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Limits to Knowledge: Malthus, Club of Rome, and Peak Oil

July 18, 2007 by philip

(By guest blogger Philip)

I was just reading F.A. Hayek’s speech upon receiving the Nobel Prize for Economics in 1974 and he mentioned a book called Limits to Growth as a current (to 1974) mistake in the application of seemingly scientific method to complex economic phenomena. It led me to read about this book on Wikipedia and then, via Google, to a paper by Matthew R. Simmons called Club of Rome Revisited in which he attempts to rehabilitate the Club of Rome (widely panned in the years since) by showing how misguided its critics were and how correct its predictions were. I started to be more interested when I then browsed to Matthew Simmons’ site and found that he is a big proponent of Peak Oil. In fact he wrote a book I had heard plenty of but whose author’s name never stuck: Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. It is referenced a lot by a certain type of paranoiac on the market bear boards I frequent (don’t ask what that says about me).
It was crazy to read an intelligent man, Matthew Simmons, summarizing the gloom and doom predictions for the future and saying “jeez! they were right! look how good their math was!” When in fact, whether or not their predictions were right, what Hayek so eloquently debunked was their math. It was a bullet-proof debunking. They tried to apply simple math to complex social phenomena to get any sort of prediction. Can’t be done. Wait, I am wrong. It can and is done all the time. It can’t be done accurately or with any hope of scientific validity. Read Hayek’s paper if you want an eloquent explanation of why. What amazes me is that this man, Simmons, is not ignorant of Malthus. In the intro to his paper he strenuously distanced himself from the blindspots and errors of Malthus. He then did his best to channel Malthus. I’d say if his Peak Oil scam doesn’t work out he should set up a scam as a medium because I’d have been willing to believe he was communicating directly with the long-dead British doomsayer.
I suppose it is mean to call it a scam since he is a victim of the scam before he is a perpetrator. Malthus is already serving an eternal sentence in the Halls of Shame for popularizing it. But just because the Club of Rome used an early supercomputer to distance themselves from the bad math doesn’t make their results any less shamefully unscientific and inaccurate. And just because Simmons noted that their predictions of the world population in 2000 were pretty accurate doesn’t get him off the hook for failing to note that everything else they predicted was way off. But more importantly, the accuracy of their predictions does not in anyway validate the methods used to generate them! If an accurate prediction is based on flawed analysis is the prediction still correct? Only in the most useless sense or to your balance with your bookie. The limit of what is knowable regarding the state of mind of the (accurately predicted) billions of individual actors in the world prevent math from being a tool to accurately predict the future of the world. As a phenomenon of organized complexity (see complex systems in Wikipedia) it is immune to this treatment. The complexity of human genius has allowed us to make a mockery of Malthus’ predictions of doom and exhaustion (though not his population numbers) and further to laugh at the well-intentioned but blinded-by-misapplied-science Club of Rome and now I suspect that Peak Oil is the third act in Malthus’ original play “Oh My God We’re DOOMED! or How I Misapplied Science to Scare the Children.” It continues to embarass the Keynesian central banks of the world and force senseless double speak from politicians and economists as they explain why their policies fail, their predictions are useless, and the unintended consequences of their actions dominate the intended ones. It just isn’t that kind of science. In closing, I hate you John Maynard Keynes =) =p

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