31 Jan 2009

The Cost of Rationing

In previous posts, I have said that rationing (as a response to water "shortage") is extremely expensive to businesses. This World Bank paper brings numbers to that thought:
The current paper, using firm-level data collected by a business environment assessment survey in 26 countries in Europe and Central Asia, estimates the marginal impacts on firm costs of infrastructure quality. The results suggest that the reliability or continuity of services is important for business performance.

Firm costs significantly increase when electricity outages occur more frequently and the average outage duration becomes longer. Similarly, increased hours of water supply suspensions also reduce firms' competitiveness.

In these countries, it is found that the total benefit for the economy from eliminating the existing electricity outages ranges from 0.5 to 6 percent of gross domestic product. If all water suspensions are removed, the economy could receive a gain of about 0.5 to 2 percent of gross domestic product. By contrast, the quality of telecommunications services seems to have no significant impact.
Bottom Line: Outages can be traced to two causes: insufficient revenue that impedes capital and operational spending, and/or prices that are too low to constrain demand to be less than supply. Fix these and prosper.

End Agricultural Subsidies

Watch this clip from Reason TV:

Among others, Dan Sumner (UC Davis) slams subsidies that waste resources, distort farming decisions and keep too many farmers MBAs in the farm business. But let's not just end subsidies, let's also kill the Farm Bill!

Bottom Line: Good farmers grow food to stay in business; bad farmers need subsidies to do so. Make farming a real business.

30 Jan 2009

Preparing for Failure

Mayor Sanders of San Diego has announced [PDF] public workshops...
...to help prepare the public for potential cuts to water supplies.

The Department is staging the workshops to discuss and take input on how water allocations for City water customers are being developed.
Here's what they should discuss -- raising the price of water to water wasters (while keeping it low for water misers). Santa Barbara did it in the last drought. Why can't San Diego use the price mechanism? Why does the Mayor and water department insist on rationing -- the most costly command and control response?

I'll be in the area (Feb 9, 10 and 12), so I'll show up to see what happens.

Bottom Line: Don't hold workshops to tell people what to do. Raise prices and let them decide what to do.

hattip to DW

Why the Peripheral Canal Will Happen

The simple answer is that politicians want it to happen -- no matter what the economists say. (The fact that some economists also support the PC is practically irrelevant; notice how Schwarzenegger is pushing for the PC without waiting for any scientific or economic justification.)

This case reminds me of when politicians ignored economists in making the decision to build the State Water Project (which was called the Feather River Project at the time). Read this 1957 paper [PDF] to see what the economists said.

They also ignored economists economics when they decided to build the Colorado River Aqueduct in the early 1930s. See Sections 3.2 and 3.3 of my dissertation for more on that.

Bottom Line: Politicians like to promise everything to everybody, but somebody has to pay -- and sometimes we ALL have to pay.

Groundwater Banks Bleg

KD asks:
Our organization is examining potential conjunctive water management projects in the Sacramento basin and one of the issues that has been identified is the impact this will have on third-party groundwater users. I'm trying to look into how other groundwater banks (Kern, Arvin Edison, Semitropic, Yuba) have addressed this issue in an effort to develop a "lessons learned" type document and an appropriate monitoring and mitigation plan. Any ideas of who else might be working on similar issues; other groundwater banks that would serve as case studies (CA or elsewhere); or documents/articles that address this?
My first impression is that water banks ONLY work when the whole area is adjudicated. To my knowledge, the earliest example studied by academics (Elinor Ostrom) was West Basin Water District in LA.

Can anyone give good examples of groundwater banks that were well or badly run? Stories are good. Hyperlinks are better...

Bottom Line: It's not easy to govern something you can't see with a bunch of people whose actions you cannot observe, but people do manage to succeed.

29 Jan 2009

How Much Water Do Farmers Use?

In my post yesterday, I questioned the meaning of "use" when farmers do not receive all of the benefits of the water they divert.

Today, I want to question the accounting for water diversions.

Say that a farmer applies 10AF of water to his fields. If 2AF are consumed and offgassed by the plants, 3AF run off the property and 5AF sink into the soil, recharging groundwater, then how much water did the farmer use?

