Lessons for Climate Panic from the Y2K Panic

This is kind of interesting, and comes via Odd Citizen.  The author links this Australian study looking retrospectively at the Y2K scare, trying to understand why an irrational collective hysteria developed that allowed for no skepticism (seem familiar).  The whole thing is interesting, but here is the money quote:

From the perspective of public administration, the two most compelling observations relate to conformity and collective amnesia. The response to Y2K shows how relatively subtle characteristics of a policy problem may produce a conformist response in which no policy actors have any incentive to oppose, or even to critically assess, the dominant view. Moreover, in a situation where a policy has been adopted and implemented with unanimous support, or at least without any opposition, there is likely to be little interest in critical evaluation when it appears that the costs of the policy have outweighed the benefits.

The article is written without any reference to current climate issues, but wow, does this sound familiar?

25 thoughts on “Lessons for Climate Panic from the Y2K Panic”

  1. I’ve noticed this before. The parallels are significant. It was a problem only the computer experts could comprehend and it lead to significant spending on the industry in order to correct this perceived problem. I was working in IT for an international airline at the time, and we knew how insignificant the problem was but why attack it if it brings us incredible budgets which was simply spent on all the other things we wanted to spend on anyway?

    The politicians also loved it:

    From http://www.co-intelligence.org/y2k_quotes.html:

    “I came here today because I wanted to stress the urgency of the challenge to people who are not in this room…. Clearly, we must set forth what the government is doing, what business is doing, but also what all of us have yet to do to meet this challenge together. And there is still a pressing need for action…. In the business sector just as in the government sector, there are still gaping holes. Far too many businesses, especially small- and medium-sized firms, will not be ready unless they begin to act. A recent Walls Fargo bank survey shows that of the small businesses that even know about the problem, roughly half intend to do nothing about it. Now, this is not one of the summer movies where you can close your eyes during the scary parts.” — President Bill Clinton, in a speech about Y2K at the National Academy of Sciences, July 15,1998

    “I am very, very concerned that even as government and business leaders are finally acknowledging the seriousness of this problem, they are not thinking about the contingency plans that need to be put into place to minimize the harm from widespread failures…. I think we’re no longer at the point of asking whether or not there will be any power disruptions, but we are now forced to ask how severe the disruptions are going to be…. If the critical industries and government agencies don’t start to pick up the pace of dealing with this problem right now, Congress and the Clinton Administration are going to have to…deal with a true national emergency.” — Senator Christopher J. Dodd, (D-CT), at the first hearings of the Senate Special Committee on the Year 2000 Technology Problem, June 12, 1998

  2. Sorry, the Y2K problem was real. There is no parallel here. I could point to a line of code and tell my bosses “that line will cause your program to crash on Jan 1, 2000”. If that program was business critical, the management of that company had a fiduciary responsibility to fix the issue before Jan 1, 2000.

    Did we go overboard? Sure, we fixed some things that didn’t need fixing, or that could have limped along just fine with some workarounds, but hell, when you are resurfacing the street, why not take the opportunity to replace the aging sewer lines below?

    I don’t believe for a minute that if we had done nothing to fix the Y2K issues, that it would have lead to the end of Western Civilization as we know it. I think the scenarios evoked in the media at the time were rather ridiculous. But if we had done nothing, some things would have failed, rather spectacularly. Some companies would have ceased to be able to conduct business and failed.

  3. My brother worked as an electronic technician for a couple of years correcting the Y2K problem. He stated that for most equipment, it was a non-problem; sure, the equipment wouldn’t work properly after 12/31/99, but for most machines, the date was immaterial. The companies could have more cheaply fixed the problem by just resetting the dates to January 1, 1980.

  4. josh, I’m not saying there was no problem, and I’m not saying that if we did nothing everything would have been fine. I’m just saying the problem was so small that it was insignificant compared to the noise, effort and money applied to fixing this problem, especially if you consider the prevalence of software bugs out there in general.

    Gartner estimated fixing the problem to cost $1 trillion, which was about the market capitalisation of the Fortune 500 companies, while if there was a full blown disaster it would have had less of an impact on the economy as the Chinese New Year.

