All posts by Kevin VS Marshall (Manicbeancounter)

Volokh Conspiracy on VAT in USA

Volokh Conspiracy posts on the proposals to introduce VAT into the USA here.

The essence of the post is that VAT is hidden, so it makes it easy to creep up revenues. Therefore it will not serve to reduce the phenomenal deficits of the USA, but  increase government expenditure. As the cousins over the pond are inexperienced in the workings of VAT, I made two comments.

The first was that VAT (at least in the UK ) encourages the black economy, gives opportunities for fraud and is often a tax on tax.

There are a couple of big issues with VAT here in the UK, that the US should be aware of. (NB the rate is 17.5%, soon to rise to 20%)
1. Small businesses do not pay VAT. The current threshold for registration is around $90,000. Therefore sole traders have a big advantage over larger businesses for decorating, plumbing etc. Due to this cost advantage (on top of avoiding around 35% marginal tax rates for self-employed up to $60,000 per year), the black economy is large. VAT exposes people to the fly-by-night rogues.
2. The UK has a large amount of trade with other EU nations. The Intrastat scheme for dealing intra-state VAT is open to fraud. Criminal gangs have made $m’s through carousel fraud. See http://en.wikipedia.org/wiki/Missing_trader_fraud
3. VAT is charged on other taxes. In the UK the current price of gasoline is GBP 1.13 per litre or $6.60 per US Gallon. With VAT at 17.5%, $1 is VAT, and around 60c is VAT on around $3.20 of excise taxes.

There are a couple of big issues with VAT here in the UK, that the US should be aware of. (NB the rate is 17.5%, soon to rise to 20%)
1. Small businesses do not pay VAT. The current threshold for registraton is around $90,000. Therefore sole traders have a big advantage over larger businesses for decorating, plumbing etc. Due to this cost advantage (on top of avoiding around 35% marginal tax rates for self-employed up to $60,000 per year), the black economy is large. VAT exposes people to the fly-by-night rogues.
2. The UK has a large amount of trade with other EU nations. The Intrastat scheme for dealing intra-state VAT is open to fraud. Criminal gangs have made $m’s through carousel fraud. See http://en.wikipedia.org/wiki/Missing_trader_fraud
3. VAT is charged on other taxes. In the UK the current price of gasoline is GBP 1.13 per litre or $6.60 per US Gallon. With VAT at 17.5%, $1 is VAT, and around 60c is VAT on around $3.20 of excise taxes.

On a comment on how wondering how to calculate the average rate of of tax, pointed out it was irrelevent. In theory the accounting is simple. In practice it is enormously complex.

jmaie, although I do not like VAT, the accounting treatment is quite simple. For any business, they charge VAT on sales and pay VAT on purchases.
It is the detail that creates a mindfield of complexity. The effective rate is superfluous.

The following is for the tax accountants and the insomniacs:-

If VAT is 10%, for a $1000 net sale the entries are CR Sales $1000, CR VAT payable $100, DR Accounts receivable $1100.

For a $500 purchase, then DR purchases $500, DR VAT reclaim $50, CR Accounts payable $550.

The business then pays $100 — $50 = $50 in VAT.

In theory the system is simple. With basic accounting software filling in a VAT form takes 15 minutes a month. The effective rate that is paid is therefore irrelevant.

The complexity comes with the exceptions. In the UK we have zero rate; VAT exempt; (One businesses can reclaim VAT on the purchases the other they cannot); non-reclaimable (e.g. business entertainment); and special rates (especially 5% for domestic gas and electricity).
Indeed, a supposedly simple tax has help manuals about as long as for income tax. So I would expect the accountancy firms in the USA are privately backing VAT introduction.

by Kevin VS Marshall (Manicbeancounter) on 03/09/2010  •  Permalink
Posted in Economics, Tax Accountancy
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Posted by Kevin VS Marshall (Manicbeancounter) on 03/09/2010

https://manicbeancounter.com/2010/09/03/volokh-conspiracy-on-vat-in-usa/

The Myths of Green Jobs – from the Classical Economists and a Beancounter

The Adam Smith blog posts (here) on the seven myths of green jobs (by the Policy Network). They are useful as a criticism, but more fundamentally the classical economists gave a rebuttal over a century ago.