Put differently, if farmers "use" 80 percent of developed water supplies, how much double multiple counting is involved? If other farmers apply the 3AF of tailwater and still others pump the 5AF onto their lands, does that mean that farmers as a group are using 20AF or 10F?

I genuinely do not know the answer to this question. If the total is 20AF, then we need to think again about the meaning of "use". If the total is 10AF, then we need to be careful when discussing water rights. I'll let Ray's comment from yesterday illustrate:
Consumptive Use (CU) for your carrot patch is the amount consumed by growing the carrot. It will take a great deal more water to grow the carrot with flood irrigation methods, but much of the water will help recharge the groundwater. Sprikler irrigation of the crop is "more efficient", but the evaporation losses can be high and there is little if any recharge.

In dry regions, one man's use is the next man's water right. With flood irrigation, the secondary use would be from groundwater.


Converting from flood irrigation to sprinkler &/or drip irrigation (best management practices) is why groundwater aquifers are eventually depleted...too many straws and not nearly enough historic recharge.
Water accounting is a topic dear to my heart (one reason I want California to adopt comprehensive groundwater monitoring), and I came to the topic by accident. As I discuss in Section 6.3.4 of my dissertation, the Metropolitan Water District (importer of Delta and Colorado river water to SoCal) "forgot" to record its groundwater recharge deliveries. Why does this matter? Because it makes it look like local water supplies (which now include the recharged groundwater) are bigger than they really are, which makes it harder for activists to claim that imported water is encouraging sprawl.

Well, here's the news -- imported water (and the way it's priced) does encourage sprawl in SoCal.

Anyway -- back to farmers and agricultural water. Make the accounting clear so that everyone can track individual water diversions but also net out "reused" water when accounting for total sector use.

Bottom Line: If we mess up the accounting, we'll mess up other things.

Sludge on Your Veggies

"A nationwide survey of sewage treatment plants shows that the sludge they produce--the residue from cleaning up wastewater--contains a wide variety of toxic metals, pharmaceuticals, flame retardants, and other compounds, including some antibiotics in surprisingly high concentrations. That's significant because every year more than half of the roughly 7 million metric tons of these so-called biosolids produced in the United States are applied as fertilizer to farm fields."

The EPA wanted to allow sludge to be used at organic farms, but the practice is not allowed.

Bottom Line: Wash those veggies!

Clearing the Backlog, Part I

Here are some quickies:
  • IID ranchers complain that they need more water. That sounds like BS to me. Why are there 400,000 cows in the desert?
  • Engineers are going to cut down 900 trees (many native oaks) to build levees to protect real estate developments in a flood plain. Why are people living in a floodplain?
  • An irrigation district will charge water misers less and water hogs more. Good -- even if they were forced into it. (Now only 53% of customers have bills based on actual consumption. That number is set to increase to 70%, which only leaves 30% crazy.)
  • If we all died today, it would take 1,000 years for the climate to return to "normal." Ouch.
  • California farmers are cutting back on production and jobs. Although the impact will be small relative to the State's economy, it will be concentrated in areas that are relatively poor. Better water markets and pricing would reduce the harm, but nobody is talking sense in that area.
  • The Bush administration's management failures (Iraq, Katrina, etc.) can be traced to managers hired for loyalty instead of competence. Change is good.
  • Reducing carbon output may not be that costly if we do it the smart way. Beware of fear-mongering energy lobbyists.
  • Blame Earl Butz (Nixon's Ag Secretary) for launching the corn juggernaut that is destroying our farms, food security and environment.
  • Republicans take the high road (?) on carbon legislation -- claiming that they will call out Democrats who claim high morals but hand out free permits to local polluters. Awesome. (I read recently that the Republican implosion can only be good. After so much failure, they've got to get back to good ideas, innovation and higher standards.)
hattips to DW

28 Jan 2009

Climate Change & Coastal Ecosystems Workshop

U.S. Fish and Wildlife Service & U.S. Geological Survey are sponsoring a free Workshop on Climate Change, Natural Resources and Coastal Management. It's in San Francisco THIS Thursday and Friday. Looks like a lot of science but no social science...

