28 November 2014

Brazil's one-sided deforestation policies

Rob H writes:*

The deforestation of the Amazon is a great threat to biodiversity, local peoples' livelihoods and the planet's carbon balance. While from 2005 to 2013 the efforts to reduce the rate of deforestation have been successful (pdf), the problem is still far from being solved. The recent slowing of deforestation is largely due to increased efforts from the Brazilian government to monitor and regulate the production of beef and land use. State and municipal forest conservation policies have been implemented since 2004. Satellite monitoring has been improved. Local authorities revoke farming licenses when illegal deforestation is detected. Furthermore the beef industry has been forced to reduce waste in production and transport.

These policies have greatly reduced the rate of deforestation, but they do not mean the problem is solved. Overlapping regional borders, unclear regulations and lots of paperwork have raised compliance costs to ranchers who may move to less regulated lands or crops. Brazil is encouraging investment in agriculture by offering $41 billion of cheap production credits to farmers (palm oil planting is growing rapidly), thereby exposing the weakness of a system aimed mainly at beef production.

Bottom Line: Brazil should regulate other deforestation drivers if it is going to avoid a costly game of cat and mouse in which some farmers bear high costs while land degradation continues.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

Nigeria’s Oil Reforms

Bart H writes:*

It is ironic that Nigeria – the tenth largest country in oil reserves – imports most of its fuel. This fact may perhaps explain why Nigeria's oil industry -- rather than reducing socio-economic tensions -- has contributed to false hopes and listless GDP growth. Much of Nigeria’s current woes are the result of corruption, governmental incompetence and underinvestment in industry. Rather than Nigeria showing mere symptoms of the Dutch disease, it seems to have died entirely. It is time for Nigeria to be brought back to life.

The Petroleum Industry Bill (PIB) promises to improve Nigeria’s situation. First presented in 2012, it was based on a list of recommendations by the Oil and Gas Sector Reform Implementation Committee. The PIB recommended a new regulatory and institutional framework that would guarantee greater transparency and accountability in the sector. The PIB would also ensure a greater fiscal take by the government, acknowledge the potential of gas investments, and overhaul the tax regime.

Opposition from International Oil Companies (IOCs) and the National Assembly has stopped the bill from approval, thereby converting an opportunity to stimulate investment into a barrier against it. IOCs do not want to invest amidst uncertainty over the PIB, Nigeria’s fiscal take, and changing definitions of "profit." Inaction from Nigeria’s legislature is even more striking. Perhaps corruption explains their preference for an opaque system plague by fraud, but they should see the need for action to protect Nigeria from collapse.

Bottom Line: It is sink or swim for Nigeria’s petrol industry. The improving investment climate for extraction industries in neighboring countries threatens Nigeria’s domination, and the current legislative paralysis is not helping. The PIB must be approved.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

Anything but water

  1. People may disagree on the definition of "green job" (I think it's silly), but that's no excuse for politicians to bury a study on green jobs for partisan gain. Speaking of politicians, Coyote says President Obama should not ignore laws "to do the right thing"

  2. Oil-rich gulf rulers are stripping citizenship from advocates of democracy and openness

  3. Does describing an ecosystem as "degraded" mean scientists are biased? Related: Peter Thiel (Paypal, Facebook) has interesting (anti-academic) opinions on education and innovation

  4. "Development People" fail because they keep trying to do The One Big Thing

  5. "Today nearly one in six Americans lives within three miles of a major hazardous waste site... That these contaminated places are no longer the focus of national attention is in part due to a rarely cited phenomenon: governmental competence"

27 November 2014

How to get the (plastic) soup out of the ocean?

Koen L writes:*

More and more plastic is ending up in the oceans and seas, causing environmental degradation, economic losses and lower oxygen supply. Ocean pollution receives more and more public attention through i.e. the plastic soup foundation. The problem of ocean-pollution is that the oceans are not owned by one individual or state. States manage their parts with little concern for the ocean as a whole, which causes problems over the the distribution of costs and benefits.