From Adam Smith, you get increased prosperity from division of labour. Localism reduces the division of labour, thus reduces the wealth of nations

From David Ricardo this is augmented with the idea of comparative advantage. Trading nations gain advantage by specialisation in areas where they have a comparative advantage. Green economics ignores this. (Mises applies this concept to the labour markets. Low productivity, green, jobs will be created at  the expense of high productivity, conventional jobs.)

From Alfred Marshall there is concept of opportunity costs. In evaluating a measure you should not only look at the benefits of a choice, but the alternatives forgone. Green jobs will be creating, but at the expense of conventional, higher productivity jobs along with higher taxes.

From Karl Marx, you should look at the distribution of the national pie. Green jobs will only be created by forcibly reducing non-green industries. This enforced tendency towards monopoly will increase the profits accruing to the bourgeoisie, at the expense of the working classes. Given that the rate of return on Capital has fallen dramatically over the past two decades, is the Green Movement just a puppet of a degenerate Capitalist Class?

But as a (slightly manic) Beancounter, the economist’s arguments pale into insignificance beside a project management issue. In a major project, if you have no dynamic concept of how to control and continually reduce costs, or a clear idea of how to achieve objectives, along with ridiculing of any questioning of the attainability of the objectives –  then you have a recipe for massive cost overruns, and benefits failing to be achieved on a massive scale.  In the UK, the NHS computer system, the Scottish Parliament and the New Deal for jobs were all massive policy failures for these reasons. But they all pale into insignificance beside the global attempt to stop global warming by reducing CO2 emissions. Not just the scale, but also the lack of clarity as well.

(Roger Pielke Jnr’s recent talk is instructive on the perspective here)

by Kevin VS Marshall (Manicbeancounter) on 31/08/2010  •  Permalink
Posted in Beancounting Methodology, Climate Change, Costing, Economics
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Posted by Kevin VS Marshall (Manicbeancounter) on 31/08/2010

https://manicbeancounter.com/2010/08/31/the-myths-of-green-jobs-from-the-classical-economists-and-a-beancounter/

Denialists become Superfluous

OR Who Needs Enemies when you have Friends like These

Climate Psychology is a blog specialising in mirror-posting articles from one side of the climate change argument, but with more lurid titles. The direct inference being that the truth of the science is so blatantly apparent that any criticism must be by the deluded, the deranged, or be in the pay of some sinister forces. One such mirror posting is of Tamino’s “Hockey Stick Delusion” at RealClimate under the Title “Tamino debunks the junk science of Montford and McIntyre for the umpteenth time — the hockey stick is still sticking around”

To anyone who looks at both sides of the argument – who properly compares and contracts each point made, will see that Tamino fails to address the points made. As I said in an earlier posting

 Look at

1. Who gives the fullest answers?

2. Which side evades the points, or attempts sleight of hand?

3. How are contrary or neutral points treated. Clue – look at how Judith Curry (who is trying to remain neutral) is treated. Further, look at how contrary opinions are treated.

4. Finally who are the real deniers in all of this?

This leaning on psychology is nothing new. It was used by the KGB to punish dissenters without trial (see also here and here). The recent publication of a statistical analysis of the Hockey Stick by McShane and Warner again shows which side of the debate the delusional mostly reside. The greatest irony is the blog has the following quote:-

“Because the truth is that promoting science isn’t just about providing resources — it’s about protecting free and open inquiry. It’s about ensuring that facts and evidence are never twisted or obscured by politics or ideology.” Barack Obama

by Kevin VS Marshall (Manicbeancounter) on 16/08/2010  •  Permalink
Posted in Climate Change, Eco-Fanatics, Hockey Sticks, Science & Non-science
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Posted by Kevin VS Marshall (Manicbeancounter) on 16/08/2010

https://manicbeancounter.com/2010/08/16/denialists-become-superfluous/

Andy Revkin doesn’t know which way to Panic

Andy Revkin today blogs about a 30km chunk of the Petrmann Glacier in Greenland breaking free. Yikes! We say! Run for the hills the see levels will rise!

Just hold on a minute! How much will this chunk of ice affect the global see levels? Well assume that this iceberg is only 20% submerged (still resting on some bedrock) and has a volume of 30km3.  With the oceans covering around 140 million square miles of ocean (363 million km2) this will raise ocean levels by about 16mm or 2/3 inch.

