ExtremePerspective

Common sense perspectives and finding a way to retire

Straight Line Projections

Posted by Paul on December 14, 2006

As someone trained in engineering and statistics, one of my pet peeves is people making “straight line” projections. People tend to look at the trend line of past events and continue it into the future. (For the technically minded this is called “extrapolation” and is inherently flawed Vs “interpolation” which is technically sound.) I believe that the reason for this is that 95% of our population doesn’t understand or appreciate the concept of statistical variability (and surprisingly many scientists fall into this due to their desire to be “right”).

Some of the flawed analysis that comes out of this leads to all kind of hysteria and poor decisions. Some easy ones I can think of

  • 1970’s projections of global ice age, massive famines, population explosion
  • 1970’s projections that we would run out of oil by the 1990’s
  • Current projections of global warming continuing indefinitely and running out of oil
  • 1980’s hysteria that the Japanese would take over our economy
  • 1970’s projections about air pollutions
  • Ongoing projections that we are running out of water
  • 1900’s projections about the streets becoming 10 feet deep in horse shit

All of these projections are, of course, nonsense. The only real certainty is that there will be change in the future. Most people do not account for human kinds adaptability and resourcefulness. Take a look at this plot. Now most people and many scientists would say that after 100 points it sure points to a definite trend (maybe global warming!). In fact, this is strictly a randomly generated curve and after 1000 points it is slopped downward.

trendmodel2.gif

Take another example – water. The brilliant Marilyn Vos Savant last Sunday said that we are “running out of water”. I’ll be damned – I was taught as an engineer that we couldn’t create it or destroy it (Law of Conservation of Matter), so where is it going Marilyn?

In truth, what she probably means is that the “cheap” water is being used up or polluted. The solution to this is simple – clean it up! One process I’ve personally worked with, reverse osmosis, can be used to create clean drinking water from the ocean.

Can we run out of energy? Never, it’s impossible as long as the sun burns (and might be possible once it goes out). We just have to find a way to creatively extract energy from existing or new sources. Will it cost more? Maybe short term, but look at gas prices. We are back to inflation adjusted prices well below the 1980’s high – and they will go lower.

One of the best books I ever read was called Unlimited Wealthby Paul Zane Pilzer. His basic premise is that nearly all economic models are based on the scarcity principal (everything is a zero sum game).

If you ever want some perspective on the media and political hysteria that surrounds us, I highly recommend you read this book

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One Response to “Straight Line Projections”

  1. […] I wrote earlier about my favorite economic book Unlimited Wealth by Paul Zane Pilzer. It’s not difficult reading as you might expect from an economist, but rather entertaining. Pilzer traces the root of the scarcity mentality to the basic premise on which economics has been based – economics is the study of the limited supply of the worlds resources. If that premise is correct then it makes sense to fight over raw materials (gold, oil, etc.) […]

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