Jeremy Grantham: Contrarian, Up To a Point

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Jeremy Grantham is the wildly successful investor who writes entertaining quarterly letters to his fellow "die-hard contrarians." Grantham struck it rich investing against herd mentality and his missives usually sparkle with insights. I've been a fan for a long time. But there is one issue on which Grantham has jettisoned his contrarian impulses: global warming. He has joined the fashionable crowd of alarmists and doom-and-gloomers.

This is evident in his most recent letter in which he outlines "Everything You Need to Know About Global Warming in 5 Minutes." It contains the standard doomster litany about climate change. The costs of doing nothing include "probable political destabilization from droughts, famine, mass migrations, and even war."

Not much new here. But the letter does contain a "special word on the right-leaning think tanks" that's worth addressing. "As libertarians," he writes, "they abhor the need for government spending or even governmental leadership, which in their opinion is best left to private enterprise... But global warming is a classic tragedy of the commons ... and the problem desperately needs government leadership and regulation. Sensing this, these think tanks have allowed their drive for desirable policy to trump science. Not a good idea."

While Grantham might be correct about some harder-edged libertarian places, he paints with an overly broad brush. The libertarian think tank of which I am a part, for example, has published several papers calling for government policies to address climate change, including investing more in geo-engineering research. And while there's difference of opinion among the scholars on some specifics, one paper even recommends a tax on carbon to reduce greenhouse gas emissions.

What's most bizarre about Grantham's letter, however, is when he advances a "plausible 'conspiracy theory': that fossil energy companies, driven by the need to protect hundreds of billions of dollars of profits, encourage obfuscation of the inconvenient scientific results."

"Why are we arguing the issue?" Grantham asks. "Challenging vested interests as powerful as the oil and coal lobbies was never going to be easy. Scientists are not naturally aggressive defenders of arguments. In short, they are conservatives by training: never, ever risk overstating your ideas. The skeptics are far, far more determined and expert propagandists to boot. They are also well-funded... The obfuscators' simple and direct motivation - making money in the near term, which anyone can relate to - combined with their resources and, as it turns out, propaganda talents, have meant that we are arguing the science long after it has been nailed down."

Put aside for the moment that the budgets of alarmist green groups dwarf those of the skeptics. The idea that scientists never risk overstating their ideas is nonsense. Does he not remember the population bomb predictions? The Club of Rome report? The Alar scare? How many times has it been predicted we are running out of everything, only to find vastly more resources than predicted by scientists?

What's more, asserting that intellectual opponents in the climate fight are industry stooges is a timeworn tactic. But what's comical about Grantham's assertion is he conveniently omits his own role in supporting organizations to push his preferred views on climate. These include the Grantham Research Institute at the London School of Economics. According to the Institute's website, it was "established in May 2008 through a generous £12 million donation from the Grantham Foundation for the Protection of the Environment, and works closely with the Grantham Institute for Climate Change at Imperial College London, which was launched in February 2007."

The Grantham Research Institute is chaired by Sir Nicholas Stern, author of the infamous Stern Review on the Economics of Climate Change which demanded an "urgent global response" to climate change. The called-for response includes a ramped up "emissions trading" of greenhouse gases.

But the Stern report has taken a severe beating in the years since it was released. Even the alarmist-friendly BBC was forced to acknowledge in 2007 that "the report may have been loved by the politicians and headline writers but when climate scientists and environmental economists read the 670-page review, many said there were serious flaws. These critics are not climate change sceptics, but researchers with years of experience who believe that human-induced climate change is real and that we need to act now." Richard Tol, a leading environmental economist, said of the report: "If a student of mine were to hand in this report as a Masters thesis, perhaps if I were in a good mood I would give him a 'D' for diligence; but more likely I would give him an 'F' for fail. There is a whole range of very basic economics mistakes that somebody who claims to be a Professor of Economics simply should not make."

Interestingly, Stern is now attempting to profit on his policy recommendations as he recently became Vice Chairman of IDEAGlobal group, whose IDEACarbon program "is a leading professional services provider to the carbon finance community."

It doesn't appear that Grantham the investor is profiting from climate alarmism yet. "Global warming will be the most important investment issue for the foreseeable future," he writes. "But how to make money around this issue in the next few years is not yet clear to me." But Grantham the philanthropist is making big investments in climate science alarmism. And in that way he's guilty of what die-hard contrarians consider the biggest sin on the Street -- talking his own book.

Nick Schulz is DeWitt Wallace Fellow at the American Enterprise Institute and editor of He is co-author of From Poverty to Prosperity.

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