But in the Youtube video accompanying this piece, the problem is much more serious than that. It seems that the Greenland icecap is melting in the summer faster than the snow is replenishing it. If it all melted then see levels would rise by 20 feet or 7m (2min 50s), so Florida disappears beneath the sea. But hold on a minute, computer models show that all this cold water entering the Atlantic may cause a sudden Atlantic cooling in years to come. (1min 50s). I might be a little uneducated, but if the Atlantic cools around Greenland, then this will affect the air temperature. That means there will be cooler summer temperatures nearby. So the net melting process will be diminished, stop or even be reversed.

The message from this for the residents of Florida is not to run for the hills, but buy in a sweater or two, and be prepared for bigger beaches – the tide will go out, and never return.  However, for those a nervous disposition, I suggest take a shot of Whisky (Springbank 21 y.o. or Lagavulin 16 y.o. are my favourites), sit down and relax. The ice-melt will happen over decades, so see levels will not rise much in the next hundred years. Even with a 5 degree warming, most of Greenland will still be below freezing throughout the year. But this will not happen, as natural correction mechanisms will diminish the impact.

by Kevin VS Marshall (Manicbeancounter) on 07/08/2010  •  Permalink
Posted in Climate Change
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Posted by Kevin VS Marshall (Manicbeancounter) on 07/08/2010

https://manicbeancounter.com/2010/08/07/andy-revkin-doesn%e2%80%99t-know-which-way-to-panic/

The Division of Labour & Climate Science Part 1

Bishop Hill displays to an excellent short video at TED by Matt Ridley, encapsulating the concepts of the division of labour and comparative advantage. One thing that Matt Ridley leaves out is the creative destructiveness of competition through supplanting the existing order. Specialisation leads to new products and processes. By implication, the established processes and products are overturned. (Joseph Schumpeter needs to be added to the list of Adam Smith and David Ricardo)

It is not just in the sphere of production that these concepts apply. It is also with empirical science, be it economics, medical research or climatology. With complex data and many facets to the subject, there is scope for division of labour into

–         Data collectors,

–         Data analysts & measurers,

–         Statisticians to validate the analysis,

–         Theoreticians to innovate or create new ideas.

–         Mathematicians, to provide tools for analysis.

–         Methodologists, to provide structures of meaning and assess the boundaries of science.

–         This is alongside the general sub-divisions of the subject, which may change over time.

–         Alongside greater specialists there is also scope for generalist assessors who get a total perspective of the corpus of knowledge, weighing up the status of competing ideas.

–         Academic competition (to gain status) leads to improvements, but can also lead to diversity in conclusions. It also tends to blunt the conclusions where data is ambiguous or fuzzy.

This makes things a bit messy. In economics there has ceased to be any dominant schools of thought or policy prescriptions. But in climatology we are lucky to have the IPCC, which divides the world into a small group of generalist experts (who agree their main conclusions) and the masses, who accept the wisdom handed down. A bit like the guild system, that kept England in the Dark Ages.

by Kevin VS Marshall (Manicbeancounter) on 07/08/2010  •  Permalink
Posted in Climate Change, Economics, Global Warming, Science - the Boundaries
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Posted by Kevin VS Marshall (Manicbeancounter) on 07/08/2010

https://manicbeancounter.com/2010/08/07/the-division-of-labour-climate-science-part-1/

Keeping ahead of China and India

John Redwood is comments that the Chinese and Indian economies will soon be larger than those of The EU or USA. The high growth rates, coupled with their huge populations means that this will happen quite soon. I believe that if the most advanced nations are not to stagnate they must accelerate the advance into higher value-added activities*.

 The government’s role in this should be, at minimum, to refrain from hampering the creativity and the flexibility that this requires. Further it should provide a structure to enhance the comparative advantages that the UK enjoys. For example, in no particular order:-

 1. In learning. Britain is probably second in the world (behind the USA) for attracting foreign students. For the size of population, we lead the world in world-class universities. The government should encourage/enable the universities to build upon this. Our comparative advantage is that we are the home of the English language, the World’s second language.