Poll Results -- Oil Prices

Hey! There's a NEW POLL (water wasters!) to the right ---->
Oil Hit $140/bbl because of (choose 1 or more)
US politics 14 votes
Iraq 3 votes
The Strategic Reserve 1 vote
Spectators 46 votes
Oil Companies 14 votes
Oil Exporting Nations 10 votes
Supply-Chain Problems 11 votes
Politics elsewhere 4 votes
Surges in Demand 26 votes
Animal Spirits 13 votes

These poll results are pretty clear. The thing that confuses me about the speculators answer is this: If they bought oil on the spot or futures market, but did not intend to take delivery, then how did they sell the oil at a profit? Or were they dumb speculators who ended up selling the oil cheaply?

OTOH, maybe "normal" market participants started to speculate because they bought into the whole narrative of peak oil, Chinese demand, etc. They put a lot of money on the table until everyone realized (very quickly!) that Price was wearing no clothes...

Oh -- and those of you who worry about such bubbles forming in the water market (should one exist), need not do so. "Peak water" is meaningless, and local water markets would not accrue the same excesses as a single global market.

Bottom Line: Markets can be hard to understand.

Farmers Don't Use Much Water

NB: I updated this post on 20 Aug 2014 to replace and update missing "food dollar" data.

This post is important and perhaps paradigm shifting. Let's see if you agree...

It's conventional wisdom that farmers "use" 70-80 percent of all developed* water supplies. But farmers do not use water in the same way as municipal and industrial (M&I) users do. When I use water to flush the toilet, that water only benefits me and is unavailable to others.**

Farmers, on the other hand, use water to grow products that benefit others. Put differently, we also use that water when we consume agricultural products.

So the right way to calculate "use" is not by looking at how much water one person (or sector) diverts but by looking at each participant's share in the total benefit from that initial diversion.

For instance, say that a farmer diverts water to grow carrots. If he sells those carrots for $0.25/pound to the wholesaler, who sells them for $0.50/pound to the retailer, who sells them for $1.00/pound to consumers who value carrots at $2.00/pound, then we can say that the farmer and wholesaler each get 12.5% of the total value, the retailer gets 25% of the total value, and consumers get 50% of the total value.

So consumers are using 50 percent of "agricultural" water.

So that's the theory. How much water do farmers use in reality?

To find that number, we need to know two things (for each product): What is its value to the final consumer, and who gets paid what along the way?

Although the second part is easier (the USDA tracks this information crop by crop), the first part is much harder. Basically we need to know how much a consumer values an agricultural product. Although we know that they value it at more than the price (because they buy it :), it is hard for us to know how much value they assign above the price. Measuring that "consumer surplus" is more of an art than a science, and it relies on estimations using demand elasticities and/or stated preference surveys. I am now looking for such data. Please email me or comment on where I can find it.

To get back to the second part, consider this USDA statistic: Farmers only keep 19 percent 11 percent of the retail price of food. The average share to each actor in the food supply chain is distributed as follows:

From these statistics, we can see that farmers are using a maximum of 11 percent of 80 percent -- or 9 percent of developed water.

Compare this to M&I's 20 percent share. Are you seeing paradigm shift now?

If consumers enjoy any surplus from agricultural products (i.e., if those products are worth more than they pay for them), then farmers' share of the total is even lower!

Bottom Line: Farmers are not using 80 percent of the water because they are not receiving all the benefits from that water. Use should be attributed in proportion to benefit. Those who receive more benefits are "using" more water -- and that's us, the consumers of agricultural products.
* Developed as in "controlled." If one counts all uses of fresh water, then farmers use about the same amount as the environment (about 40 percent each), and cities use the rest.

** Conventional water accounting defines water as used when it cannot be used by others without processing. Thus, power generators use water by discharging it at temperatures that are too hot for the environment, plants use water when they discharge it through evapotranspiration, and I use water when I flush black water into the sewer system. These discharges can be recovered by cooling, precipitation and cleaning, respectively. (Tomorrow, I'll have more on this.)

A BIG hattip to JR for bringing this idea to my attention.

