Odd Lots · Friday, August 14, 2026
A potentially record-breaking El Niño event is anticipated to have significant global economic repercussions, with estimates suggesting trillions of dollars in losses. This phenomenon, driven by oceanic and atmospheric interactions in the Pacific, is predicted to impact weather patterns worldwide, leading to a cascade of economic effects beyond immediate price level changes.
“So there's a bunch of different ways to forecast almino. All of them kind of stem from some of the original innovative work in the late seventies and early eighties by Mark Cain and Steve Zediac who built the first kind of physical model of el amino to explain it as a phenomenon and then actually make predictions of its occurrence, which is pretty remarkable. But all of these are kind of based on Some of them are statistical in nature, so kind of taking temperatures at time T and making a prediction, given kind of autocorrelation in that time series, what it should look like at time T plus one. There are others that are physical models that are actually stimulating the relationship between oceanic temperatures, wins, the overlying atmosphere and what it does to the kind of pressure and circulation that actually gets air moving in the first place. And so those ones are called process based models, and those are distinct from these statistical models. But all of them, regardless of how it's being modeled, are kind of converging on a record al nino at least since nineteen fifty, but arguably since much earlier, right the eighteen seventy seven eighteen seventy eight El Nino, which was associated with the Great famines, and Mike Davis has this amazing book from two thousand and two about that al Nino event.”
“What we actually found is that there was empirical evidence for a systematic depression of economic growth and over a five year period that amounts to about five point seven trillion dollars in global economic losses instead by the year two thousand and three, right five years after the ninety seven ninety eight event.”
“But what that tells me is that we are not optimally adapted to the climate we have, and so there isn't much evidence that we have that we are taking on board the feedback we're getting from the climate system about how things are going and pursuing strategies that really offset or mitigate losses in a coherent way.”