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Terence Corcoran: How fossils fuelled the GDP hockey stick

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CP169097874.JPG

The great climate hockey stick trial ended Wednesday in Washington, a libel and science battle between journalist Mark Steyn and climate scientist Michael E. Mann. The jury’s decision sets the stage for debate over free speech and the quality of the climate science used to justify the global campaign to rid the world of fossil fuels.

Missing from the trial, and the ongoing ideological clash over climate change, is another hockey stick, one that economists have been musing about for some time: The GDP hockey stick. While the temperature version under scrutiny at trial plots 1,000 years of speculative reconstructions of temperature history, the GDP hockey sticks deals with harder real data.

The Mann-Steyn trial, outlined here last week and reproduced by steynonline, focused in part on a 1998 graph shaped like a hockey stick developed by Michael Mann. Mann and others claim the graph provides statistical evidence that the use of fossil fuels led to a sharp rise in global temperatures in the 20th century.

The graph, leaving aside problems with the temperature measurement techniques, is one of the major selling points for national and international mega-plans to decarbonize the global economy down to net-zero emissions by 2050.

Missing from policy-making thinking is another hockey stick. Developed by British economist Angus Maddison, the GDP graph posits a thousand years of flatline global growth until the 18th century, when it began a major surge. Through the 19th and 20th centuries, GDP measured in constant dollars per capita began to soar toward $8,000 by 2010 and higher still in later years.

Economic and political debate over the causes of this spectacular gain in average human achievement and welfare has been raging for decades. Maddison, in his 1995 OECD book Monitoring the World Economy, which he expanded on with The World Economy: A Millennial Perspective, in 2001, identified key factors that produced the huge gains, including colonialism, international trade, capital movements, population growth and technological innovation.

Scores of other economists have taken up the GDP hockey stick issue. In a 2013 paper titled Tunzelmann, Schumpeter, and the Hockey Stick, University of Chicago economist Deirdre McCloskey wrote that “The history of the world for tens of millennia before 1800 was, roughly, a flat handle of unchanging real income per head for the average human. Then around 1800 the world reached the business end of the Hockey Stick, and all our joy.” By 2008, the 53 per cent of the world’s population that had lived on less than $1.25 a day in 1981 had been reduced to 22 per cent.

McCloskey reviews (via dense economic wit) the multiple possible causes for the radical transformation that began with the Industrial revolution in the 1800s — capitalism, free markets, innovation, entrepreneurialism, trade, technology, science and ideology. Ultimately, though, she attributes the growth revolution to innovation and human communication. As she puts it in her book Bourgeois Dignity: Why Economics Cannot Explain the Modern World, the real growth propeller was innovation propelled by dynamic communication and ethical structures.

Even the World Economic Forum acknowledges the GDP hockey stick. But the WEF does not, and neither do Maddison, McCloskey or scores other hockey stick economists deal directly with what may be the real underlying force behind the explosive expansion of the global economy over the past 150 years: fossil fuels. It is unmistakeable that the fossil fuels hockey stick — oil, gas and coal — scored the goals that made possible the GDP hockey stick.

There should be no debate. Without fossil fuels the 20th-century economic boom could not have taken place and the world might still be stuck with $1.25 a day income averages. Whether GDP-fossil fuel correlation equals causation is secondary to the indisputable fact that without fossil fuels, developed and expanded via innovation and market forces, we would not have experienced the spectacular economic benefits seen today around the world, with more to come.

The most enthusiastic public booster of fossil fuels today may well be Alex Epstein, author of Fossil Future: Why Global Human Flourishing Requires More Oil, Coal and Natural Gas — Not Less. The fossil fuel hockey stick graph “exactly correlates” with major improvements in life expectancy, income and population growth, writes Epstein, and fossil fuels remain essential to future growth.

This is not to deny the climate-change risks. The point now is to open the institutional, political, corporate and popular debate about the vital role — the existential importance — of fossil fuels to the world economy and its people. Public discussion needs to recognize and acknowledge that the economic hockey stick is based on real, measurable information and perceivable experience. That fossil fuels also produced and threaten devastating climate change is based on speculative extreme statistical modelling; not quite fiction, but not irrefutable fact.

Just two weeks ago, a commentary from the climate alarmists at the International Energy Agency dealt with the GDP-fossil fuel issue without using the hockey stick label.  “Since the dawn of the industrial age, fossil fuels have been a key enabler of economic development, providing the fuel that generated most of the world’s electricity, powering automobiles, ships and aircraft, and fuelling industrial activity. As a result, economic growth has been closely tied to a rise in greenhouse gas emissions through most of modern economic history.”

The IEA headline conclusion, however, is that this relationship between growth in GDP and CO2 “needs to be cut completely.” But if the link between fossil fuels and growth is almost causation, the impact would be to break the GDP hockey stick.