The table below displays a simplified 2-player game of this problem. Cleaning up the ocean costs money and if only one country cleans, the non-cleaning countries experience positive externalities from this (as their water is cleaned too). As countries cannot be sure of the other’s cooperation, countries have an incentive not to clean. This results in a compete-compete outcome, in which none of the countries actually takes measures to clean up the plastic.

Recently, a possible solution for the problem has been proposed by Boyan Slat, a 19-year old student. His solution is the only technically and financially viable method proposed thus far. By attaching a system of long floating arms to the seabed, the oceans can clean themselves. The arms would collect the plastic and hold it, to be taken out at a later moment. At the moment, a team of international experts is building and testing large-scale operational pilots. This solution, however, collects only half of the plastic, doesn’t solve the influx of plastic and needs the plastic to be collected and disposed of elsewhere.

The question is therefore how the different entities co-owning the ocean will be incentivized to cooperate and each contribute to financing the arms, collecting the plastic and preventing the influx or more plastic. The problem is of immense scale as about 44% of the world population lives in coastal areas and 148 out of the 196 countries in the world border one or more seas or oceans. This scale impedes collective action, as the payoff of free riding is high given uncertainty over other countries' actions. Furthermore, the complexity of the issue is high, as the impacts of plastic pollution are very difficult to estimate. This results in a tendency of countries to be passive towards this issue.

The money necessary for Slat’s plan could be raised by, for example taxing polluting companies, but individual pollution and the effect of taxes on economic output might lead to resistance. A possible measure to reduce further pollution may be to (implement and) enforce territorial property rights and either sue or bargain with those polluting a country’s territorial waters. This, however, will be a long-term solution (if a solution at all) and is not likely to reduce pollution if individuals and companies do not face additional incentives to minimize plastic pollution. These additional incentives might be created through public campaigns raising awareness, taxation or fining and trying to incorporate pollution costs in the prices. They will, however, produce side-effects and negative outcomes the public might not be willing to face to clean our oceans

Bottom Line: A plausible means of cleaning plastic from the oceans exists, but the complexity of assigning responsibility among countries, companies and citizens makes it difficult to put this solution into practice.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

The Time is Not (Yet) Ripe for GM-Products

Katharina B writes:*

The European Commission proclaims that a diversified agricultural industry is key to ensuring Europe’s competitiveness on the world agricultural market. As such, it has supported the coexistence of GM (genetically modified) and non-GM crops since 2003.

The problem is that GM and conventional farming are incompatible agricultural methods that interfere with each other in inefficient ways. The need for buffer lands (to reduce the risk of GM pollen affecting conventional crops), for example, reduces the amount of productive land.

Having strictly separated GM and non-GM zones would be more feasible as the use of buffer zones could be minimized and a maximum of agricultural land used. The European Commission is against this policy as it would create economic zones that could be labeled as organic and conventional or as GM. This would make a geographic area representative of its produce and non-GM agricultural zones might have a market advantage as GM-free products are largely favored by consumers in the EU. The average support for GM foods in the European population is about 27%.

That GM crop areas will have a market disadvantage to GM free zones should, however, not be a concern of the EU and hinder the implementation of clearly segregated agricultural zones.

GM-produce faces low demand in the population and the mere existence of GM-pollen as a negative externality is due to lacking market demand for GM produce. If consumers in the market were in favor of GM crops, no one would mind the presence of GM content in produce and cross-pollination would not harm conventional growers. Competition in the market ensures that products with lacking demand will suffer a reduction in supply. Forcibly introducing coexistence between GM and non-GM products ignores fundamental market processes and leads to losses in agricultural land and conflicts that reduce market output.

Bottom Line: The time is not yet ripe for GM agriculture because people do not want GM crops and GM crops contaminate conventional crops. GM crops should be segregated and conventional agriculture emphasized.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

26 November 2014

Hurricane Economics: Housing

Robert D writes:*

First in 2005, and once again in 2012, the U.S. Was devastated by both hurricane Katrina and Sandy. Of course these disasters impacted society in countless ways, the housing market (or in some cases the lack there of) provides an interesting perspective on these impacts. With both hurricanes, thousands of residents were displaced due to the severe damaging of houses. This led to an overall decrease in housing prices in areas impacted by the storms. At the same time, these displaced resident were now in search of new (and affordable) housing. Traditionally, the replacement housing and or compensation for damage is provided by the federal government. But as you might recall, there was (and still is) some serious doubt about the government's capability in providing these 'goods'. If the government is inadequate in providing support for hurricane victims then what are the alternatives, and does this mean that there is a potential market for hurricane relief?