  5. The point is that something had to be done. When you are a major company, faced with changes you have to make, why not make the best of it? Instead of futzing around setting back the clocks on your massive network of automated teller machines, that need to be replaced sometime soon anyway, why not just replace them earlier with Y2K compliant models.

    Yes, we spent $1 trillion – was that wasted money? Perhaps some of it, but much of it went into buying new hardware and software that had much more capacity than the old – capacity that’s being profitably employed today.

    At the worst Y2K pushed procurements a few years ahead of when they would have normally occurred – so companies spent money in 1998/1999 instead of 2002/2003. I don’t doubt that this was at least partially responsible for the market bubble, and the recession that followed.

  6. $1 trillion? I’ve read some lower estimates, although of a similar order of magnitude. Some BBC articles give US spending as 100 billion USD and global spending as 300 billion USD.

    What’s interesting, then, is that these sums are not dissimilar to those that the alarmists are claiming will destroy the economy and wreck civilisation, if spent on avoiding dangerous climate change. So, how did spending 100 billion USD on preparing for a situation affect the US economy? Not a lot. And 100 billion is a small amount compared to the 440 billion spent by the US military in 2007 alone.

    Where, then, do the alarmist ideas of economic meltdown come from?

  7. I work it IT. There’s some truth in what Josh says. Procurement for replacement IT systems has many drivers. Prior to 2000, the millennium bug was a compelling driver but I doubt that in the majority of cases the salesmen had any idea whether the old software would actually fail. I saw on several occasions budgets being approved for software expenditure despite having it demonstrated that turning the clock would not crash the system. Non-technical budget holders were too scared to stand out from the herd. I frequently encountered managers who recognised that if they wasted the company’s money on an illusion they were at worst making the same mistake as their peers but if they were to save the money they would get no credit and might be accused of being unprepared.

    We can judge the reality of the claimed scares by the fact that throughout Africa, very little was spent on upgrading, compared to the US and Europe, but with minuscule reported problems.

    In economics there is a concept known as the broken windows fallacy. A window pane is broken by an errant boy and a claim is made that the boy’s misdeeds have given work to a glazier – work is created where before there is none. This is a fallacy because whilst we see the glazer has work, we do not see where the wealth used to replace the broken window might otherwise have been spent. Thus a shoemaker may sell one less pair of shoes or a tailor, one less shirt – both unseen.

    To argue that spending on Y2K would probably prove to be useful in the long term is to make the same mistake. Rather than break the glass, we have merely predicted the glass will be broken and replaced the window in advance. It is surely true that some people would have replaced the software in due course, but even in those cases the costs borne were not just those of a premature replacement, the fact is that premium rates were being charged both for labor and software. In addition many companies replaced or repaired software unnecessarily. All that wealth was no longer available to be invested in perhaps more sensible schemes. Some of those investments could well have generated greater wealth. We could well be worse off as a society because of the failure to invest in unseen potentials.

    This was a South Sea bubble and whilst we should recognise that some of that investment became otherwise useful, that shouldn’t fool us into thinking that wealth was not wasted.

  8. Carbon hysteria! The tax that keeps growing even as economic activity keeps shrinking. There really is no good conventional way to measure the costs of carbon hysteria such as the Snake Oil Scientologists purvey. With Y2K it was only money that was thrown away. With climate hysteria, the entire economy is tossed in the garbage.

    The cost for carbon hysteria and alarmism will be much higher than $1 trillion. Probably more like 100 times that amount when all is said and done. That is only two years of normal global economic activity, except that under the alarmist regime there will be very little global economic activity.

  9. This discussion on Y2K may be missing an exploration of consequences. I do not see anyone arguing that we should have completely ignored Y2K issues, but what were the unintended consequences of going overboard? There is a persuasive argument that the 2001 recession came from the Y2K hysteria. Businesses had overinvested in IT expenditures, and the IT budgets were maintained until the fall of 2000. Then the cutbacks occurred, driving the slowdown and eventually the recession. Consumers did not cut back in expenditures, and government did not. The recession was led by falling investments by business, and the recession was over by the time 9/11 hit.
    Likewise for AGW, we need to think of the unintended consequences.

