24 September 2016

SoS: Sep 2015

These posts are still useful one year (or more) later. Please comment on the original if you have updates on progress or deterioration...

20 September 2016

Demand for elephants can save elephants

Back in 2008, there was a big kuffaw over a paper that said "Lake Mead has a 50 percent chance of going [technically] dry by 2020." (Lake Mead Reservior is close to Las Vegas and an important reservoir in the western US distribution system. It exists due to Hoover Dam.)

I contacted the authors of that paper -- both scientists at Scripps in San Diego -- and asked them how they calculated the progression from current to predicted supply and demand for water from Lake Mead. On the supply side, they considered how climate change might change precipitation, runoff and evaporation. Good science that. On the demand side, they multiplied current demand by future population (perhaps with some trend adjustments) to find total consumption. Bad economics that.

The reason why good turns to bad is that demand (and supply, to an extent) will adjust to changes in policies, behaviors and prices.

I just wrote this for an article that's soon to be published:
In conditions of scarcity, economists think of reducing demand by shifting in or sliding up the demand curve. The demand curve of an individual or group shows how the value of each unit of water falls as more water is consumed. These values show priorities, i.e., for drinking over irrigation. Taking these values as given, actual consumption --- or quantity demanded --- only occurs for units whose values are greater than the price of water. The demand curve can shift in with a change in tastes or technology that assigns lower values to water. One might, for example, decide not to have a lawn or use drip irrigation to produce the same greenery with less water. An increase in price, in contrast, reduces demand by choking off lower-valued uses, e.g., the tenth minute in the shower.
Now what you should take from this is that there are lots of ways of reducing demand, such that shortage never results in the face of lower supplies. In other words...

Demand is not a fixed constant.

The good news is that the authors of the Mead study did somewhat integrate that thought fact* into their revised study.

So, why this post, 6 years later? Because this problem --- of scientists (and just normal folks) taking demand as a fixed constraint --- constantly produces misleading conclusions.

In this case, it's an article entitled "Can We Sustainably Harvest Ivory?" [open access]. In the paper, "a harvest model is developed to estimate sustainable ivory yield from elephants" and the authors conclude that "even in the best-case scenario, the sustainable yield is well below the current demand... Our study shows that lifting the ivory ban will not address the current poaching challenge. We should instead focus on reducing consumer demand."

So they are sticking with the ban on ivory trading (and thus the continuation of the black market in poached ivory) while hoping to shift demand in by telling people ivory is unsustainable, etc., and that they should not buy it.

This is bad advice because it misses the obvious problem of people who still like ivory. I'm pretty sure that their "campaign of hope and virtue" (my label) will fail --- just as the War on Drugs has failed due to users' continued insistence on buying illegal (but very enjoyable) substances.

I emailed the author of the article and asked why they didn't look into markets and prices as a means of converting a common pool resource (elephants that roam without any owner who could make money from them) to a private good that would be sold for as a trophy but that would also provide a living to its owners as well as a huge incentive to get as many elephants as possible.**

He replied that property rights were not clear everywhere and that quantity demanded was far too high to be brought down by prices.

On the former, I replied that it's not hard (indeed it's done all the time) to isolate and protect -- thereby privatize -- elephants. On the latter, I gave this example: "Say you offer a van Gogh painting for $20. You'd have 10,000 people lined up to buy it. The reason it's auctioned is to find the ONE person who will pay $23 million for it. The same dynamic explains how to choke demand by raising prices."

He wasn't interested in changing his mind, so that was that.

But it wasn't, because it's likely that anti-hunting, anti-market people will use this "peer review study"*** in their fight to keep ivory trade illegal. Yes, they will win a moral victory, but they will lose the war: the black market and its customers don't care about your morals. They will pay for tusks from elephants slaughtered in dead of night, by people trying to make a living.

Bottom Line The only thing worse than killing elephants is leaving elephants vulnerable to murder. We can save them just as we save dogs and cats -- by giving them owners who value them, sometimes as dead trophies but more often as a thriving, growing herd.