In New Orleans alone, over 214,700 houses were damaged and approximately 400,000 residents were displaced. This created an overwhelming demand for emergency relief shelters. This demand could not be met through federal means, therefore new systems should be implemented to account for the (possible) demand. One possible system is the Exo unit, which is a small, affordable, emergency housing unit for up to four people. These units are designed as “upside down coffee cups” and therefore they are easily transported. Even if this solves the short term housing issue, there are still long term consequences like whether the change in housing prices correspond with the impact of the storm. More specifically, the price of houses may drop too much or too little due to the federal supply of houses immediately after the hurricane.

But even if we implement a new relief system before it is too late (i.e. another catastrophic hurricane occurs), there must be an initial investment towards the system. At this point, it becomes a matter of risk. How large of a risk are the investors of the new relief system willing to take? This question depends on the expected level of destruction for a hurricane as well as what is considered 'enough' in terms of emergency housing relief. If there becomes a lack of investment, it is difficult to see a solution that does not involve the intervention of the government.

Bottom Line: In post-hurricane areas, the federal supply of housing units disrupt the housing market so much that prices may not reflect the damage caused by the storm. This calls for a change in hurricane relief policies in regards to housing.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

The corn(y) side of beef production

Alexia T writes:*

The vast majority of US cattle today spend most of their lives away from pasture, confined in overcrowded and revolting feedlots, and force-fed a diet of grains, especially corn.

For centuries cows have been used to convert grass into meat and milk, however, in the past few decades the trend of mass production, at low costs, to maximise profits has turned the beef industry into a profit seeking machine rather than a sustainable source of feed. This ever-expanding industry comes with a great cost to society and its environment.

Corn-fed cows grow and fatten up much faster than grass-fed cows have ever done. 75 years ago it took cows about 4 to 5 years to reach their ideal slaughter weight, whilst today, with the high influx of corn, and other supplements such as antibiotics and growth hormones, it takes approximately less than 15 months for a cow to reach this weight.

Corn consumption in cattle causes several important problems. The production of corn, which by the way is heavily subsidised by the US government, demands vast doses of pesticide as well as continual applications of nitrogen fertilisers, which in turn use great quantities of natural gas and oil. In 2010, US corn production consumed more than 9 million tons of fertiliser and led to roughly 42 million tons of CO2 greenhouse gas emissions.

A corn diet raises the acidity levels in the animal’s stomach, creating several health conditions such as E. Coli contamination, which not only affects animals, but humans as well (remember the mad cow disease…). Further, the corn diet has changed the levels of Omega 3 and Omega 6 in beef, which has paved the way for higher rates of cancer, weight gain, diabetes, and heart disease amongst meat eaters. The corn diet along with the other supplements that cattle are stuffed with has also led to the weakening of the humane immune systems, making many forms of modern medicine ineffective.

It may be true that the corn-fed beef industry is more efficient, but it may be neither sustainable nor efficient in the long run. The true cost of “cheaper meat” is becoming more and more evident, and the beef production industry is having a worrisome impact on climate change. Not only is it slowly destroying the environment around us, but individuals regularly consuming corn-fed cattle are also receiving direct health impacts.

Bottom Line: Corn-fed cattle production and consumption contribute negatively to climate change and severe health impacts. Changing our patterns of production and consumption would assist in reducing these negative outcomes.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

As a migrant...

A friend of mine wrote this on FB:
So being a poor immigrant means more than not owning a home, not having nice clothes and not speaking the language. It also means not having a home-community with strong ties to relatives, neighbors, friends, church members etc. These factors could affect one's ability to see, establish and appreciate such vital connections. I have seen and felt this "numbness" in myself and others in a way that reminds me of the first day I stepped into a new school in a new country with a different language. It makes me SO appreciate my first U.S. teacher Mrs. M. who started teaching me English, my first Mexican friend EV who also spoke (albeit a weird version of) Spanish, my first high school friends..., my neighbors..., my adopted family..., and SO many others! THANK YOU!!! We are ONE human race, ONE community, ONE family. We all have SO much LOVE to give and yet have no idea how much even the tiniest gesture of KINDNESS can mean to those that need it!
Bottom Line: Even 30 years later, these feelings are worth appreciating.

