate Change, Economics, Prediction, Risk

*Risk trajectory (black circle) shows the anticipated future state for the risk in 2050. Current risk position in grey. Source:* https://actuaries.org.uk/planetary-solvency

The excellent report from the Institute and Faculty of Actuaries and the University of Exeter Planetary Solvency – finding our balance with nature splits the risk trajectories into four sections: Climate, Nature, Society and Economy. I have focused on the Society one above as, in my view, this is the reason we are interested in all of the other ones. According to the Planetary Solvency report, we are on track for a society in 2050 described as follows:

Nature and climate risk trajectories will drive further biophysical constraints including stresses on water supply, further food supply impacts, heat stress, increased disease vectors, likely to drive migration and conflict. Possible to Likely risk of Severe to Decimation level societal impacts, with increasingly severe direct and indirect consequences of climate and nature risks driving socio-political fragmentation in exposed and vulnerable regions.

So what are we doing about it? Well the United States has just voted in Donald Trump as President. There was a flurry of executive orders issued in his first week (with the appropriate caveats about how many of these might actually be implemented), the climate-related ones of which are neatly summarised here by Bill McKibben:

The attacks on sensible energy policy have been swift and savage. We exited the Paris climate accords, paused IRA spending, halted wind and solar projects, gutted the effort to help us transition to electric vehicles, lifted the pause on new LNG export projects, canceled the Climate Corps just as it was getting off the ground, and closed the various government agencies dedicated to environmental justice. Oh, and we declared an “energy emergency” to make it easier to do all of the above.

Timothy Snyder has written about how to respond to tyranny in your own country. What is happening currently in the United States is threatening tyranny for many (as Robert Reich lists here):

The government now recognizes only two “immutable” genders, male and female. Migrants (now referred to as “aliens”) are being turned away at the border. Immigration agents are freed to target hospitals, schools, and churches in search of people to deport. Diversity efforts in the federal government have been dismantled and employees turned into snitches. Federal money will be barred from paying for many abortions.

The first thing you should do, according to Timothy Snyder, is to not obey in advance.

Most of the power of authoritarianism is freely given. In times like these, individuals think ahead about what a more repressive government will want, and then offer themselves without being asked. A citizen who adapts in this way is teaching power what it can do.

And how did we respond to all of this in the UK? Well Keir Starmer was keen to tell The Donald that we were deregulating to boost growth in their first phone call. His reward for this was the story that Trump thought he was doing a good job. Supposedly an endorsement from the “Drill Baby Drill” guy is the proper corrective from being told he should be locked up by the Nazi salute guy.

And then there were the actions on the environment. From the talking out of the Climate and Nature Bill which sought to meet new legally binding targets on climate change and protect nature. To a housing policy which will be both hugely environmentally destructive and fail to make houses more affordable. To announcing the intention to overhaul the planning rules, in the upcoming Planning and Infrastructure Bill, to reduce the power of people to object (and, as the Conservatives’ restrictions on protest have not been lifted, subsequently bang them up for years on end if we subsequently demonstrate about it) so that global firms would think that the UK was a “great place to invest” .

And then today we had Rachel Reeves’ big speech. Approval for developing the third runway at Heathrow, as had been extensively trailed, and the creation of “Europe’s Silicon Valley” between Oxford and Cambridge were the main announcements. There was quite a lot of talk about investment in sustainable aviation fuel (which means biofuels, the benefits of which have already been shown to be wiped out by rising demand).

And as for the Silicon Valley idea, I am not sure we want one. First there is the lack of real innovation despite the excellent game they talk. And second, is it going to be the authoritarian nightmare that the Californian one is turning into? The early signs are not good. Just last week Marcus Bokkerink, the Chair of the Competition and Markets Authority (CMA), was replaced by Doug Gurr, until recently Jeff Bezos’ head of Amazon UK. So not exactly standing up to Technofeudalism then.

According to Cory Doctorow:

Marcus Bokkerink, the outgoing head of the CMA, was amazing, and he had charge over the CMA’s Digital Markets Unit, the largest, best-staffed technical body of any competition regulator, anywhere in the world. The DMU uses its investigatory powers to dig deep into complex monopolistic businesses like Amazon, and just last year, the DMU was given new enforcement powers that would let it custom-craft regulations to address tech monopolization (again, like Amazon’s).

