25 Apr 2018

Links of interest

  1. Here's a good podcast (Part I Part II) with me, talking about this blog, climate change, drinking water systems, gender in academia, etc.
  2. A German coder starts his own university where 2/3rds of students pay nothing up front but part of their later salary. Even better, they focus on solving real problems.
  3. To build a better Facebook, you need a new paradigm (maybe personal data control?)
  4. Abolishing digital slavery with personal data trading
  5. Want to think about how social media manipulates you (and you can manipulate those platforms)? Then check out "If this, then I"
  6. Climate change is creating new child brides (hungry families forced to marry off their girls)
  7. A few ways in which cryptocurrencies will force laws to change
  8. A different perspective on China's recent political "reforms" and how Saudi's new ruler thinks.
  9. Can Phoenix -- "the world's least sustainable city" -- survive without water?
  10. Another data/water broker is looking for business in TX and 20 other states
  11. The World Water Atlas shows where water is scarce, excessive and dirty. Example:
H/Ts to CD, LJ and WFV

24 Apr 2018

Review: The Cartoon Guide to Macroeconomics

I read this book after reading and enjoying the Microeconomics volume. I found this one to be just as entertaining and informative.

One major surprise to me is how this macro book discusses development, trade, poverty and the environment. I think of these as micro topics, but they seem do just fine here.

The book is organized into three parts: A single economy (unemployment, money, inflation, gdp and government), international trade (trade & technology, class view of trade, complications, foreign aid and foreign currencies) and global macro (business cycles, poverty, environment and aging). I found the organization to be intuitive and the discussions well-balanced and thorough.

I think these books are really great for combining words with illustrations (and humor), as they reinforce each other to help get the point across. Here's an example:

Bottom line: If you're interested in economics but have fears (or bad memories) of too much math and obscure language, then read these books! I give this one FIVE STARS for making macro great again!

For all my reviews, go here.

23 Apr 2018

Monday funnies

This is one of several interesting photos by a Japanese photographer:

20 Apr 2018

The myopia of techno-optimists

10 year ago, I blogged on Julian Simon's "end of the world" bet with Paul Ehrlich. Ehrlich (author of The Population Bomb) though that humans were destroying the environment and thus their future. Simons (author of The Ultimate Resource) thought that humans would innovate their way out of any problems (the "resource" is humans).

In this bet, Ehrlich made the fatal mistake of betting that a market commodity (metals) would rise in price because resources were being depleted too rapidly. Simons thought the price would fall as market incentivized innovation. Simons won the bet, but I argued that Ehrlich was right because he was thinking of damage to the environment, a "good" that cannot be priced, traded or managed well in markets.

Recently, some stories have brought these topics up again, so it's time to put them in their proper (right or wrong) context.

First, read this optimistic post from Will Boisvert, who argues that economic growth and technological innovation mean that climate change will only be "a middling-scale" problem. He's over-optimistic (and wrong) because he entirely fails to discuss the massive cost of replacing the flow of "ecosystem benefits" that we now get for free. These estimated benefits total $125 trillion per year, significantly higher than global gdp of $75 trillion per year. Boisvert works for the Breakthrough Institute, a think tank devoted to "ecomodernism," i.e., that we will innovate our way out of trouble. The BI opposes ecologists who want to reduce our footprint, argues with bias and sophistry, and supports subsidies for technology even when it would be cheaper to reduce destructive incentives.

Second, read this overview of the ongoing destruction of ecosystems (and the biodiversity they contain) and how that is bad for humans. If you want to hear it from the horse's mouth directly, then read this update on Ehrlich's thinking.

Third, consider why Ehrlich (and people like me) are so pessimistic about our future while Boisvert and other Simons-types are so optimistic. I think the optimists are too isolated in their theory, thinktanks and urban lifestyles to see the changes underway, let alone understand them. I also think that they are professionally "blind" (economists who only study markets) or deaf (journalists like Boisvert) to see the whole picture, which is helpfully illustrated by this photo I took of a recent TEDx:
Nature isn't going to hire you again if you trashed the place last time 'round.
Bottom line: Technology will not save the environment if there's no governance model to protect it from over-exploitation. Don't sit back and wait for Uber-solar to save nature. Uber, like all profit-seeking companies, doesn't give a shit.

19 Apr 2018

How much "surplus" do people get from consuming water?

A few months ago, DJ emailed:
My company has been asked to help a local water utility with a risk assessment in case of an earthquake. We are proposing an economic approach -- attempting to quantify actual risks, as opposed to the more common "high, medium, low" or risk tolerance thresholds.

A major difficulty seems to be estimating the consumer surplus from water supply, particularly after a disaster. I've looked at estimates of [price] elasticity, but even if you believe them, they don't tell you much about the economic cost of a total loss of supply.