* It's ain't called the Law of Demand for nothing!

** Read this paper about a successful program that "farmed" wild animals for community income in Africa. If you're into pandas, remember that they are no longer "endangered" in China because the Chinese government [irony!] spent heavily on breeding pairs that can be rented for $1 million/year.

*** It would never have passed peer review by any economist.

Addendum: Here are a bunch of comments (and my replies) to this post on Reddit.

Addendum: These authors are MUCH better at saying what I am

13 September 2016

Oriental Despotism -- the review

I read through this massive (550 pages) book in a hurry because much of its discussion is overly-erudite and many of its examples redundant.

BUT, I recommend that you read the book -- or at least keep its lessons in mind -- due to its relevance to discussions over water management, projects and politics.

Karl August Wittfogel's book was published in 1957, and it reflects upon -- and warns against -- the weaknesses of the Marxist-Leninist-Stalinist brand of communism that was practiced at the time.

The key thesis of the book is that "oriental despots" use access to land and water as a means of controlling peasants who have no rights except those given to them. This system -- which can be contrasted with a liberal system in which private rights reside with individuals yeoman farmers -- gives the despot immense powers that can be used to benefit or undermine progress and prosperity.

Wittfogel wrote this book as a lapsed Marxist who objected to Lenin's reinterpretation of Marx. This dispute comes from Lenin's attempt to leapfrog capitalism on the way to socialist paradise -- a move that Marx had never suggested, as he wanted capitalism (including private ownership of land and water) to flourish before it withered away in a workers' revolt against capital that put the means of production in communal hands and resulted in a classless society. Lenin was in a hurry to turn Russian peasants into post-industrial communists, so he decided to skip the whole property rights step (as well as the development of a market economy) and put the land and water under the direct control of Soviet bureaucrats, who would "plan accordingly" for the benefit of the community.

Wittfogel's claim (we'll get to Oriental in a moment) was that these "hydraulic bureaucrats" were essentially a ruling class that controlled land and water for their own benefit, just as oriental despots did.

Now, how did oriental despots behave?
  1. Get big or go home. They controlled whole water basins, to direct water to their designs.
  2. It's all about you. The State, as the possession of the despot, was stronger than "civil society," which made it easy to do what he wanted and die in peace (Stalin died in 1953).
  3. Fuck them. Total power is not benevolent. Thus, local losses are irrelevant to the despot's gains from managing HIS land and water rights.
I'm sure you know how badly the bureaucrats of the USSR treated their fellow citizens and screwed up the future, but that dead experiment has sprung back to life in the guise of Putin's Petro-despotism, which may or may not outlast low oil prices (he doesn't even have enough talent to turn land and water into money). But we can also see these aspects in other dictators, despots and fascist-wanna-bes. They want to control natural resources to serve their own plans -- not the goals of citizens, let alone alternative models of political and economic development.

Examples? How about China's S-N canals? Maybe Malaysia's borneo boondoggle or Aswan High Dam. In the US, you have the classic Cadillac Desert case of the US Bureau of Reclamation competing with the Army Corps of Engineers to see who could throw more money at projects designed to dominate regions by destroying ecosystems to construct irrigation monstrosities. I fear to imagine what would happen if Trump-the-developer turned into Trump-the-land-despot.

Bottom Line: Concentration of power is dangerous because, first, the owner of that power may serve themselves over others. Second, because they may choose the wrong way to even serve themselves. Third (and differently) because land and water management should be left in the hands of those subject to management decisions. Oriental despots were good at controlling citizens but miserable at improving their lot. The US system was excellent at giving citizens freedom but has weakened in the past 100 years as power over land and water has flowed to the centre. I give this book FOUR stars for providing these insights (in a form that's slightly long for today's readers).

Addendum: The Economist has a book review discussing Oriental Despotism this week.

12 September 2016

Monday funnies

This is a pretty accurate depiction of how people who have not really looked that deeply into themselves act after they return from Burning Man



(If you're following the "commodification meltdown" controversy, then read my take here and here.)