  10. I think, honestly, that there is no persuasive argument at all that the millenium bug preparations had anything to do with the early 2000s recession: the dot-com crash (an entirely separate phenomenon) and the switch to the Euro which then swiftly depreciated were clearly much bigger factors in the recession; and the US, which spent a third of the total spent on millennium bug preparations, was never in a recession anyway.

    We can judge the reality of the claimed scares by the fact that throughout Africa, very little was spent on upgrading, compared to the US and Europe, but with minuscule reported problems. – it should come as very little surprise that on a continent where half the population are subsistence farmers, a) little was spent on a computing problem; and b) the effect was minuscule. Using Africa to claim that the bug was not real is preposterous.

    With climate hysteria, the entire economy is tossed in the garbage – there’s a beautiful example of the hysteria that is infecting this debate.

  11. I think the really salient comment in the report was this solution to the problem, a solution which has very much not been implemented in GW:

    “the Y2K failure suggests that, in situations where there is strong pressure to conform with a consensus arises, some form of institutionally sanctioned skepticism is necessary. The generic term for somone willing to argue against such a position is ‘devil’s advocate’, and the history of this term reflects the fact that the canonisation process in the Catholic church is one which naturally generates enthusiastic support. The office of the Promotor Fidei, popularly referred to as the ‘Devil’s Advocate’, was instituted to provide a skeptical check on such enthusiasm by collecting and presenting evidence against candidates for canonisation. In the criminal legal system, skepticism is institutionalized through rules that ensure legal representation, even for criminal defendants who are viewed by the community as ‘obviously guilty’.”

    If you’re interested in the truth, institutionalized skepticism is a key tool. If you’re interested in promoting a particular world view or action, you’re going to try and do away with as many skeptics as possible.

  12. There may be a lot of good unintended consequences in action over AGW, like reducing pollution, creating economic benefits for the producers of low carbon solutions, preserving forests, energy independence and freedom from oil producing countries. I believe these consequences stand as good enough reasons on their own to happen without the threat of AGW. Actually, I believe these things are so desirable that they will happen by themselves, and urgent action over AGW will only really aid in accelerating it. Urgent action over AGW will only divert funds from other probably more urgent concerns in order to aid these concerns.

    Oh, and Scientist, don’t make such wild assumptions over IT in Africa 😉

  13. Kriek –

    Judging by the whole ethanol debacle, it will counteract some of those goals, in particular the preservation of forests. (And the “producers of low carbon solutions” don’t need economic benefits if it’s a non-issue anyways.)

    Pollution reduction happens anyways, yes, as a result of economic prosperity, as it is lower on the priority chain of poor people than the whole “not being poor” thing.

    Energy independence and freedom from oil producing companies are non-starters, though; those are as ridiculous in concept as the idea of cheese independence, and freedom from dairy producing states. (Down with California and Wisconsin!) OPEC is not nearly as important as it was in the long-distant past; right now independence from oil-producing countries in the US would mostly be independence from Mexico and Canada, after all. (And who wants oil independence from Mexico? As long as we’re their primary importer they have to do whatever we tell them.)

  14. “scietrollogist”

    you make a mistake in the way you compare Y2K with CO2 abatement. Y2K was a one time cost. CO2 abatement will be an ongoing issue every year. the energy needs to some from somewhere. generating it without releasing CO2 will dramatically add to costs.

    this effect will pile up and compound over decades and decades of missed growth on top of missed growth.

  15. morganovich –

    I once read a very interesting economist’s commentary on taxes. He calculated the average difference in annual GDP growth made for each percentile point of it consumed by taxes, and then extrapolated out how much GDP growth taxes have cost the US over the past century.

    The average American, assuming his calculations would hold true, would be a multimillionaire today, had taxes consumed only 5% of GDP annually for the past century. (This might not be accurate of the US, however – his calculations were largely based on trailing nations, wherein capital expenses are nearly completely physical, whereas in the US they’re largely intellectual. But this could go either way – he could have vastly underestimated as easily as overestimated the difference it would have made.)