I wonder if you have any suggestions about where to look.
I replied:
The surplus from access to drinkable water would be HUGE, varying from the price of bottled water (saved by having piped water) to the value of not getting an intestinal disease/losing your unborn child etc.

Note that water consumption after a disaster occurs at the top of the demand curve, where values (thus surplus) are highest and elasticity is probably VERY low. Elasticities are not usually calculated with respect to such consumption decisions. In the case of indoor water use (drinking plus much more) they are as low as -0.10. In most places where drinking water is used extravagantly (e.g., watering lawns), elasticity is high (-0.8-1.2), meaning that surplus is low.
To which DJ replied:
For the time being our approach is to estimate a demand curve using current price and estimated elasticity of demand. We extrapolate using a constant slope to a maximum value [for the first unit, thus the "anchor point" for tapwater demand (i.e., $500/m3 @ $0.50/liter), which does NOT represent the value of drinking water as much as the point at which demand for tap water shifts to the demand for tap water...], based on the price of bottled water or something like that.
Although I see the merit in this approach, it's important to think about it in terms of comparing cost to price to value.

Bottom line: The value of water depends on how much you already have.

18 Apr 2018

Links of interest

  1. Some interesting thoughts on President Xi, China's President (for Life?)
  2. Steven Pinker makes the case for human progress, but that's not inevitable
  3. Milton Keynes, a successful garden city?
  4. How much are you paying for your neighbors' solar panels?
  5. A paper comparing Dutch to American flood programs. The Americans are lagging. 
  6. "It’s sometimes said that data is the ‘oil’ of the digital economy, the resource that fuels everything else. A more helpful analogy is between oil and privacy, a concealed natural resource that is progressively plundered for private profit, with increasingly harmful consequences for society at large. If this analogy is correct, privacy and data protection laws won’t be enough to fight the tech giants with. Destroying privacy in ever more adventurous ways is what Facebook does."
  7. A very complete, and simple, guide to eating
  8. How Copenhagen avoided being cut to pieces by highways
  9. Trouble for Australia's Murray-Darling Basin Authority accused of "ignoring" farmers stealing water and wasting money as it fails to protect the river's environmental flows.
  10. Bangladesh vanquished diarrhea by helping poorer people (the rich then imitated them, to maintain status) and lacking the Hindu superstition that only untouchables "manage" waste. (That said, here's an article on the untouchables struggling with bursting sewers in Dhaka, so there's clearly a lot of work needed!)
  11. New book! Groundwater around the World -- free download
H/T to CP

17 Apr 2018

A teacher comments on my book

Andrew sent these comments awhile back, but they may be interesting for you:
I thought The End of Abundance was a really great tool for my course. In particular, I was teaching an online course on water economics for students in an online Master of Water Resource Management program. My course was the sole economics course in their curriculum, and there was considerable heterogeneity in my students’ math and economics backgrounds. In short, the only thing I could rely on was that my students could handle Algebra-I level math. Consequently, the course focused much more heavily at building economic intuition and using economic concepts to form written arguments.

I found the chapters I assigned from Part I to be better-suited for my course than the chapters I assigned from Part II. Broadly speaking, I found Part I chapters to be more closely and clearly tied to canonical economic concepts than the Part II chapters. In Part II chapters, it was more difficult to disentangle “textbook concepts” from more philosophical points or your own policy suggestions. In particular, I used chapters 7, 8, and 9 to teach about asymmetric information and moral hazard, benefit-cost analysis, and environmental externalities. That worked all right, but I think my students had a hard time understanding these concepts outside of the context of your chapters.

The above comments are from my perspective as an instructor. In fairness, I should also share my impression of my students’ thoughts. I think many of my students liked the Part II chapters quite a lot. Many of my students work in water management or environmental assessment capacities, and found your direct treatment of water management in California to be remarkably relevant to their own experience.
Besides being pleased with this nice use of my book, I have two responses:
  1. Part II of TEoA (and its successor Living with Water Scarcity, which presents the same material in a less-academic, free-to-download format) is about the political and social dimensions of water scarcity that must be considered and included in water management discussions. That duality (explained in this blog post) is why I call myself a "political economist" rather than just "economist."
  2. My policy suggestions often acknowledge complex institutional realities that economic models ignore. One of my favorite ideas, for example, is to turn a bunch of "non-point-source" polluting farmers into a single "point" responsible for all the runoff in their area, as a means of avoiding the traditional economic response (i.e., giving up). Such a suggestion (see Chapter 4 of Living) has almost nothing to do with economics, pricing or externalities, except in the way it avoids individual free-riding by assigning responsibility to a group. Such applications of the Coase Theorem are more familiar to political-economists working in the tradition of the Ostrom School than economists.
Bottom Line: A book presents ideas, but those ideas are only useful if you can integrate and apply them to your situation.