2. In Finance. Sorting out a proper structure for banking regulation that will both prevent the build-up of systemic risk, whilst at the same time encouraging/enabling future innovation. The apparent contradiction between these two aims is best resolved by emphasising general all-encompassing principles, rather than the detailed rules of the American’s or the detailed form-filling that was key feature of the last decade.

3. In Climate Change. The current aims to reduce CO2 emissions by 80% by 2050 are totally unrealistic. The attempts to do so will only serve to make Britain’s poorer and fail to meet our growing energy requirements. Roger Pielke Jnr explains why here.

* It is usual to say that higher productivity per person is required. From that tautologous statement the National Income = National Output, the way to increase income per person is to increase output person. As working time tends to decrease, more that 100% of this must come from higher output per unit of time. That is, greater productivity. However, the way to increase the income of a business is to increase the margins. The output of a university is not in the raw number of published papers, but the rare papers that create a seismic shift in out knowledge. In finance, it is not the quantity of deals done, but the large deals that create the most profit. For these reasons, I prefer the term more value-added rather than productivity as the driver of increased income per capita.

by Kevin VS Marshall (Manicbeancounter) on 07/08/2010  •  Permalink
Posted in Climate Change, Economics
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Posted by Kevin VS Marshall (Manicbeancounter) on 07/08/2010

https://manicbeancounter.com/2010/08/07/keeping-ahead-of-china-and-india/

Why Electric Cars Cannot Pay

In the Sunday Times of  1st August, Jeremy Clarkson does a review of BMW Mini E – an electric test car. (In Gear Pages 15 & 16).

He concludes that  electric cars are something that cannot be achieved – simply because they are too expensive, too short a range, and we have not got the electrical capacity.

There is another reason. We would decimate out public finances. Clarkson estimates that topping the Mini E up with standard rate electricity would cost £4, compared with about £12 for a standard Mini Cooper, or around £10 for a 60mpg diesel for 104 miles.

Now consider the exchequer impact. The £4 of electricity carries 20p of tax (VAT at 5%). The tax on petrol or diesel is about 60%, so £7.20 for petrol and £6.00 for diesel. The net loss for a typical 10,000 mile per year motorist is in the order of £650 – plus the road tax loss of around £100 or more.

If just a million car users switch to electric – 3% of the total – then the loss is around £750m per annum.

 Will motorists actually go for these savings? Not if they look at the total costs of ownership. The life of the batteries will be less than the 100,000+ miles that you expect from a modern engine. Current lithium ion might give you about 300 charges, or 30,000 miles in the Mini E. With the cost maybe £6,000 per pack (for simplicity), that would add 20p per mile to costs – equivalent to annual costs of £2,000 per year. The servicing may cost a bit less (no engine, but still all the other mechanical bits like brakes, tyres, etc.), but overall the cost of ownership.

Therefore, it will only be a small minority who will buy these cars – probably the richer end of the Prius set. Alternatively, the government will step in to subsidise the battery pack. So the middle class conspicuous consumers will be subsidised by the, poorer, users of internal combustion engines.

Finally, will this save the planet within Lord Stern’s criteria cost of £80 per tonne of carbon? Let us assume somebody swaps their standard small car with 130g/km of carbon with the zero-emission car. At 10,000 miles per year, that is a saving of 2 tonnes of carbon IF the electricity comes from zero-emission sources. The net cost to society is going to be at least 10 times that, so it fails the economic test as well.

by Kevin VS Marshall (Manicbeancounter) on 03/08/2010  •  Permalink
Posted in Climate Change, Economics
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Posted by Kevin VS Marshall (Manicbeancounter) on 03/08/2010

https://manicbeancounter.com/2010/08/03/why-electric-cars-cannot-pay/

To compare Environmentalists to Baptists is to insult Baptists

The THES, directed at a British audience, compares BP and environmentalists to bootleggers and Baptists – they have common cause.

However, some British Baptists may take deep offence at environmentalists being likened to them as (from the mainstream viewpoint of the Baptist Union of Great Britain) the following tends to be true.

1)      Each person should read the Bible (their data) and come to their own conclusions. They try not to overstate their case, but to come to conclusions after reflection and prayer.

2)      They are proud of their history as non-conformists and dissenters. As such they believe in religious liberty.

3)      The understanding of theology is not settled, and there are quite valid differences of opinion. There is room for doubt.

