31 October 2014

Friday party!

Caught these cool cats on Rue Notre Dame in Bordeaux:

Bleg: The history of non-revenue water as a concept?

TL emails:
I am looking for someone who can help me track the history and evolution of NRW as a concept/methodology. Any ideas who I could talk to?

I have read a lot of general and context specific reports and done an embedded interview study with a water utility, but I have never found an expert who could articulate the concepts' institutional foundations. Any ideas?

Bleg: Coefficients of industrial water consumption?

DC asks:
I´m looking for industrial and commercial water use in terms of consumption. The most useful database would be consumption by industry and commercial by sector (as many as possible) expressed as as a coefficient (for example, gallons per employee). Any kind of additional data (locations, periods, country, etc) would be very useful too.
I'd add/suggest that the data be based on units of production (e.g., tons of water/ton steel) or value (tons of water/$ revenue)

30 October 2014

Economists are not the only ones...

Speed blogging

  1. Mangroves store carbon, protect juvenile fish and diffuse flood damages. Too bad corrupt governments ignore those public benefits for cronies' shrimp farms. Related: How to use nature (swamps, etc.) to absorb higher water flows due to climate change

  2. Americans in the West use far more water... because lawns. Remember that when you drink dust

  3. Another parallel between California and India: Rich farmers can drill deeper wells than poor households [Indian version from 2009]

  4. Market failure: water prices in Chile do not reflect [enough] scarcity because the value of water (its market price) is too low relative to investment and operation costs. The implication is that water will be overused (and depleted) too quickly, e.g., "in CopiapĆ³ (in the desert of Atacama) people irrigate grass lawns and wash sidewalks to reduce dust" :(

  5. Tufts University is offering a 4-week MOOC -- "The Biology of Water and Health" -- starting 4 Nov (free or paid)

  6. This paper comparing efficiency in public & private French water utilities finds (contra their "conclusion") that they are similar, once you consider taxes, debt, and tariff schedules. Regulation matters!

H/T to MV

29 October 2014

Bleg: How can I get started in environmental sustainability?

J, a former student, asks:
I'm living in Toronto and I'd like to work as a consultant on environmental sustainability. I majored in economics and minored in Geography, but I seem to lack the knowledge that people get from environmental engineering. Can you give me some advice on skills to learn (more education? professional certificate)?

The Armchair Economist -- the review

I assigned Steven Landsburg's book to students in my Principles of Economics class (their first economics class) because I wanted them to read a "popsci" book that would help them see "the economics of everyday life" (the book's subtitle). I'm glad I did, but I had to make a few corrections of Landsburg's perspectives in class. I don't think that's a problem -- economics is not always a "science" -- but it's worth remembering that some of his assumptions and/or logic may not survive scrutiny. That's probably no great shock to Landsburg, who's presenting an "armchair view" of numerous complex issues.

More important for some of you: I decided against Freakonomics (too pop), The Economic Naturalist (too many just so stories) and Economics in One Lesson (too dated) when choosing this book, although all these books have something to recommend them.

So here are a few comments on Armchair Economist*
  1. Overall, I found the book to be breezy, but sometimes too breezy. I recommend readers pursue their favorite topics on blogs, which are now far more dynamic, detailed and accessible

  2. Landsburg gives lots of great, common sense explanations for everyday phenomena, e.g., the role of asymmetric information with insurance, why weird people are the best ones to trade with, who really earns monopoly rents (the owner of scarcity), that BOTH sides -- exporters and importers -- benefit from trade, and so on

  3. He also spends some well-deserved pages explaining how economists are far more interested in happiness than wealth (something that regular folks should also consider more often), how a good policy may not be a great policy compared to alternatives (opportunity cost), and the most important policy question: you enact a policy that changes rules "...and then what happens?" I try very hard to impress these ideas on my students as they are perhaps the most useful economics can give

  4. Landsburg covers Rawlsian justice, the opportunity cost of the draft ("free" labor isn't free), and the useful tool of redistributing wealth among citizens rather than (inefficiently) redistributing opportunities. These discussions -- and others -- should help readers see the "fair" side of a discipline which is often (ignorantly) characterized as a "neoliberal justification for exploitation"

  5. I enjoyed his (macroeconomic) discussions of taxes, spending and debt as well as his simple but powerful defense of free trade (and attack on special interests)

  6. Landsburg sometimes misses critical elements, e.g., the importance of work per se over the wages that work deliver, the positive externalities of literacy (educated citizens), and/or the "irreversability problem" that makes it much harder to return a parking lot to rain forest. His last chapter -- "Why I am not a [ideological] environmentalist" -- is useful for its analogy to religious zealotry, but a failure when we compare the impact of religious people (reading old fiction) to the impact of "earth killers." Overall, Landsburg should spend a little more time on negative externalties that cannot be addressed by simple Coasian (common law) methods, due to their large scale (transaction costs)

  7. Most readers will be interested in some of these issues. Landsburg's contribution is to present a different -- often original -- perspective on their incentives and impacts, which will keep curious readers engaged and biased readers enraged.
Bottom Line: I give this book FOUR STARS for its engaging and provocative discussion of many important areas of our everyday life.

