Monday, 23 April 2012

UNCLE GNARLEY ON 'JM' AND MODELS (Part 1)


The large and thoughtful mantle of Uncle Gnarley came awake just as I, too, was regaining consciousness.  The bottle of Springbank, Gnarley’s favourite of ‘beneficial vapors’ had worked its magic and gave us both a little respite from each other’s insistent consideration of the Muskrat Falls issue. 
I had almost regretted removing the cork, in the first place, except I knew that this particular ‘elixir’ was one which improved his normally obnoxious demeanor. 

Knowing Gnarley, he likely felt that, with every sip, he was exacting proper reward just for sharing his enormous intellectual assets. 

“Now, Nav”, said Uncle Gnarley, in a less than perfect Scottish brogue, “pour me another ‘wee dram’ and I will finish off my comments on this fellow, JM”.  As I did so, Gnarly proceeded to recite his dissertation.


“Nav, JM understood the most essential concept in the field of economics: in case you didn’t pass any subject beyond the fifth grade, I am referring to the fundamental principles of supply and demand.  Now, I did not agree with everything JM had to say, but he should be applauded for all that he did say.  He left us with many vital questions which even today remain unanswered, while Nalcor continues to spend $12-15 million dollars of public money each and every month”.

“On the issue of electrical demand, his expertise was unassailable.  Follow me now, lad! To justify spending $5 billion, Nalcor ought to be expected to prove, beyond a shadow of a doubt, that there will be a demand for this power in the future and not merely for the purpose of replacing Holyrood, either.  JM, some other members of the public or me should not have to provide this assurance. On that point, my dear man, they have failed miserably”.
“Throughout my reading of the papers you gave me, I have been sceptical of Nalcor’s approach, and JM has shown that serious danger exists when the wrong econometric model is used, er... now Nav, before your eyes glaze over, this is not tiddly winks, but it is not nearly as complicated as it sounds, either.  Modelling is used by economists and statisticians all the time; essentially, it is a tool to predict the future, using a series of historical data; it gives you a projection curve and it all looks nice and pretty, especially in these days of colour printing….my goodness, Nav, how much more could I have charged some of my private clients with that little invention.  Oh my! Oh my!”

“Of course, Nav”, Uncle Gnarley continued, “as any student knows, if you have constructed your model poorly or merely chose the wrong one, as Nalcor appears to have done; well, what is it that the young people say, ‘garbage in-garbage out’? But sometimes these ‘linear progression models’, as we call them, are simply inappropriate to the task.  They might work fine in a place like Ontario or Alberta.  These Provinces each have a history of consistent economic growth coupled with a larger population and industrial base and hence, a broader statistical foundation.   But, it’s very tough, Nav, to build a model given our small population and given too, that we simply have not grown these past many years”. 
“In fact, you should know, Nav, that Newfoundland and Labrador suffered through 20 years of 0.1% growth since 1980 plus another five years when growth was in the negative; this has not been a place to refer to billions of anything, let alone dollars.  Now, all of a sudden, we are expected to believe that we need a phenomenally large block of power and that we should mortgage, not just our children, but our grand-children and our great-grand-children, too, in order to get it.  You do have to wonder what is motivating these people, Nav.  But that’s another story.  Let me finish this one.  I say, Nav, it does get more ridiculous.

Indeed, my boy, I fear I may need another small snort of that gorgeous liquid, as a bad taste in my mouth keeps reappearing and I fear it has nothing to do with our Scotch friend. Were we influenced more by the Scots as an intelligent, prudent and wonderful people, I expect we would not be in this fine mess.

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