Half the planet’s species could be extinct by the end of the century. That’s the conclusion of the world’s leading biologists, ecologists and economists who are meeting in the Vatican this week to discuss threats to the biosphere. One topic not on the agenda: What can an 80-year-old model of stock market prices tell us about the risk of such a major extinction?
The Elliott wave model, developed by American market analyst Ralph Nelson Elliott in the 1930s, describes price fluctuation in financial markets. Elliott suspected it could also describe processes of growth and decay in nature, but he lacked the data to test the hypothesis. In 1999, social theorist Robert Prechter applied Elliott’s model to data series on the number of families of species on Earth over time. The conclusion was striking: The same model that describes the ups and downs in the stock market also describes the ups and downs in the diversity of life on Earth.
Now, in a special report this week from the Socionomics Institute, senior analyst Alan Hall presents new data that sheds light on what could be the largest extinction of all time. Hall studied variation in life over 550 million years, using a more granular data series than the one that was available to Prechter in 1999. Hall found that the five largest declines in life diversity, what scientists call the Five Great Extinctions, all corresponded to large-degree retracements identified in Elliott’s model. The model confirms what the scientists meeting at the Vatican this week believe: The Sixth Great Extinction, the largest decrease in life in the planet’s history, is likely already under way.
“Over the past 550 million years, we can trace life’s natural process of expansion and contraction,” Hall said. “That process ultimately led to the greatest amount of biological diversity that the Earth has ever seen. For the past 10,000 years, that peak has been rolling over into a decline.”
How big of a decline would that be? “A typical retracement of this degree could bring a decline of 40% over the next six million years,” Hall explained. So perhaps we don’t need to be prepared to wave goodbye to half of the world’s species just yet. “The model’s outlook is not that stark. These are large processes that unfold over massive time scales. What’s fascinating to me is that the same model that describes the second-by-second fluctuation in the stock market can also account for the millennium-by-millennium fluctuation in the amount of life on Earth.”
As for why a model built to describe equities can also describe extinctions, Hall and his colleagues have a simple explanation. “Elliott waves are ubiquitous in natural growth processes. The human species is part of nature. Whether we study the growth of stars, species or stock indexes, we find that they all follow a path of least resistance that is best described by the Elliott wave model.”
Hall’s report, “Elliott Waves Manifest in Stars, Minerals and Fossils,” is available from the Socionomics Institute.