But it’s even worse. The CMA and DMU are the headwaters of a global system of super-effective Big Tech regulation. The CMA’s deeply investigated reports on tech monopolists are used as the basis for EU regulations and enforcement actions, and these actions are then re-run by other world governments, like South Korea and Japan.

When you see Trump flanked by Bezos and the other Tech Bros at his inauguration, it certainly feels like we are obeying in advance. Rachel Reeves’ speech had an enormous increase in energy demand implicit in pretty much every measure announced, which is expected because, GDP (the thing she is looking to boost) and energy consumption have been in lockstep forever. This is the implication of prioritising GDP growth over everything else.

What were missing were both a compensatory increase in renewable energy capacity and/or a reorganisation of our economy away from energy intensity. The problem for the government is that the latter would not increase GDP, so instead we get into the absurd position of the Business Secretary saying we “cannot afford to not build runways”.

However it seems that when the motivation is big enough (in this case to dispute the assertion that the Russian economy is doing well in wartime despite the official statistics, which the EU really needs to do in order to continue to make the case for sanctions) alternative ways to measure the economy can be found. In section 3.2 we find this:

The general assumption of connecting GDP growth to making people better off is not relevant in this situation, which should be included in any discussion of how the Russian economy is doing.

What is interesting about this analysis is that:

a. It is carried out by the kind of orthodox economists (the Stockholm Institute of Transition Economics) who believe GDP would be a good index to use in normal circumstances; and

b. They are saying this even if the GDP figures published by Russia are technically accurate. As they go on to say:

What this analysis suggests is that if we believe in official Russian statistics, then Russia has economic capacity to sustain current policies in the short run, a conclusion shared with many other observers. We also find, though, that beyond the GDP numbers, the redirection into a war economy is already putting pressure on all sectors not directly involved in the war, causing internal macroeconomic imbalances, increasing risks in the financial sector, and eroding export revenues and existing reserves. Short term growth is kept up by a massive fiscal stimulus, but the impact is mitigated by necessary monetary contraction to deal with inflationary pressures, and structural factors (demographics, weak property rights) limiting the possible economic response to the stimulus.

Some of which sound familiar closer to home – “necessary monetary contraction” (things we cannot afford) and “increasing risks in the financial sector” anyone?

We are currently facilitating a world where the only capacity we are increasing is to fly over the climate-ravaged areas of the globe and their fleeing populations. Fly Baby Fly is not going to get us anywhere we want to go.

Getting serious about politics

16. January 2025 · Write a comment · Categories: Actuarial, Climate Change, Economics, Health, Media & Politics, Regulation, Risk

When I started writing this blog in April 2013, one of its main purposes was to highlight how poor we are at forecasting things, and suggest that our decision-making would improve if we acknowledged this fact. The best example I could find at the time to illustrate this point were the Office of Budget Responsibility (OBR) Gross Domestic Product (GDP) growth forecasts over the previous 3 years. They do not appear to have improved much since then.

Fast forward to 2025 and apparently we have a crisis. Rachel Reeves has been forced to defend her budget following rises in 10 year gilt yields to levels not seen since the financial crisis and the Prime Minister has been forced to say that she will stay in post for the rest of Parliament. Everyone has piled in, from the former Deputy Governor of the Bank of England to the Institute for Fiscal Studies. So is there in fact a crisis? Well no, not really. As an opinion piece in the FT has pointed out, the drivers of the latest rate rise are not really UK-specific at all. Another piece in the FT puts the gilt yield “crisis” into yet further perspective. Finally, there is the comparison with the US gilt market, which moved above its 2008 level in 2022.

The reason for all of the hype of course is the totally self-constructed cul-de-sac that the Government has built around its economic policy options. Tiny movements in government debt or CPI or GDP or indeed gilt yields have been given heightened significance by being explicitly tied to how much the Government will allow itself to spend on its various programmes. As stated in the FT:

Only the OBR can accurately predict how much headroom the Treasury has against its fiscal rules, the Treasury insisted on Wednesday. “Anything else is pure speculation,” it added.

I refer back to the aforementioned forecast history of the OBR and ask how we ever got in a situation where their forecasts would determine how the UK government behaved. As the recent essay by Stefan Eich (on Adam Tooze’s Chartbook) points out, Keynes said:

“Our power of prediction is so slight, our knowledge of remote consequences so uncertain that it is seldom wise to sacrifice a present benefit for a doubtful advantage in the future.” It was consequently rarely right to sacrifice the well-being of the present generation for the sake of a supposed millennium in the remote future.

