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Climate Economics: Much More than Costs & Disasters

What I call Flat Earth economics is the current level of primitive thinking about climate change and the economy.  The focus is all on costs of adapting to a low carbon lifestyle and various disasters that can occur with climate change.  This ignores the basic nature of how heating and cooling affect human beings, which turns out to be the dominant real economy effect on economics.

The first industrial engineer, Frederick Taylor, discovered in circa 1896 that laying railroad track was best done at a temperature of 64 degrees Fahrenheit.  Above that level, people naturally slow down in the heat, just like we do on a tropical beach.  I first learned about Taylor working on my MBA.  Later as a dry cleaning executive I learned of the terrible hot summer conditions in that industry.  The NASA (dry cleaners trade association) found that at a comfortable heat of 72 degrees there is no change in productivity, but at 74 degrees productivity drops 3%, and at 85 degrees it drops 18%.  At 95 degrees Fahrenheit productivity drops 37%.  Thus economic activity will drop as the temperature rises.

A glance around the world and temperature obviously affects the apparent advantage temperate zone economies have long had over tropical economies.  Even within the temperate zone, the cooler countries of Europe clearly have stronger economies that the Mediterranean countries, with the cool Scandinavian countries and cold mountainous Switzerland leading the way.  Likewise, the Northern States have long had an advantage over the Southern States in America.  So latitude and altitude affect economics.

When I broke down the US economic growth rate change versus temperature change by five year periods from 1895 to 1988, in 15 of 18 cases, when the temperature cooled the economy strengthened, and when the temperature increased the economy decreased.  The clearest example is also the biggest, as the 95 year study peaked in temperature increase from the late twenties to the early thirties, exactly when the Great Depression occurred.

Investments grow about 6% more in the coldest six months than the warmest six months in the US the last twenty years, and this effect was statistically significant in every stock market in the world in a peer reviewed 2002 study.

The International Panel on Climate Change has nothing in their report about any of these discoveries first connected to the economy by Dr. Robert Reuschlein twenty two years ago in his “Natural Global Warming” paper May 7, 1991 and more extensively in his Real Economics 1999 text.  This four paragraph proof will stand the test of time and become the standard way of looking at long term economic changes someday. for audio at bottom of page. for more info.

Dr. Peace, Dr. Bob Reuschlein, 608-230-6640


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