Weather forecasts and economic forecasts

I've long thought that economic forecasting is like weather forecasting. Both rely on models, which is the same thing as saying that they rely on history repeating itself.  If events don't evolve in the way they have in the past, in the way that's built into the models, then the forecasts will turn out to be wrong.

It's a brave economist, then, who would try to combine economic and weather forecasting into one piece of work. It turns out that the head of TD Economics (my employer, many years ago) is that brave economist.  Craig Alexander and his team have just published an interesting piece on how the apparently increasing frequency of natural catastrophes will affect the Canadian economy.  You can find it here.

It's a well-balanced piece that stays well away from any kind of scaremongering about the future direction of the climate -- which, after the winter we've endured in most parts of Canada this year, is probably just as well!  The key message is that it's only prudent to plan on the basis that the more unpredictable and dangerous weather we seem to have been seeing in recent years is likely to continue: "With no sign that things are going to be getting any better, it's prudent for businesses and policymakers to start thinking of the long-term implications, and place a larger emphasis on catastrophes when making investment decisions".

That may seem obvious and even trite,  but it's a welcome change from the panic-mongering of many climate scientists.  It recognizes the fact that preventing the problems that climate change may cause will be a lot easier if economic growth is allowed to continue, rather than brought to a halt or even reversed by ill-premature measures to curb fossil fuel use.

The latest IPCC report on mitigating the impact of climate change offers up the pithy catch phrase that "it doesn't cost the earth to save the planet".  At least one guy is unimpressed with that: Bjorn Lomborg, the "sceptical environmentalist", who takes issue with just about everything in the IPCC report, arguing that the cost of trying to mitigate climate change stands to be much worse than the costs of the climate change itself.  The conclusion reached by TD Economics, at least for the specific case of Canada, is more practical and hopeful than that of either the IPCC ("we must spend whatever it takes to stop this") or Lomborg ("new technologies will save us").  Whether or not you think climate change is for real, and whether or not you think it is man made, there are still things that can be done to protect citizens and businesses from the worst.