25 November 2014

Amsterdam chilled out

This video has a nice feel...

Related: Eighteen things to love about Amsterdam

The Cost of Deception

Ezra S writes:*

When one needs to make a certain decision, a basic cost-benefit analysis is often used to weigh options -- especially when it comes to economic or political decision-making processes. Although such processes may seem straightforward, there are sometimes less easily measured, but important aspects to consider.

Take, for example, the 2004 sale of publicly owned hospitals to a private company that took place in Hamburg. The incumbent city government assessed the money they would gain from the sale to outweigh the cost of not being able to control part of the public health care system of its citizens. In a country like Germany where health care is considered a public good, making significant changes with long-term impact within the system always comes hand in hand with a public and political battle. A referendum assessing public opinion found a clear majority (76,8%) against the sale. That result seemed to settle matters until the court ruled that public referenda results were not binding. That ruling allowed the government decided return to its original plan and sell the hospitals to the private company Asklepios.

That selling against the public’s will is problematic with regard to basic beliefs associated with democratic rule is rather obvious, but that shall not be the focus of this post. It shall rather be stressed that the government did not take changing circumstances to its original cost-benefit analysis into account, which were caused by the referendum. The citizens of Hamburg believed that a majority vote against the sale of the hospitals would mean that the city would not sell, period. When the government decided to sell anyways, many citizens felt directly deceived. Psychological research (pdf) has shown that deception causes significant cognitive-emotional and behavioural responses. In this case the trust not only in the government at the time but also in the whole democratic process was diminished. That meant that the ultimate cost for selling the hospitals increased significantly after the referendum, a development that the government did not fully take into consideration.

Bottom Line: Quantifying emotional costs and taking them into account when making a decision, may it be political, economic or of any other nature, might be difficult but is essential. Especially when a party involved is left with a feeling of deception, which triggers distress and negative responses, the resulting increase in costs should not be ignored.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

Quinoa boom threatens people and their environment

Theresa L writes:*

Quinoa has been an essential food for Andean people over centuries but, until recently, was unnoticed in most of the Western world. I got to know quinoa when living in Ecuador four years ago. Back home in Europe, the crop could only be found in fair trade shops or specific organic supermarkets. Today it is promoted as a "Superfood", becoming ever more trendy due to being the grain crop with the highest nutritional value per 100 calories. No matter in which supermarket I have recently been, quinoa was always prominently featured.

As consumers in Europe, the United States and Australia enjoy the valuable addition that quinoa is for their diets, its world market price has tripled since 2006. It is now strongly discussed whether this price increase has more negative or positive effects on traditional producers and consumers in Peru and Bolivia. According to a study of the FAO (pdf) local quinoa consumption didn't break down. Instead, higher prices enabled farmers to afford products like fruit and vegetables that they weren't able to consume before the quinoa boom. However, non-farmers, especially the urban poor, only face higher prices. Critics thus point towards the fact that many locals can't afford quinoa anymore and are forced to substitute it with cheaper but less nutritional products like rice or noodles.

Additionally, the increased demand of quinoa leads to serious environmental problems. According to the FAO, more than 50 percent of interviewed quinoa farmers in Bolivia noticed a decrease in soil quality during the past three years. This is due to the land now being farmed year-round and being treated with pesticides. Additionally, farmers focussing on higher quinoa production are allowing their lama populations to shrink. Thus, the important services of grazing and fertilizing traditional farms and preventing erosion with their large, padded feet is missing. The Southern Altiplano area where quinoa is grown is a very fragile ecosystem as it has an average altitude of 3,600 meters where not many organisms are able to survive. Therefore, changes like an increase in quinoa along with a decrease of lamas that might seem little can bring this ecosystem out of balance, threatening its future fertility.

