Tuesday, February 06, 2007

Hedge Fund Approach to Climate Change

I meant to link to this article last week when I saw it. I think this is one of the best approaches I've seen to the climate change debate. Mr. DeLong does not argue that he knows the science or the ultimate answers to the issue or questions of the existance, causes or remedies of climate change. Instead, his point is that no one REALLY knows what the answers are, and that the drum-beat of 100% certainty that we get from the MSM opens the door to make some money. What I like about his approach is that it calls for the humility of recognizing what we don't know instead of the arrogant posturing that usually characterizes this particular debate. I especially like this paragraph:

In this world, the worst sin is assuming something has a 100% probability when it may well have considerably less, or assuming it has zero probability when it actually has a real shot. "They forgot the tail of the risk," is a term of contempt, bringing to mind bygone firms gone bust, such as Long Term Capital Management.
Read the whole article. And, if anyone has any suggestions of some mispriced assets from this debate or any other, put them in a comment here, and let's see if we can make some smart investments.

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