* I realize that my reviews tend to be "note heavy" and structure light, but this is easier for me. Look up the table of contents (or wikipedia for well-known books) if you want more on the structure.

28 October 2014

I'm teaching common pool resource challenges!

The class will take more than a few minutes, but it's good to notice when we succeed:
Wikipedia, along with open-source software and other free collaborative projects, are examples of “commons-based peer produc­tions... in which the central characteristics are groups of in­dividuals that successfully collaborate on large-scale projects following a diverse cluster of motivational drives and social signals, rather than either market prices or managerial commands.” These motivations include the psychological reward of interacting with others and the personal gratification of doing a useful task.

Anything but water

These threats are unlikely to kill you
  1. The "clean coal era begins" with a carbon capture and sequestration project in Canada. I see this as a greenwashing excuse to keep buring coal, and I doubt that it will (1) ever capture enough to retard the onset of climate change or (2) work "forever" as required

  2. Americans worry about Ebola and ISIS due to their failure to grasp basic statistics? The real threats are guns (3), traffic accidents (2), and heart disease (1). Related: The UK Independence Party takes advantage (and promotes) innumeracy so that frightened citizens vote against a flood of muslims stealing welfare (lies x3)

  3. Judges for sale in the US? Why not? Corporations are people and money is free speech (reminds me of this Grisham book, based on fact)

  4. Crony capitalists in Tunisia got monopoly profits and paid lower taxes. That corruption suggests a solution for Tunisia's future as well as a way of defeating terrorists:
    The Arab world’s informal economy includes vast numbers of potential Islamic State recruits—and where they go, so goes the region. It is widely known that the Arab Spring was sparked by the self-immolation in 2011 of Mohamed Bouazizi, a 26-year-old Tunisian street merchant. But few have asked why Bouazizi felt driven to kill himself—or why, within 60 days, at least 63 more men and women in Tunisia, Algeria, Morocco, Yemen, Saudi Arabia and Egypt also set themselves on fire, sending millions into the streets, toppling four regimes and leading us to today’s turmoil in the Arab world.
    These suicides, we found, weren’t pleas for political or religious rights or for higher wage subsidies, as some have argued. Bouazizi and the others who burned themselves were extralegal entrepreneurs: builders, contractors, caterers, small vendors and the like. In their dying statements, none referred to religion or politics. Most of those who survived their burns and agreed to be interviewed spoke to us of “economic exclusion.” Their great objective was “ras el mel” (Arabic for “capital”), and their despair and indignation sprang from the arbitrary expropriation of what little capital they had. Bouazizi’s plight as a small entrepreneur could stand in for the frustrations that millions of Arabs still face.
  5. How do you build a successful startup? "(1) Learn a lot about things that matter and then (2) work on problems that interest you (3) with people you like and respect." (0) Read this insightful essay
H/T to RM

27 October 2014

Monday funnies!

Afroman is back, telling you why you should VOTE for people's right to get high

Reviewing Libecap's review of Living with Water Scarcity

I was pleased to see a review [page 7-9 of this pdf] of Living with Water Scarcity in Regulation, a monthly quarterly review published by CATO, a free-market think tank based in Washington DC, but then I was disappointed.

The author of the review, Gary Libecap, is a professor at UC Santa Barbara with decades of experience in water economics. We can see the depth of his experience in the review, of which two-thirds is devoted to his work and one-third to my book. This is a pity not due to the lack of space for my ideas but for Libecap's extended "rebuttal" of ideas I do not hold and his omission of ideas I propose to put his life's work into use.