Facing these problems, quinoa lovers might question whether they should still consume the product. That decision may be easier in the future, as cultivation expands in the United States, Canada, China, Denmark, India and Australia. In the meantime, consider organic and fair trade quinoa if you want to support Peruvian and Bolivian farmers and their environment.

Bottom Line: A boom of an agricultural commodity might be beneficial for the GDP of a country and for particular groups involved in production, but is at the same time problematic for the environment and national consumers. Higher incomes due to an increase in the market value might thus not make up for the total negative effects.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

Speed blogging

  1. Back to the future: some California winegrowers see the virtue (risk reduction) in "dry" farming without irrigation. Related: climate change may bring back local food production as diversification replaces mono-sourced, monocropped farms. Also related: a nice overview on "water markets" (loosely defined) in California and an excellent analysis (pdf) of how to address calls for "more storage" into California's water system

  2. The Dutch government engages citizens on climate change and flood risk, via apps!

  3. LA has moved to Owens Lake 3.0 (furrowed dry beds) in an attempt to restore exports

  4. Late and misunderstood budgets interfere with good water management

  5. An update on unbundling customer service from water provision in England/Wales

  6. The Daily Show criticizes Detroit's efforts to collect money from the poor -- just as I did
H/Ts to DL and RM

    24 November 2014

    Monday funnies

    I could watch this all day...

    Transvestite fish and male infertility

    Kristian K writes:*

    Superstition and misleading information regarding the Pill is abundant both from the obvious Catholic adversaries and extremist websites, but also in women’s magazines and protective parental blogs. “The Pill is a sensitive issue for many reasons” (My Girlfriend, 2014), and strong accusations against it including the risk of blood clogs, feminization of fish and male infertility only exacerbates this. To some extent such accusations do not come out of nowhere, but there is no clear evidence that the pill is the sole responsible factor. At best it is a contributor amongst many. However, this does not necessarily mean that the pill does not cause any environmental problems, only that we need to remain realistic regarding what we know and what we don’t.

    The artificial hormone and EDC 17-alpha-ethinylestradiol (EE2) is a main component in female hormonal contraception. EE2 has been linked to for instance the feminization of fish, and has been found in damaging concentrations in freshwater American streams. Still, it remains unclear how large a responsibility can be ascribed to EE2 compared to other endocrine disruptors. A 2009 study found that feminization of fish could best be statistically explained by the presence of estrogen together with anti-androgens (used in for instance the treatment of cancers) or by anti-androgens alone.

    Still, regardless of how large concentrations are in a given area, it has to be admitted that artificial estrogen, like other EDCs, can have severe adverse effects to animals and young humans. Therefore, a general solution should be found to limit the presence of EDCs, found in a variety of products, in waterways and the air. Another idea is to improve general water sanitation. This is difficult in places that do not have water sanitation already but it might be a possibility in places such as Europe or The US. In order to fund such a sanitation program, it might be possible to estimate the concentrations of the different EDCs in the water sources, and ascribe a fitting sanitation tax to the products, either at a consumer or producer level. We could also consider alternative contraceptives, for both males, females (and all in between).

    Bottom Line: EDCs are a problem for the environment and we need a solution. Since birth control pills do contain EDCs, they should be considered as part of the discussion of how to mitigate adverse effects. As a man it seems almost hypocritical to ask women to use an alternative, since the idea of a temporary vasectomy or using the potential ‘male’ pill, does not sound particularly tempting to me. Still, surely there is a solution to this problem, but whether it should be found in alternative contraception methods or in better sanitation, begs the question. What do you think?

    * Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

    The invisible problem of light

    Līza L writes:*

    After the 1994 earthquake knocked out power in Los Angeles, local emergency centers received calls from anxious residents who reported a strange “giant, silvery cloud” in the dark sky that they had never seen before. They were reporting the Milky Way – the galaxy that contains our Solar System. As someone who grew up in the suburbs of Rīga, the capital of Latvia, I find it comic that people had never seen the Milky Way before. What is less comic is that this is the reality for millions of urban people around the world.