Meanwhile we are now doing precisely this on the basis of OBR forecasts. As Rachel Reeves set out at the start of her chancellorship in July, in a precise inversion of Keynes:

Because if we cannot afford it, we cannot do it.

Unfortunately for the government, while they spend all of their time trying to solve this imaginary problem they have created for themselves, there are actual real problems that do need to be addressed, and which are currently being drowned out by the noise of political commentators with too little of substance to talk about apparently.

So Sir Michael Marmot, author of the landmark Institute of Health Equity reports on health inequalities in 2010 and 2020 and the recent report on the role of the property sector in improving health, referred to the maintenance of the two child benefit cap as “almost a form of eugenics”.

The Trussell Trust reports that:

A record 9.3 million people face hunger and hardship across the UK. This includes 6.3 million adults and 3 million children. This represents one in seven (14.0%) people across the UK, and one in five (20.9%) children. Current levels are more than a third higher than they were 20 years ago, when 6.7 million people faced hunger and hardship.

And a group from the Institute and Faculty of Actuaries, in partnership with Prof Tim Lenton and his team from the University of Exeter, set out in a report today (Guardian summary here, Planet Critical discussion here) the dangers of the current massive underestimation of climate change risk. As Tim Lenton says:

The choice is simple: continue to be surprised by rapidly escalating and unexpected climate and nature-driven risks, or implement realistic Planetary Solvency risk assessments to build resilience and support ongoing prosperity. We urge policymakers to work with scientists and risk professionals to take this forward before we run the ship of human progress aground on the rocks of poor risk management.

The part which really stood out for me (in such contrast to the equally massively exaggerated risks ascribed to movements in bond markets this week) was on the inadequacy of global risk management practices:

Policymakers often prioritise the economy, with their information flows focused on this. But our dominant economic model doesn’t recognise a dependence on the Earth system, viewing climate and nature risks as externalities.
Climate change risk assessment methodologies understate economic impact, as they often exclude many of the most severe risks that are expected and do not recognise there is a risk of ruin. They are precisely wrong, rather than being roughly right.
The degradation of natural assets such as forests and soils, or the acidification and pollution of the ocean, act as a risk multiplier on the impacts of climate change and vice versa. Traditional risk management techniques typically focus on single risks in isolation, missing network effects and interconnections, underestimating cascading, compounding risks.
Current risk management approaches fall short of the RESILIENCE principles detailed in this report for realistic and effective risk management. Consequently, policymaker risk information is likely to significantly understate the potential impact of climate and nature risks, weakening the argument for urgent action.
These limitations mean that policymakers are likely to have accepted much higher levels of risk than is commonly realised.

If policymakers judged these risks on the same calibration scale as they current view the knockabout on financial markets I doubt we would ever hear about the intricacies of the 10 year gilt yield or the decimal places of CPI ever again. Similarly, if the societal impact of prolonged policies targeting the poor was included (perhaps in the form of meaningful measures of poverty based on the work of the Social Metrics Commission), rather than the level of the FTSE 100, we might start to make inroads into the current dire statistics.

We have hard problems to solve which require a serious government prepared to be bold, do big things and take the political risk of doing so (because the political risks are so tiny compared to the actual risks the population face), not one so focused and constrained by minutiae that it defeats itself.

Where there is no profit

09. January 2025 · Write a comment · Categories: Actuarial, Climate Change, Economics

I thought I would return to a point I raised in my musings on Deadmeat before Christmas, because it has probably got the most reaction from readers of the blog of anything I wrote in 2024. Most of the reaction, it has to be said, was disbelieving. The point in question was this:

And this is the key I think. What economists call “public goods”, goods which are non-rivalrous (ie your use of the sun’s energy does not stop somebody else’s unless you put them in the shade) and non-excludable (ie you cannot easily stop someone else from using it, in this case by sticking a solar panel on their roof), are very difficult if not impossible to make a profit from. Private markets will therefore not provide these goods, possibly at all without extremely artificial regulation (something we have probably had enough of with our utilities in the UK) and certainly not in the quantity that will be required.