Let's start by acknowledging Libecap's contribution to the role of property rights in enabling markets for water for economic use, as well as the importance of minimizing interference with markets by overweening regulators or citizens invoking a "duty to public trust" as an excuse to nullify or restrain the use of rights. These factors are indeed important when discussing water markets. Libecap, sadly, appeared to miss my extensions of his ideas. On Page 66, for example, he says:
Auctioning would confiscate existing prior appropriation rights, not strengthen them... water would be moved from existing owners into the political process... the discussion does not make clear whether such auctions would be recurring, or... whether water could be traded subsequently.
In my book, however, I address all of these concerns, i.e.,
I designed a forced market that was not an oxymoron. An all-in-auction (AiA) puts all rights (or allocations) into a pool and allows eligible parties to bid for that water in a single-price auction. The key innovation is that the proceeds of the AiA are distributed among those whose rights are auctioned. The AiA moves water to those who value it most without violating the rights of owners because owners can "bid for their own water" if they want to keep it... AiAs should be matched to local conditions [i.e., in frequency or as complements to existing markets]. Rights owners decide who can bid.... Note that this market --- like any other --- can reallocate permanent rights or temporary flows. [p 54]
Libecap's critique, in other words, does not apply to the auction I describe in the book. But what about his concern that the "public trust" will impede market efficiencies? On page 65, he says:
Zetland allows the public nature of water to confound potential private solutions... The community is never defined, and why politics fails in one case but not the other is not explained... [and] how will scientists weight the value of competing uses or opportunity costs.
It's unfortunate that Libecap failed to notice that I had addressed exactly these problems, i.e.,
Interacting economics and politics complicate water management. I have tried to simplify matters by grouping chapters into two parts. Part I covers economic topics in which one person's action or water use does not necessarily affect others. A bottled water company need not affect agricultural irrigation; long showers do not prevent green lawns. Part II covers political topics in which people's decisions or uses interact. A dam changes flood risks, environmental flows, and the cost of irrigation. The separation of personal topics in Part I from social topics in Part II clarifies whether we should rely primarily on economic or political tools...

The book's ordering of parts and chapters does not imply that water should be managed in that order. Indeed, it is often necessary to resolve political issues before implementing economic policies. It is not possible, for example, to set the right price for drinking water without an engaged and knowledgeable regulator. Allocations to farmers should, for similar reasons, only occur after water is set aside for the environment. [pp 4-5]

From this, we address his worry about "political interference" in markets for water as a private good while allowing for a political discuss of social allocations of water as a social good. What about over-conservative scientists? On page 90, I say
Greater environmental flows will upset some people and please others. Some people will change their habits or business models. Others will gain (real or imagined) benefits from increased flows. Extraction limits can be administered with prices, regulations, or other techniques, but their level needs to be agreed upon though a political mechanism that reflects social priorities.

"Acceptable" levels should not be set by those with an interest in diverting water. They should be set by scientists who understand the connections between flows and healthy ecosystems. Scientists may be vulnerable to the bias of reserving too much water for nature. That means we should make changes if their recommendations lead to outcomes that over- or undershoot the community's ecosystem targets. These adjustments will add or subtract water available for private uses, but a two-step allocation (reserve environmental flows before allocating remaining waters among human uses) is much easier to manage than balancing between "co-equal goals."
I don't know if Libecap read that passage or if he distrusts my mechanism, but his response -- "Private water rights are routinely traded for augmenting stream flows by Oregon's Freshwater Trust" [an example I also mention] -- does not even come close to supporting his conclusion that such an example proves that "state environmental mandates are not necessary to protect aquatic and riparian habitats" [p 66]. I wish that was true, but ill health of rivers in the US (and around the world) shows that Libecap's solution is far from being implemented on any reasonable scale. "Flow augmentation" will not restore the Colorado River Delta, let alone protect ecosystems under assault in Europe, the Middle East, South Asia, China, Brazil, and so on.

Finally, we need to consider the audience for my book: people who want to know more about how to manage scarce water to balance among different economic and social demands. Libecap's review will cover familiar ground for CATO's government failure choir. I know those tunes, but I have also spent a lot of time with people opposing those arguments -- people who hold sensible views in terms of logic and passion. I wrote my book for both groups in the hope of creating consensus on reasonable steps. Libecap missed an opportunity to evaluate this middle ground when he argued against a straw man I've never met.

Bottom Line: I hope Regulation's readers put Libecap's perspective aside until they form their own opinions. It will only take them a little time with the book (free download!) to read what I really said on liberating water management from dysfunctional perspectives and outdated institutions.

25 October 2014

Flashback: 20-26 Oct 2013

A year later and still worth reading...

24 October 2014

Friday party!

Some Australians having fun

Speed blogging

These "lily pads" clean water (cost needs to fall)
  1. News from Chile: Water market participants are more efficient with water than non-market participants and new challenges facing water suppliers who now provide drinking water and wastewater services to 99 percent of the population

  2. California bureaucrats are "trying really hard" (but not doing so well) when it comes to following their own conservation mandates

  3. These Silicon Valley guys are drinking recycled water (toilet-treatment-tap)

  4. Biased source, but Westlands has indeed swung a nice deal (free water, lots of money) out of the Feds. Rights or corruption?

  5. Monterey residents are protesting "unfair" water rates. CalAm's rates guy emailed me an explanation:
    Residents are billed on an allotment based structure where the more used the higher the terminal rates. Non-residential are billed on compliance or non-compliance with best management practices and the amount of outdoor watering. Residents are protesting that non-residential are billed on flat rates per division (based on compliance and outdoor watering), so they have a "sweet" deal. We have strongly defended the current structure since the two lowest residential tiers are less than the lowest non-residential rate and over 80% of residential consumption being in the lowest two tiers.
    So, let's not defend the "water hogs," eh?
H/T to ML, RM and SS