IPCC 6: Drought

I have now looked through all of the latest IPCC report. I say “looked through” because the report, including the Summary for Policymakers, is huge, just under four thousand pages. I looked over all of it, read only bits of particular interest to me.

One complication in writing about it is that the main report has, across every page in large light grey letters, “ACCEPTED VERSION SUBJECT TO FINAL EDITING,” and at the bottom of every page, “Do Not Cite, Quote or Distribute.” I will limit myself to describing what is in it and where but not actually quoting. The restriction is not present in the Summary for Policymakers, however.

Drought

Climate change is often blamed for recent droughts in a variety of places. That claim was supported by the fourth IPCC report but retracted in the fifth, so I was curious what the sixth said about it. 

The answer is complicated. The summary contains the figure shown below. It divides the world into 45 regions and reports for each on both confidence that drought had increased (or decreased) and confidence that there was a human contribution to the change. Yellow hexagons are regions where there is at least medium confidence in increased drought, green of decreased. One dot indicates low confidence in human contribution, two dots medium confidence, three dots (of which there are none) high confidence. 

As you can see, twelve of the 45 regions show at least medium confidence in an increase in drought, one of a decrease. In only two of the 45 regions is there medium confidence in a human contribution to the increase. So it is still true that, over most of the world, there is no confidence of increased drought due to humans. On the other hand, one of the two regions is WNA, Western North America, where I live. So the report does support the claim that recent drought in California is at least partly due to human contribution, presumably through climate change.

One complication to all of this is the definition of drought. According to the summary:

Agricultural and ecological droughts are assessed based on observed and simulated changes in total column soil moisture, complemented by evidence on changes in surface soil moisture, water balance (precipitation minus evapotranspiration) and indices driven by precipitation and atmospheric evaporative demand.

The IPCC defines drought by the amount of water in the ground, not the effect on plant growth. The reason this is a problem is that one of the effects of an increased concentration of CO2 in the air is a reduced need by plants for water. This fact gets mentioned in a different context in the main report, along with references to the resulting greening, more plant growth, over time. It follows that the IPCC definition of drought overstates it so far as the effect on plants is concerned. The IPCC ignores this in its discussion of drought.

The report does not provide enough information to redraw the figure, defining drought by plant growth instead of soil moisture. It is at least suggestive that, on the figure, twelve of the forty-five regions show increased drought, only one decreased, and yet according to the body of the report plant growth has, with high confidence, increased globally over the past 2-3 decades. That suggests that revising the figure to show the combined effect of change in soil moisture and CO2 fertilization would show fewer areas of increased drought, more of decreased, very possibly on net a decrease, not increase, in drought.

 

Covid, Vaccination and Infection

Judging by current evidence, vaccines continue to provide strong protection, about 90%, against death or hospitalization, for many months. Protection against infection is much weaker. A recent study in Qatar found that the Pfizer vaccine's protection against infection got down to about 20% by the fifth month. That is the lowest figure I have seen; other estimates of the effectiveness of vaccination against infection over time vary, but 50% is fairly typical.

If the question is whether I should get vaccinated in order to protect myself, the main issue is effectiveness against hospitalization or death. If the issue is whether you should get vaccinated to protect me and others, on the other hand, the main issue is by how much vaccination reduces the chance you will get infected and be contagious.

People are likely to take fewer precautions against getting infected after they are vaccinated — certainly I did. If effectiveness is down to 20%, even 50%, the chance of infection might easily be as high among the vaccinated as the unvaccinated. Infection of the vaccinated is more likely to be asymptomatic, in which case the individual is unlikely to know he is infected, hence unlikely to take precautions against transmitting the infection, which increases the chance of transmission. It is, so far as I can tell, unclear how close the relation is between severity of infection and contagiousness — at least I have seen claims both that asymptomatic people are much less contagious and that they are not.

I conclude that while it is clear that by getting vaccinated I protect myself against consequences of Covid, it is not clear, contrary to what the CDC, Biden, and a lot of other people claim, whether and how much I protect other people against the risk of my catching Covid and passing it on to them. It is that claim on which the current push to require people to be vaccinated is based. 

 

Some evidence that while vaccination may reduce contagion it doesn't reduce it very much is the lack of any clear connection in international data between vaccination rate and infection rate. Israel had steeply increasing infection rates from late June to early September, the UK from late May to late July, periods in which both had relatively high vaccination rates — higher than Czechia, which had declining rates until late June, roughly constant for the next two months, and much higher than India, which has had a declining infection rate from early May to the present. I have not yet seen any careful analysis of the international data trying to separate the effects of climate, vaccination rate, and natural immunity from previous infection, but the effect of vaccination alone is not large enough to be obvious from a casual look at the data.