  16. it should come as very little surprise that on a continent where half the population are subsistence farmers, a) little was spent on a computing problem; and b) the effect was minuscule. Using Africa to claim that the bug was not real is preposterous.

    On the contrary.

    The claimants predicted that older software and hardware would be the worst affected. Now Africa might have little IT infrastructure but where it does it has a disproportionate amount of old. Therefore it should have exhibited all the worst predictions. Are you claiming that Africa has no banks, no air traffic control? Your argument makes no sense. If the catastrophists claims had come true then it would still have been severe in urban areas. Planes would have fallen from the sky; Bank accounts would have been wiped out; We would have heard that Tusker beer’s distribution was paralysed for days. We would have heard that Nigeria’s public servants rioted when the payroll failed.

    Should you prefer, you can pick Italy or eastern Europe instead.

  17. So how about, TDK, you provide us with some links to sources showing how much money was spent in Africa, and how that compared, as a proportion of GDP, with elsewhere? Sure, of course there are banks in Africa. Have you ever been to one? I changed some traveller’s cheques at a branch of Barclays Bank in Solwezi in Zambia in 2001. The procedure took about half an hour and the cashier didn’t have a computer. The point remains that obviously, on a continent where half the population are subsistence farmers, the impact of a computing problem will be way, way smaller than it will be on a society which is more or less totally reliant on computers. And the point further remains that even if every penny spent on the problem was wasted, it still had an imperceptible impact on the global economy. We currently have catastrophists claiming that somehow the entire global economy will be destroyed by taking action to avoid dangerous climate change. There is no basis in reality for their arguments and the millennium bug preparations illustrate that.

    Adirian – they have to do whatever we tell them – you really think so? And so clearly you are from the United States – why on earth do you think that your vast country with its countless rivers, thousands of kilometres of coastline, plentiful wind, and even in places vast geothermal energy reserves, is forever going to have to rely on foreign oil deposits? When your attempts to secure a stable supply have pushed the price up four fold since 2003, don’t you think it would be wise to seek alternative?

    As for your economist, who was it? Did they consider inflationary effects? Did they really assume that taxation has no financial benefit?

    “morganobitch” – see, I can make up pathetically immature insults as well. And on top of that, I can spell them correctly!

  18. I contracted for Standard Bank and also Mobil Oil. Their work took me to Kenya, Zimbabwe, Cameroon, Nigeria, Ghana, Cote D’Ivoire. Morocco, Tunis and Egypt for extended periods and some other countries for short periods. I was there from about 1998 to 2001 with breaks. Never made Zambia.

    Funnily enough I was there working on IT systems for all that time. The only companies who worried about Y2K were western or South African companies.

    Used to withdraw money for expenses from ATM machines, which I now know didn’t exist!

    Here’s CNN predicting civil unrest in the third world, naming Africa http://www.cnn.com/TECH/specials/y2k/stories/overview/

    Here’s an article quoting Gartner to stockpile food and saying that Africa “is as far behind as it is possible to be”

    The CIA regard Africa as ill prepared but predict unrest will be restricted to urban areas. “Government institutions, small businesses, the health sector, and some public utilities lag because of funding shortfalls”

    All these reports come prior to doomsday. They all identify shortcomings in African preparedness. There are dozens more all confirming the same picture. Conversely there are remarkably few after doomsday.

    I do not agree that actions to reduce or eliminate CO2 will cause economic meltdown in the west. We will certainly be poorer as a result but after a century of increasing government spending we have grown used to that. But it won’t be a one off hit. Y2K was a single short term event; actions to prevent AGW must be perpetual or there is no point. For example less flights is not something for just 2008. We expect to reduce flights (except for philosopher kings of course) permanently. Since ease of travel is a factor in generating trade and hence wealth, restricting travel logically ought to reduce wealth. Some of those missed flights might be resolved in alternate ways but not all of them. And every missed flight increases the lost wealth forever. That wealth is unavailable to generate more wealth. We thus have a cumulative situation – compound interest if you like.