    Source: www.stellarium.org
    The stars in very urbanized and industrial cities have become (almost) non-existent. It’s not that stars are suddenly dying out; they are simply hidden from view because of urban sky glow. Due to urbanization at least half the kids in any given population are growing up in urban areas where most of the light pollution is happening, and they might not know what a sky full of stars looks like. They are not presented with the stark contrast of a countryside sky and a city sky if they barely leave cities, so they don’t realize there is a problem. And it’s not just kids but adults too – while light pollution is now talked about more, many adults don’t realize that all the artificial light in cities is creating problems not only for their health, but for ecosystems disturbed by artificial light. Most wildlife follows diurnal patterns of dark and light so their interactions might alter and overall physiological harm can be done to plants and animals alike.

    Light pollution is, in a sense, similar to the problems presented as a consequence of fisheries depletion because people don’t necessarily see the strong impacts in their immediate environment. People who assume there isn’t a problem are mistaken. Similarly to ocean fisheries, people feel like they are far away from the light pollution problem. This false perception creates an imaginary distance between individuals and "unattainable" solutions. But of all the pollution we face, light pollution is probably most easily remedied because most of the solutions are quite simple, such as changing the type of light used or improving light fixtures so that light isn’t leaked. So even if raising awareness of light pollution and its harmful consequences to the general public is too difficult, it shouldn’t be too difficult to change policies and reduce light pollution.

    Bottom Line: Light pollution is an ‘invisible’ problem which can be easily remedied. Even if we cannot make the problem ‘visible’ to the general public, simple policies can substantially reduce that pollution -- and bring back the stars.

    * Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

    Some thoughts on my Reddit AMA

    My "ask me anything about water" was roughly 4x more popular (based on votes) than the first one I did in July. (It was also more popular than Naomi Klein's, but she was only answering questions for an hour :)

    I spent about 8 hours in total, writing 450 replies to over 1,000 questions and comments.

    The most popular question was "What's your opinion of the bottled water industry?" to which I replied: "It's like the soft drink industry. Both need to worry about groundwater supplies and litter. Both promise quality and advertise well ahead of what they deliver."

    My most popular answer was in response to this question:
    Hello. I live in Manila, where the tap water is not as clean as in other countries, so we don't drink it. Do you know what it would take to make it drinking water, just in general? Also, any interesting water facts about the Philippines? We have loads of slums and corruption here, coupled with massive flooding and the biologically dead Pasig River flowing through town. As far as improving water quality is concerned, what would you say is the best way?
    I wrote:
    Yep. Tough problems. Leaking pipes are the start, as they lose water and allow contaminants to get clean water (from the treatment plant) dirty. Neighborhoods should look at small scale treatment-for-sale facilities (see photo with bottles here).

    Corrupt people don't care about slums, so they need to take care of themselves. For drinking, you can use filters and chlorine, but it's MUCH better to have drinkable tap water for cooking, showering, etc.

    Get your neighbors together. After you get 100, look into larger filters. After 1,000, you can build a larger system. They are affordable, even in slums, when shared among many...
    It was interesting to see this response -- and several others -- covered in a nice summary by a Filipino blog.

    Here are a few of my favorite questions and answers (in no particular order):
    • Them: "Water economist... Alright, in developing countries in Africa and Asia there are many people who earn a living by selling water. How can you build water infrastructure in developing countries without ruining their lives?"
      Me: "Well, people can switch jobs (like nightsoil collectors). Look at the benefit to water USERS, in terms of cheaper, cleaner water."
    • Them: "How does one get into studying the economy of water?"
      1. Read my book.
      2. If still interested, then find a water issue that interests you.
      3. Study that (or work in the area).
      4. ???
      5. AMA!
    • Them: "Where is the "Manhattan Project" to passively desalinate ocean water? [snip] It just seems that if population rates - regardless of location - allow for a doubling of humans within 30 years, the water has to come from somewhere. Business people and globalist control freaks love to make everything SCARCE in order to regulate it, control it, charge more for it, etc. There is a lot of talk about ABUNDANCE in this gee-whiz age of Google this and Apple that. It just seems that a program to passively separate salts and minerals from ocean water for use in human activities is a necessity"
      It's called "rain" :) Seriously, lots of people support supply side solutions. Those are no problem, as long as users pay for them.
    • Them: "Why is it so difficult to desalinate water?"
      Front page! Woo hoo!

