Coupled Dynamic Modelling of the Economy and of the Climate System

Date: 15 Mar 2012
Speaker(s): Michael Ghil
Venue: London School of Economics and Political Science (LSE)

Hosted jointly by the Centre for the Analysis of Time Series (CATS) and the Centre for Climate Change Economics and Policy (and the Munich Re programme.

We reviewed the classical arguments about business cycle modelling, using either endogenous business cycle (EnBC) models or ‘real’ business cycle (RBC) models. A particularly simple EnBC model, called the Non-Equilibrium Dynamical Model (NEDyM), was then presented, along with its surprisingly realistic, sawtooth-shaped business cycles and their five to six-year periodicity.

It was shown that this EnBC model – unlike the balanced-growth models currently used in the study of climatic impacts – presents a “vulnerability paradox”, with catastrophic shocks impacting the economy more during expansions than during recessions. Studies of U.S. macroeconomic indicators support this theoretical result – according to an out-of-equilibrium fluctuation-dissipation argument – by showing both a dominant 5 to 6-year mean cycle and greater volatility during expansions.

These preliminary results indicate that truly coupled, dynamic modelling of the economy and of the climate system might be both more interesting and more difficult than the prevailing wisdom would admit.

More information

• Download presentation slides – ‘Extreme Events: a tale of climate and economics’ (PDF, 30.5MB)

Biography of Michael Gil

Michael Ghil has been:

• Distinguished Professor of Atmospheric Sciences and Geophysics at the University of California, Los Angeles (UCLA) since July 1994;
• Distinguished Professor of Geosciences since September 2002;
• Director of the Environmental Research and Teaching Institute (CERES-ERTI) since January 2003;
• and is based at the Ecole Normale Supérieure (ENS), in Paris, where he also acted as Head of the Geosciences Department (July 2003 to December 2009).

Michael graduated with an MSc in Mechanical Engineering from the Technion–Israel Institute of Technology (Israel, 1971), before completing a PhD in Mathematics at the Courant Institute of Mathematical Sciences at New York University (USA).

He has over 260 refereed journal articles and book chapters in areas ranging from the geosciences – through applied mathematics, fluid dynamics, and nonlinear physics – and on to macroeconomics. He has authored or edited a dozen books in these areas.

Michael is: an Honorary Member of the Hungarian Academy of Sciences (2010); E. N. Lorenz Lecturer of the American Geophysical Union (2005); Foreign Member of the Austrian Academy of Sciences (2005); G. Lemaître Chair at the Université Catholique de Louvain, Belgium (2004); Honorary Member of the Romanian Academy of Engineering Sciences (2004); Associate of the Royal Astronomical Society (2004); Member of the Academia Europaea (1998); Visiting Chair at the Collège de France (1997); Elf-Aquitaine/CNRS Chair and Medal of the Académie des Sciences (Paris, 1996); Fellow of the American Geophysical Union (1995). He was a Guggenheim Fellow from 1991 to 1992.

Michael was also awarded two NSF Special Creativity Awards (1993-1995 and 1998-2000), as well as the L. F. Richardson Medal of the European Geosciences Union (2004). He was also recently awarded the European Geosciences Union’s top medal – the Alfred Wegener Medal – which he will receive in the forthcoming April 2012 EGU session.

Michael’s Wegener Medal Lecture is also entitled ‘The Complex Physics of Climate Change: nonlinearity and stochasticity’.