Economics by Sloman, Garratt and Guest, which informs the Institute and Faculty of Actuaries’ core reading for its Business Economics syllabus states (in its 10th edition) that a pure public good is:

A good or service that has the characteristics of being perfectly non-rival and completely non-excludable and, as a result, would not be provided by the free market.

It then goes on to say that:

There is some debate as to whether pure public goods actually exist or whether they are merely a theoretical idea.

This I think brings us back to the extremely artificial regulation I mentioned above, as a lot of the economists who have got their views into this book (the sort that have contributed to the “debate” over whether pure public goods exist) appear to struggle with the idea that markets cannot provide everything better, even if you have to embark on some pretty tortuous contortions to create them.

My conclusion in my previous post was as follows:

Therefore if the private sector will not provide public goods and renewable power is predominantly a public good, then it follows that renewable power needs to be in public ownership. And if the climate crisis requires all power to be renewable and zero carbon, which it does, then it also follows that the entire power sector ultimately needs to be in public ownership too.

However I now realise that this is not quite correct. There is an alternative to public ownership. Not the ridiculous quasi-markets which bedevil our utilities in the UK currently, which I don’t expect to be with us for many more decades, but something else which is alive and well and in the process of taking over capitalism as we know it: private monopoly.

As Yanis Varoufakis says in Technofeudalism about green energy in particular:

Advances in green energy are pushing down fast the costs of green electricity generation. Even though the life cycle of fossil fuels has been extended, ruinously for the planet, cloud-based green energy is growing – and, with it, so is the relative power of cloudalists.

“Cloudalists” are our modern feudal lords. Whereas capitalism was a system in which the most powerful people as owners of capital were able to dictate how and where workers could use their capital to make profit for them, under technofeudalism the money is made as rent.

In the section entitled “The New Enclosures” Varoufakis says:

“In the eighteenth century, it was land that the many were denied access to. In the twenty-first century, it is access to our own identity.” Expanding on this:

Strewn across countless privately owned digital realms, it has many owners, none of whom is us: a private bank owns your ID codes and your entire publishing record. Facebook is intimately familiar with whom – and what – you like. Twitter remembers every little thought that caught your attention, every opinion that you agreed with, that made you furious, that you lingered over idly before scrolling on. Apple and Google know better than you do what you watch, read, buy, whom you meet, when and where. Spotify owns a record of your musical preferences more complete than the one stored in your conscious memory. And behind them all are countless others, invisibly gathering, monitoring , sifting and trading your activity for information about you. With every day that passes, some cloud-based corporation, whose owners you will never care to know, owns another aspect of your identity.

As Cory Doctorow says in his review of Technofeudalism:

Varoufakis points to ways that the cloudalists can cement their gains: for example, “green” energy doesn’t rely on land-leases (like fossil fuels), but it does rely on networked grids and data-protocols that can be loaded up with IP, either or both of which can be turned into chokepoints for feudal rent-extraction.

To make things worse, Varoufakis argues that cloudalists won’t be able to muster the degree of coordination and patience needed to actually resolve the climate emergency – they’ll not only extract rent from every source of renewables, but they’ll also silo them in ways that make them incapable of doing the things we need them to do.

When did we get so complacent about private monopolies? As Cory Doctorow reminds us in The Internet Con, in the 19th century debate in the US Senate about monopolies, Senator John Sherman (of the 1890 Sherman Act) gave the war against monopolies equal importance to the recently won War of Independence from the British Crown:

If we will not endure a King as a political power we should not endure a King over the production, transportation, and sale of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.

The “harmful dominance” theory of antitrust (ie the idea that companies which dominate an industry are potentially harmful just because they are dominant, before they even start to abuse their dominant positions) led to the dismantling of several “empires”, including that of Rockefeller’s Standard Oil Company in the early 20th century.

But the power of the Varoufakis’ cloudalists vastly exceeds anything Rockefeller (oil), Carnegie (steel), Vanderbilt (railroads and shipping) and, of course, JP Morgan could muster even at the height of their influence.

Which brings me back to my original contention that the energy sector needs to be in public ownership. There may be many other “necessaries of life” which we may also want to consider bringing back into the public realm if their provision is otherwise going to slip beyond our regulatory grasp. Because the alternative is to relinquish any last vestiges of control over how we run our lives to puffed up billionaires. If you object to Elon Musk conducting polls about whether to stage a coup in the UK, then it is probably worth expending some effort on trying to stop someone like him deciding whether you can heat your home, cook a meal or charge your phone.