      Me: "Salt and water like each other."
    • Them: "I live in Melbourne, Australia and in the first decade of the new millennium, we went through a drought that rendered our water storage levels dangerously low. As a bit of a knee-jerk reaction, our government hastily spent BILLIONS of dollars building a desalination plant, because I guess they saw the possibility of our water reserves running dry. Shortly after construction of the plant had gone past the point of no return, we had record breaking rainfalls which basically filled our water storages, and continue to have very good rainfalls year on year. We are still paying money for our desalination plant via a water levy (tax), and will continue to pay it until we have completely paid off, which will be in about a decade or so, and the plant is yet to deliver us with a single drop of water. My question is do you think that building the plant was a good idea back then, and do you think it is a good idea to have it for the future of Melbourne? Do you think in the foreseeable future we will ever turn it on?"
      "Good question. The plant is an insurance policy. You don't always need insurance... until you do."
    • Them: "What does California need to do to solve (both in the short-term and long-term) the drought/water shortages it is currently facing?"
      Me: "(1) Raise the price of water so people don't have lawns in the desert (2) Protect groundwater and use aquifers (3) Allow water markets, so ag can reposition/shrink (4) STOP subsidizing sprawl (via cheap water)"
    • Them: "Based on your knowledge of major trends, what will be the biggest changes we'll see over the next 20 years?"
      "Food chain disruption. Groundwater exhaustion. Dead ecosystems. These will be black and white WTF [were we thinking?] situations in many places."
    • Them: "How quickly will there be major impacts from ground water exhaustion in US south west?"
      "The impacts will be felt after 3-5 more years of drought for ag; cities can get along for 25+ years."
    • Them: "What is more likely to occur in severe cases all around the world in a few years: extreme drought or extreme rainfall/floods?"
      Me: "Both."
    • Them: "You mentioned competition on quality. Where does that apply - developing countries, developed countries or plain everywhere? I wouldn't know how to judge whether tap water or battled water were higher quality. These numbers (German pdf) released by the utilities company mean nothing to me and they aren't even available for bottled water."
      Me: "Yep. Everywhere. Consumer's Union could nail that one."
    Bottom Line: People are very curious to know the risks, causes and potential solutions to water quality and quantity problems. Many put too much weight on technical hope (desalination) or moral outrage (bottled water is evil). Few understand the roles of government failure, monopolistic ineptitude and community engagement. I am working to move the discussion in that direction, and the fact that people downloaded 2,000 copies of my book during the AMA gives me hope.

    John Briscoe has died. May his insights endure.

    I never met Professor Briscoe, but I was familiar with his work at the World Bank and Harvard. He had an excellent reputation, and perhaps this is why:
    By the time Dr. Briscoe arrived at the World Bank, lending for infrastructure projects was under attack and “social-sector lending” on health and education had become a priority. Many dam projects were scuttled as the bank became a target for environmental nongovernmental organizations and protesters with general grievances against what they saw as a corporate model of development.

    The complaints, Dr. Briscoe said, often came from places where the lights and water flowed with regularity because of hydrodams.

    “Time and time again I have seen NGOs and politicians in rich countries advocate that the poor follow a path that they, the rich, never have followed, nor are willing to follow,” he once wrote.
    Although there are obvious costs to dams, Briscoe had the right perspective on their benefits. It's a pity that so many dams (and other water projects) are not about helping the poor or promoting sustainability but rewarding privileged special interests.

    Let us remember him for working to put water in the service of those who needed help.

    22 November 2014

    Flashback: 17-23 Nov 2013

    A year later and still worth reading...

    21 November 2014

    Friday party!

    This rant underlines the problem (bankers screwing taxpayers and customers without consequences) and the solution (utility banking separation from markets).*

    Bottom Line: I'd drink to honest bankers and diligent regulators!