4)      Resolution of debate is not by a few experts handing down an opinion. It is from discussion and mutual understanding at the local level, to which all believers can contribute.

5)      You will not find these British Baptists looking for signs of the end times in every minor event, or proclaiming that those of other denominations or faiths are agents of the Devil.

6)      When studying their religion, contemporary theology tries to put meaning of the text in the context of what has gone before and after. Also, they look in the context of the time and place when the passage was written. Further, they would look at the original text in Hebrew or Greek. The antithesis would be to cherry-pick a few juicy quotes, mistranslate from the Hebrew and Greek, add in some unsupported assertions, add a good dash of sensationalism and proclaim loudly.

Found via Bishop Hill

A few Baptist blogs to demonstrate the point are Baptist Bookworm, Nah then, Andy Goodliff and Sean the Baptist.

by Kevin VS Marshall (Manicbeancounter) on 30/07/2010  •  Permalink
Posted in Christianity, Climate Change, Eco-Fanatics
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Posted by Kevin VS Marshall (Manicbeancounter) on 30/07/2010

https://manicbeancounter.com/2010/07/30/to-compare-environmentalists-to-baptists-is-to-insult-baptists/

The Hockey Stick and Climate Science

Posted Yesterday to the discussion at Climate Audit on the topic of “The Team Defends Paleo-Phrenology”

It may help …. to understand the nature of the science. It relies on statistical techniques to establish results. These, crucially, depend for their validity on the elimination of bias. If a researcher has faulty data, then the results are undermined. If the researcher is selective in the data, then the results are undermined. It outliers are not eliminated then the results are undermined. This all means that where there is extremely complex data, and problems of measurement, it is extremely difficult to establish conclusions that cannot be overturned. This is both true of economics and of paleoclimate.

I would contend that climate scientists, as a junior scientists, need to learn from other disciplines.
– From accountancy, about sense-checking the data (see link below)
– From research into new drugs, about the necessity for more technicians to collect and collate data, and to experiance dead-ends.
– From law, to distinguish between levels of evidence and distinguish baseless rhetoric from cogent arguement
– Most of all from statistical theory, where you will find you results will have no validity unless you take active steps to eliminate bias. Even then, with complex data, your results may still be later undermined, despite passing a battery of tests.

For all of these reasons, we should accept that the results of research are tentative. We should recognise the limits of our knowledge. In recognising the boundaries, and establishing procedures to quickly identify error, paleoclimate may be able to move forward.

 

The whole hockey stick issue, brought to a head with the Tamino posting, shows the problem of bias. To obtain a temperature reconstruction requires using data that usually gives a very weak signal indeed. Therefore any data needs to be carefully collected and every conceivable bias removed. It is only by eliminating bias that the statistical analysis can begin. In many cases there will be no significant results. Much painstaking work will achieve a dead end. And there is the rub. Careers are not made by failing to get a result. In this arena phenomenal fame and prestige can come to those who produce results that fortify the consensus. And there is plenty of recognition to those with supporting roles as well.

The original MBH98 may never have emerged in a more muted form if an expert reviewer had asked how such a novel result could be reconciled with the existing view that there was a medieval warm period. Hence my point about sense-checking in the previous blog posting. Similarly the comment that the 20th century warming was unprecedented should be answered with how do you know that? Read the Hockey Stick Illusion and you will find that the claim lacks scientific validity.  

If climate science it to mature it needs more painstaking data collection and analysis. As a science, it needs to find the current boundaries and limits of our current knowledge.

For those who believe that the Hockey Stick Team still have something worthwhile to say, should start with Steve McIntyres repost of “Tamino and the Magic Flute“. Compare that with Tamino’s posting “The Montford Delusion”.

Look at

1. Who gives the fullest answers?

2. Which side evades the points, or attempts sleight of hand?

3. How are contrary or neutral points treated. Clue – look at how Judith Curry (who is trying to remain neutral) is treated. Further, look at how contrary opinions are treated.

