The Scientific Method Part 2

The scientific test of alternate theories is how well they account for observed data.

Theory 1 (aka Al Gore's hockey stick): Increases in CO2 emissions are causing the earth's average temperature to rise at an accelerating rate. The rise in temperature will result in the melting of polar ice caps.

Theory 2 (aka the Null hypothesis): CO2 emissions are not causing the earth's temperature to rise nor to melt polar ice.   

Observed data:

Southern Hemisphere Sea Ice

Which hypothesis better explains the results that have been observed? 

Now, the observed data does not prove or disprove either hypothesis, and the total global ice anomaly is not at record levels (but it's still above the average of the last 25 years. 

Global Sea Ice

 

But as of now, it is the Null hypothesis that is supported by true scientific method. 

The Scientific Method

The scientific test of alternate theories is how well they account for observed data.

Theory 1 (aka Al Gore's hockey stick): Increases in CO2 emissions are causing the earth's average temperature to rise at an accelerating rate.

Theory 2 (aka the Null hypothesis): CO2 emissions are not causing the earth's temperature to rise.  

Observed data:

1. Between 1998 and 2012 the global economy more than doubled in size—to some $71 trillion in GDP from $30 trillion. Over the same period the world pumped more than 100 billion tons of carbon dioxide into the atmosphere.
2. During that period global surface temperatures have remained essentially flat. 

Which hypothesis better explains the results that have been observed? 

Now, the observed data does not prove or disprove either hypothesis, and  it is entirely possible that the next 14 year sample will yield results that are more consistent with Theory 1, but as of now, it is the Null hypothesis that is supported by true scientific method. 

The Minimum Wage Tax

Liberals regularly worship at the Church of The Free Lunch, which catechizes that government can impose costs on business that will never be borne by the public. They just disappear, or, better yet, are borne by the business owner.

This year voters in Sea-Tac, Washington voted to adopt a $15 minimum wage. Here's your Free Lunch. Kudos to MasterPark for highlighting this government imposed tax (because that's what it is) rather than burying it in daily parking rates.

Income Inequality and Household Size

Those who complain about income inequality generally disingenuously use household statistics without disclosing that that measurement itself is the source of much "inequality". Households in the top quintile have FOUR TIMES the number of earners in the household as those in the bottom quintile. Do you think maybe that has a big effect on income? When earners marry and form a household unit are we supposed to be incensed about that? Should they be punished for doing so?

The Really Productive Driver Behind Income Inequality

As the uproar over income inequality reaches ever higher decibel levels, it is worth reminding ourselves that technology is the principal driver that is responsible. Technology allows the best people to leverage their skills in ways that could not have been done before. Think about these examples:

1. When Babe Ruth was playing baseball, he was one of the best. He and the Yankees were able to monetize that greatness every time he played in front of 30,000 or so people. Today, you might argue that Miguel Cabrera has similar greatness. When he plays he, the Tigers and MLB can monetize that greatness over perhaps millions of people who can watch him play via electronic media.

2. Imagine you were a good trader on the NY Stock Exchange 60 years ago. How many shares could you trade every day? A few hundred thousand? How many could you today? A few hundred million? What's that worth compared to the same job 60 years ago.

3. Assume you are a really good tax accountant. Sixty years ago you might leverage that ability over, say, 20 clients. Today with software you might be able to leverage it over hundreds of clients. And if you created TaxAct software you'd be leveraging it over millions of clients.

4. Assume you were a really good merchant. Sixty years ago you might have worked for Macy's or Marshall Field and made them quite a bit of money.  Today, if you're name is Jeff Bezos and your store is Amazon.com, think how much more your skill is worth today.

Scale matters. Being the best performing manager for a hedge fund matters A LOT. Designing a whole new social media network matters ever more. If you're working at a job that doesn't scale well -- e.g.  as a waiter or a a school teacher -- the gap between what you can produce and what someone harnessing technology can do is increasing. Of course it's increasing. Would you want it not to?  But if you're Hillary Clinton, you consider it a "cancer".