18 Jul 2008

Forbes.com feedback

I thought I'd share the reactions I've been getting to my piece on Forbes.com.
  • A number of heavy hitters in water have said they liked the piece. Even better, a number of amateurs have said the same. Great!
  • I've had several requests for interviews (granted!), which is great for getting the word out on aguanomics. (See the video clip below for the fastest turn-around.)
  • I've spent a lot of time explaining that my proposal is not about agricultural water -- this post is.
  • I also spent a lot of time saying "yes, there is a shortage because water outflows exceed inflows [engineering definition], but the reason that's happening is that price is too low [Econ 1].
  • I've got several invitations to participate in discussions on water, economics, the environment, etc. Awesome!
What some people didn't understand (or want to understand) was that my piece -- like most economic papers -- was about one point, i.e., that urban "shortages" could be fixed right now with a suitable change in water prices. There's no need to build dams, take water from farmers, etc.

Bottom Line: The water "shortage" needs to be solved at many levels (wholesale, retail, watershed, state level, etc.) and the institutions for allocating water must reflect the relevant factors at each level.


  1. This is awesome man, great job. Please DO keep prophesying balanced resource prices rather than depletion!

  2. I enjoyed your piece on Forbes.com and interview on FBN. "James Dean" of environmental economics, eh? Excellent!

    I like your pricing plan. The poor don't get shut out so you honor the "human right to water".

    One potential issue: since water utilities are generally regulated to varying degrees and must gain approval for rate hikes, it may be difficult to get very high rate hikes through. I ran into a similar problem when I served on the advisory board to the Albuquerque-Bernalillo County Water Utility Authority in NM. We wanted to implement a commodity or scarcity charge but ran afoul of the limitation on how much money the ABCWUA could legally make (i.e., "profit").

    But your plan might be okay since you are just redistributing the burden and it might be "revenue neutral".

    Now, to ag water...

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  4. Sorry... my previous effort was a typographic catastrophe.

    Having experienced so-called "droughts" in Tennessee in the late '80s and California in the early nineties, I would suggest that the term "drought" (or any common synonym thereof) suffers from over broadness that muddies any discussion of the topic.

    The Tennessee drought necessitated the import of hay for livestock from as far away as Michigan, the draining of pools and the deactivation of fire hydrants.

    The California drought compelled folks to wash their cars no more than thrice weekly and to water their lawns no more than once daily.

    That said, your solution to the current water crisis is all well and good for a single grad-student with austere hygienic customs, but an onerous burden on a family with three kids and a washing machine who bathe and launder regularly--but not extravagantly.

    Your principle seems sound: woe to the water slobs! But the numbers you provide are impractically frugal

  5. @Michael E. -- in the piece, I mention that "profits" can go into infrastructure, but they can easily be returned as per capita rebates -- extra equity!

    @unclesmedley -- the 75 gal/day/cap is meant to keep that family nicely showered, but not support their swimming pool. the whole idea is that demand will be less than or equal to supply. The free/expensive price point will be decided by accounting and political negotiation.


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