4. Finally who are the real deniers in all of this?

by Kevin VS Marshall (Manicbeancounter) on 27/07/2010  •  Permalink
Posted in Beancounting Methodology, Climate Change, Hockey Sticks, Science - the Boundaries
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Posted by Kevin VS Marshall (Manicbeancounter) on 27/07/2010

https://manicbeancounter.com/2010/07/27/the-hockey-stick-and-climate-science/

Tamino v. Montford – A Sense-Check

Clarification – This post is an attempt to say two things – but badly.

First, a simplistic verification of a global temperature reconstruction is to cross-check against local temperature reconstructions from around the world. These, on average, strongly contradict the hockey stick.

Second, Tamino’s claim is essentially McIntyre has just been taking pot-shots at sound science. Instead McIntyre has looked at all the steps in making a reconstruction, and found all wanting.

So what of a neutral lay-person trying to compare the Montford’s Hockey Stick Illusion and Tamino’s debunking? From my accountancy experience, it is normal to try to get a sense-check. What is the expected result? If the actual is different from the expected, then difference needs to be reconciled. The MBH98, MBH99, and the subsequent reconstructions in the book, completely overturned perceived thinking, so there needs to be a sense-check to make sure the results are valid. 

 The sense-check for the global temperature reconstructions can be from localized reconstructions from around the world, to see if the global reconstruction replicates the typical pattern. A website, CO2science.org, documents peer-reviewed articles estimating temperatures in the medieval warm period. For those that have a temperature estimate, those that agree with the hockey stick – that temperatures were lower than today – are out-numbered 5 to 1 by those that say temperatures were higher in the MWP. The raw median, median, and mode values are that temperatures were about 0.75oC warmer than today. The weaker, qualitative, studies have a similar picture. Those that suggest that temperatures in the MWP were similar to or lower than today are outnumbered more than 4 to 1 by those that suggest temperatures were higher. So when the more scientific, global, reconstructions come up with a novel, contrary, result, there needs to a full reconciliation to explain why. Without such an explanation, we just have McIntyre’s multi-layered* findings that the global reconstructions are critically flawed stands.

*McIntyre’s findings are multi-layered, including.

a)      Hockey Stick shapes were given undue weighting by the short-centering of the PC analysis. For instance, McIntyre calculated that Sheep Mountain had 390 times the weighting of Mayberry Slough (p113-114). Of the 112 original proxies in MBH9, just 13 had a hockey stick shape. Tamino does not counter this, only looking at the 22 longer hockey stick series, made up of individual series, such as Gaspe, along with regional combinations such as NOAMERPC1.

b)      Dodgy data and infilling. Looking across the columns of data, McIntyre noticed identical data in adjacent columns, as though infilling had taken place. (p78-81)

c)      Many of these series were based on old data. If Mann had used the most recent data available in 1998, could the final Hockey Stick have been less pronounced? (p83-84)

d)      Some of the most important original proxies were flawed.

  1.  
    1. Gaspé has better data, but was unpublished. (p174) It also had an alternative proxy with better data in Alaska. (More here)
    2. Sheep mountain had updated proxies that fails to show an HS (p 357-361)
    3. The Graybill bristlecone series had a number of flaws (e.g. p121-125 & p353-357)

e)      The failure of alternative reconstructions. (Chapter 10).

f)        There was considerable evidence of biases in the data selection in the proxies (along with small sample sizes); the selection of the proxies in the reconstruction; and the short-centring which gave rise to hockey sticks on random data 99% of the time. Given this, any measure of correlation statistic was rendered largely meaningless. McIntyre did not explore this. However, Montford provides evidence that the verification statistic used was highly irregular in the disciplines outside of climate science. (e.g. p156-164)  Latest – McIntyre shows the evidence that to suggest verification statistic was cherry-picked.

That is, the selection of data in the proxies, the proxy selection, the bias by short-centering, and the selection of verification statistic are all different levels in establishing a reconstruction, and all shown by McIntyre to have failed.

For a different take – which side pursues scientific understanding, see the follow-up https://manicbeancounter.wordpress.com/2010/07/27/the-hockey-stick-and-climate-science/

by Kevin VS Marshall (Manicbeancounter) on 25/07/2010  •  Permalink
Posted in Beancounting Methodology, Climate Change, Hockey Sticks, Science & Non-science
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Posted by Kevin VS Marshall (Manicbeancounter) on 25/07/2010

https://manicbeancounter.com/2010/07/25/tamino-v-montford-a-sense-check/

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