    But all this lost wealth is like the money spent on repairing broken windows. The alternate lost wealth is unseen. That’s why you’ll get away with it.

  19. “Adirian – they have to do whatever we tell them – you really think so? And so clearly you are from the United States – why on earth do you think that your vast country with its countless rivers, thousands of kilometres of coastline, plentiful wind, and even in places vast geothermal energy reserves, is forever going to have to rely on foreign oil deposits? When your attempts to secure a stable supply have pushed the price up four fold since 2003, don’t you think it would be wise to seek alternative?”

    – For the first question, yes, I think so. For now, at least. Give it another five years to a decade and this will cease to be the case, as other nations are starting to step up their own consumption rates, but we’re still numero uno.

    For the second – because hydroelectric power destroys habitats on rivers, and we unlike Europe haven’t driven 95% of our species extinct and are trying not to make this the case in the future. Because tidal harnesses similarly destroy habit. Because wind is not reliable and we don’t yet have an efficient energy storage mechanism. Geothermal, indeed, is the only viable option which isn’t horrifically damaging to our environment in a thousand other ways – and it won’t nearly cover our energy requirements. I’ve been through this with you before and you raised not a flag on a single one of these.

    And for the statement that our search for a stable supply has pushed costs of fourfold – take a look at the following two graphs, and, if you care, the commentary associated with them (the commentary isn’t related to your statements, but is amusing nonetheless):

    This is also, not coincidentally, a way of answering your other question, as to who the economist was. And yes, the economic benefits of tax would have been figured in – since the calculations were based on the relationship of GDP growth to tax rate. The limitations of his calculations were exactly as I specified them, and, as such, quite considerable.

  20. It’s incredibly tiresome to copy and paste links. Can you at least have the courtesy to hyperlink them?

  21. I code for a day job. I’ve already done you the favour of closing an italics tag you were too inconsiderate to close yourself; if you want me to code to make your life easier, my consulting rates are $150 an hour.

  22. You want to make it inconvenient for people to even read the sources you cite to back your claims? Don’t be surprised if that kind of attitude doesn’t win many arguments.

  23. I was working and living in Africa when Y2K struck, in fact I was working for banks until 1999 and then the airline until after Y2K.

    As I said, don’t make assumptions about Africa. Actually don’t make assumptions about IT either for that matter. Unless, of course, you happen to know something about either.

  24. I’m in IT and was for a while heavily involved in Y2K work. As I see it there is a strong similarity between the “Y2K bug” and “AGW”… In both cases the problem exists(ed) but equally it is/was nowhere near as catastrophic as all the media hype would suggest, which in turn allows(ed) huge amounts of money to be made by the less-than-respectable entrepreneurial “gurus”.

  25. Kriek Jooste,
    If the AGW movement would reduce pollution, save forests, reduce energy dependence, and have few negative impacts, it would have more acceptance by skeptics. Unfortunately, it has increased pollution — Note the increased HFC-23 production as a result of Kyoto. Note the increased coal pollution in China and elsewhere — due in part to carbon leakage. (Also, China essentially snubs pleas to put on coal scrubbers with the snippet that the West will be asking for the coal plants to be closed down in 15 or 20 years anyway.) Note the destruction of the Amazon transforests being caused by the AGW-driven biofuel legislation. Note that we are more dependent on oil (and natural gas) imports because we disallow coal plants — turning to fuels we import for electric generation — in the name of AGW concerns.

    Also, I was involved in budgeting for Y2K projects. We diverted huge amounts of investment dollars to this project — and although I did not do the programming, I did understand the code where Y2K were issues. Not only during 1999 and early 2000 did we divert investments dollars, but later in 2000, we cut back on investments in general because we had “spent too much” on Y2K. Both anecdotally through personal acquaintances and from economic analysis by researchers, apparently this pattern was repeated on a widespread basis. The economic problems of the 2001 came from lack of Investments, not from Consumer expenditures!

Comments are closed.