    * Read more about "rabid bankers" in The Economist

    Light pollution - easy solutions, difficult implementation

    Moritz M writes:*

    Can’t sleep? Feel depressed? Chances are that the reason might be in front of your window: more and more studies suggest that light pollution is causing many health problems, including sleep deprivation, depression and various forms of cancer. This light pollution map illustrates how bright your city/district looks from space. Although the topic remained relatively disregarded in the past, governments and municipalities more and more realize the impact of excessive use of light on the environment, health and public spending. Many examples show how light pollution can be limited with additional technology: Fully shielded streetlights stop light to shine anywhere else than where it is needed – the street. But if we look closer at the “success cases”, we see that no of them were realized on a broad national basis. Since these technological solutions are relatively expensive to implement everywhere in a country and usually only find support, if the impact is felt directly by the population, e.g. if the area is famous for its clear night sky and there are no tourists anymore, because the sky has become too bright to watch the stars.

    Therefore we must come up with other, more “globalizable” solutions. We have to work with what we already have (which is a lot of lights) and simply reduce the usage. As one of the first, France has stepped forward with a national regulation of the usage of light in public areas. Since June 2013 these regulations have been in place and the government claims to save energy equivalent to 250.000 tons of carbon dioxide annually (this is about as much energy as 750.000 household use in France). While the effect seems quite big, the actual regulations are not as excessive as one might think:
    • Interior lights have to be turned off one hour after the last staff leaves the building
    • Exterior lighting that illuminates facades and window lightning have to be turned off by 1am and can be turned on one hour before sunset (more details)

    So far the regulations have been very successful in the country and should encourage policy makers to move on to other sources of light overuse. We still see the bright illuminated advertisements everywhere, even in the middle of the night. Why not also shut them off during the late night and ask for a progressive tax on every consecutive hour of the night? Companies will think twice about the reach of their advertisement and whether that is justified by higher costs.

    Bottom Line: The solutions are right there. Just make them look attractive.

    * Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

    The Benefits of Climate Change

    Diederik B. writes:*

    Climate change has began transforming life on earth. Everyday we read about the impacts of global warming on the internet and in newspapers. We have learned that it is responsible for the rise of sea levels, for a loss of biodiversity, and for many other terrible things. It is evident that global warming is an issue that needs to be dealt with quickly. However, there are also some positive externalities that can be derived from climate change.

    In this post I would like to focus on the arctic specifically. While the melting ice caps is becoming a huge issue for some countries, especially China, Vietnam and the Netherlands, new opportunities arise in the arctic region. An example of this is the Northern Sea Route (see illustration). This route is now accessible for cargo ships because of the melting ice. It can even shave two weeks off the normal route.

    Another notable is example is that global warming increases the amount of agricultural possibilities in the arctic region. Whereas up until a few years a go the agricultural sector was basically non existent in Greenland, they now have the means and environmental circumstances that allow them to grow different fruits and vegetables, including strawberries! Of course, this does not mean that tomorrow the whole world will be eating strawberries from the arctic region, but it definitely shows potential.

    Thirdly, the melting of the icecaps also exposes many undiscovered natural resources. According to the U.S. Geological Survey, these new sources should add up to about 22 percent of the world’s undiscovered oil and natural gas. Because almost the whole world still heavily depends on these depletable resources, one could argue that discovering new oil wells is a benefit of climate change as well.

    Bottom Line: Despite all of the negative externalities of climate change, some people actually benefit from it. This of course does not mean that climate change is immediately a good thing, but it is always good to place things into perspective. It teaches us that we can still make a good thing out of something bad. While we are trying to stop climate change from happening, why not recap its benefits at the same time?

    * Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

    Anything but water

    1. True: "It seems that the most fearful people in our country are those who don't travel and are metaphorically barricaded in America... We end up afraid of things we shouldn't be and ignoring things that threaten our society, such as climate change and the growing gap between rich and poor"

    2. Want to save the climate? End subsidies of $550 billion to fossil fuels

    3. PDFs from the EU: "How to communicate the risks of population growth?" and "Five principles to guide knowledge exchange in environmental management"

    4. Great TED talks on "The Global War on Drugs [FAIL]" and "The Social Progress Index [as a alternative for GDP]"

    5. Has life improved since 1989 for the people of Eastern Europe? Two economists say yes [pdf], but this reporter disagrees with them (his original analysis). I side with the economists, mostly due to the "freedoms" that do not appear in GDP statistics