The Drone Strike

From a recent news story:

After back-and-forth with Rep. Scott DesJarlais (R-Tenn.), Austin [Defense secretary] admitted that he knew “several hours” after the strike that civilians were killed. The strike occurred on Aug. 29 and the Biden administration revealed civilians were killed on Sept. 17. 

There are two possible interpretations of this. One is that they knew some civilians had been killed but assumed they were bystanders, that the vehicle they hit belonged to terrorists and was loaded with explosives. The other is that they knew they had hit the wrong target but did not intend to tell anyone,  deliberately lied about it until the falsehood was exposed by the media.

We acted several times on intelligence that we saw, and we were successful on other occasions in preventing attacks,” McKenzie [head of central command] said Tuesday. “This time, tragically, we were wrong.”

On the first interpretation,  they used a drone to destroy a vehicle full of civilians in the false belief that it was a terrorist vehicle and only found out when the media told them. If so, McKenzie has no way of knowing how many of the strikes he calls successful were errors of the same sort. They thought this one was a success, continued insisting it was for days after the strike, so could have done the same thing multiple times.

On the second interpretation, McKenzie may know how many of the strikes were successes, how many tragically wrong, but we don't know because when the military makes a mistake they do their best to pretend they didn't. As this time.

Protecting Children

If you watch mass media and believe what you see, you think the reason to require masks on school children, the reason to vaccinate them, is to protect the children. It’s a lie. Over the entire period of the pandemic fewer than five hundred children under 18 have died in the US, well under one in a hundred thousand of the population — about half as many as died from pneumonia. The IFR, the chance that someone who is infected with Covid will die of it, is about 1/100,000 for ages 5-14, somewhat higher for older teens. The reason to keep children from getting Covid is to protect the adults those children could pass the disease on to. Any  reduction in deaths of the children themselves is a minor side benefit.

But dying children make better news stories, more emotionally moving arguments, than statistics on infection rates.

The Equity Premium Puzzle: A Suggested Solution

Most investors are free to invest in either stocks or bonds, so one would expect the return of both investments to be similar. It is an obvious argument, at least to an economist, but the conclusion does not appear to be true. In the U.S. over the past century, stocks have consistently outperformed bonds. This is the Equity Premium Puzzle.

A variety of explanations have been offered. The most obvious is that the return of stocks, both individual stocks and stock portfolios, is more uncertain than the return of bonds, at least over the short run, so risk averse investors would be willing to accept a lower return on bonds in exchange for lower risk. Attempts to estimate how risk averse investors would have to be to explain the observed premium, however, produce implausible answers: 

To quantify the level of risk aversion implied if these figures represented the expected outperformance of equities over bonds, investors would prefer a certain payoff of $51,300 to a 50/50 bet paying either $50,000 or $100,000.[1]

A variety of other explanations have been offered but none appears to be generally accepted.

I have another one.

Imagine a market where many investors are insider traders on a small scale, in an economic but not necessarily a legal sense. I know more than the market about the firm I work for. You know more than the market about a firm you have repeatedly had dealings with. He knows more than the market about a technology he has worked with extensively that will affect the performance of several firms.

Each person invests some of his money where he has an edge, buys a stock that is going to go up or sells short one that is going to go down. By the standard analysis of insider trading, he makes an above market return. Because he is risk averse he wants to diversify his investment, so part of his money goes into other investments. His marginal return is the return he can get without inside knowledge, his average return is a suitably weighted average of that and his insider return. Bond investments only have to do as well as his marginal investments, so the return on bonds is lower than the average return on stocks.

When I first came up with the idea, someone I described it to offered a proof that it could not be true, one that at the time seemed convincing. My argument implies that everyone, the investor without inside knowledge and the investor with inside knowledge making marginal investments,  is getting less than the average return. Why can’t he buy a random collection of stocks, in the limit a millionth of a percent of the stock of every company, and so guarantee himself the average return?

That proves too much, only that my explanation of the equity premium puzzle is inconsistent with rational behavior by investors but also that an insider cannot profit by his inside knowledge: If some insiders are getting an above average return, everyone else must be getting, on average, a below average return, and anyone who is could get an average return by buying stock at random.

The solution to the paradox is that it is not possible for every uninformed investor to end up with an equal share of every company on the market because some of those shares, the shares of companies particularly likely to go up, belong to insiders. That explains both how it is possible for insiders to make an above average return and why my explanation of the Equity Premium Puzzle is not inconsistent with investor rationality.

Whether it is the correct explanation, of course, I do not know.

Comments welcome.

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[1] Mankiw, N. Gregory; Zeldes, Stephen P. (1991). "The Consumption of Stockholders and Nonstockholders". Journal of Financial Economics. 29 (1): 97–112.