Deadmeat was overshot

18. December 2024 · Write a comment · Categories: Actuarial, Cartoons, Climate Change, Economics, Health, Regulation, Science Fiction

Picture of Pinhead character wearing a Deadpool type mask made out of one of his ties

Imagine a super-hero who could not be killed. No I don’t mean Deadpool. A more apt name for our super-hero would be Deadmeat. Deadmeat is empirically dead, but, rather like the Monty Python parrot, is being energetically kept alive by the pretence of its continued existence amongst all of those around it. So much so that it becomes impolite to expose the pretence and point out that Deadmeat is in fact dead. If you really push, and someone likes you enough to want to give you an explanation, you will have a hand put on your shoulder and be led away to a corner to have the pretence explained to you. What that explanation turns out to be is something like this. Deadmeat is of course the Paris climate agreement from 2015 which committed 193 countries plus the EU to “pursue efforts” to limit global temperature rises to 1.5C, and to keep them “well below” 2.0C above those recorded in pre-industrial times.

Deadmeat, it turns out, wasn’t shot. Deadmeat was overshot. Under overshoot, we bring the terrible thing back under control after it has done the damage and hope we can fix the damage at a later date. It’s a bit like the belief in cryopreservation or uploading our brains into cyberspace in the hope that we can have our bodies fixed with future medicine or be provided with artificial bodies. It means relying on science fiction to save us.

Andreas Malm and Wim Carton have considered this approach and how we got here in their latest book Overshoot. For me there are two big ideas in this book, although the account of how things definitively got away from us immediately post pandemic and exactly how that played out is mesmerising too. I thoroughly recommend a read.

The first big idea is the problem with the justification for overshoot in the first place, which is that at some point in the future we will be so much richer and more technologically advanced that it will be much easier to bring carbon dioxide levels down to sustainable levels than to try and stay within sustainable levels now. In what they call “The Contradiction of the Last Moment” Malm and Carton show how an intense fresh round of fossil fuel investment is almost certain to occur close to a temperature deadline (ie fossil fuel companies rushing to build more infrastructure while it is still allowed), whether it is 1.5 or 2 degrees or something higher. Then, as they put it “the interest in missing it will be overwhelmingly strong”. If an investment is 40 or 50 years old, then it might not be so disastrous to have it retired, but if a fossil fuel company has invested billions in the last few years in it? They will fight tooth and nail to keep it open and producing. And by prolonging the time until the retirement of fossil fuel infrastructure, the capital which has used the time to entrench its position and now owns a thousand new plants rather than a few hundred will be in a much stronger position to dictate policy. The longer we leave it, they argue, the harder it will become to retire fossil fuels, not easier.

The second big idea explains why, despite the enormous price collapse of solar power in particular, there is no Big Solar to compete with Big Oil. As they put it “there was no Microsoft or Apple or Facebook. More broadly, there was no Boulton & Watt of the flow, no Edison Machine Works, no Ford factories, no ascendant clusters of capital accumulation riding this wave.” The only remotely comparable company would be Tesla, but they produced cars. Why is this?

Malm and Carton talk about “the scissor”, the difference between the stock of the fossil fuel industry and the flow of renewable power. Fossil fuel’s “highly rivalrous goods: the consumption of one barrel of oil or one wagon-load of coal means that no one can ever consume it again. Every piece of fossil fuel burns once and once only. But supplies of sunlight and wind are in no way affected by any one consumer’s use.”

In Postcapitalism, Paul Mason discussed the options when the price mechanism disappears and additional units of output cannot be charged for. As he put it:

Technologically, we are headed for zero-price goods, unmeasurable work, an exponential takeoff in productivity and the extensive automation of physical processes. Socially, we are trapped in a world of monopolies, inefficiency, the ruins of a finance-dominated free market and a proliferation of “bullshit jobs”.

This also ties in with my own experience and others I have spoken to over the years about how hard it is to invest outside of fossil fuels and make a return.

And then the motivation for overshoot becomes clear and how high the stakes are: not just the proceeds of the sale from one dead parrot as it turns out, but the future of private power generation. My fear is that the Deadmeat franchise may end up having as many sequels as Godzilla (38 and counting). With the potential to do rather more damage in the process.

We Know Zero