Sparse Rain and Bad Management

The Weather and Climate Newsletter from California's Department of Water Resources has the bad news:
a few showery days, and 6-12" of snow (2-3" water equivalent) aren't going to cut it. Estimates are we'd need another 20-30" of liquid (upwards of 20-30 FEET of snow) by April 1st to reach average runoff. That gets less and less probable with each passing day. But January will not be near a record, at least.

The Northern Sierra 8-Station Index is a relatively obscure figure that tells a great deal about water supply... It's a measurement of total precipitation over key watersheds; the Upper Sacramento, Feather, Yuba and American. The eight sites basically translate to forecast inflow for Shasta, Oroville, Folsom, New Bullards Bar, Englebright Reservoirs, etc. None of those reservoirs are in great shape... Anyway, the precipitation is measured as liquid, in the sense that whether it's rain or snow, eventually it will make it into the watershed. Of course, the ground itself absorbs a lot of that; moreso as drought conditions worsen.

The 8-Station is currently at 17.8" for the season. The average since 1920 is 50" per year (running from October 1 - September 30). So, we'd need 32" inches of rain/snow/liquid, however you want that to fall, over the next 3 months for an average year. (And average precip doesn't necessarily mean average runoff.) The normal amount for the remaining months of the season is 23"... The next 9 days over the Feather River Basin will be dry. No more in the bucket for January. Plus there was a total 28" deficit over the last two seasons, don't forget. A 3rd dry year is underway.
Bottom Line: Supply is NOT going to be there for us. How are we doing on managing demand? Pretty bad. There's talk of rationing (which is terribly harmful to business and lifestyles) but hardly any mention of conservation pricing. Be sure to congratulate the water managers for creating the "shortage."

27 Jan 2009

Pigouvian Tax Fail?

NW asks:
I understand very well the rationale for taxation to reduce pollution such as greenhouse gases. However, from an economics point of view, is that the only arsenal for controlling pollution? Are there instances when Pigouvian taxes just don't work, and that an outright ban is needed? If so, how do you justify using a ban instead of a Pigouvian tax?
These questions are easy to answer in theory ("it depends!") but hard to answer in practice. Here are a few things to consider:
  1. What is price elasticity before and after a tax is imposed? If it's low before and high after, then a tax is MOST effective. If it's low and then low, then a tax may not change behavior "enough."
  2. What is being taxed? What is being regulated? Are they the same things as the targeted behavior? If we want people to drive less but tax gas, then people may switch to fuel-efficient cars and drive the SAME amount.
  3. How do psychology and social dynamics matter? When the French government banned cigarettes in bars and restaurants, everyone ignored it.
  4. Where does the tax revenue go? If the revenue goes to the general fund or a special interest group, the tax may be too high, or never change -- even when behavior does. My favorite example of this was the phone excise tax to pay for 1898 Spanish American War many wars. That tax was finally rescinded in 2005 -- after consumers had paid the Feds $300 billion.
  5. Is there an offsetting benefit that a ban would destroy? People like smoking cigarettes (and drinking alcohol), so a ban would not be effective. Taxing alcohol is one way to reduce demand, without driving the trade underground (e.g., Prohibition). Those who still support a ban on drugs (I don't) are ignoring this important behavioral consideration.
  6. Some bans or regulations are considered superior to taxes because the current behavior is so harmful. Thus, we have the ban on CFCs, murder, organ sales, etc. As you can see from this list, a ban can be effective, useful and harmful (respectively), so consistent rhetoric does not necessarily lead to consistent results.
  7. Also note the biggest difference between a tax and a ban -- a tax will increase price by a known amount but reduce behavior by an unknown amount. A ban will change behavior by a known about, but at a cost that is unknown.
  8. As part of this difference, note that taxes are much easier to understand and trace, while bans and other regulatory actions tend to be more opaque -- especially if there are "formulas" and "adjustments" that can be manipulated by lobbyists and legislators for personal gain.
  9. All of these points assume that taxes and regulations are implemented and collected in accordance with the law. If they are not (e.g., black markets, corruption, etc.), then it's unclear which is better. It's easier to hide unpaid taxes but black markets can exist for banned items or behavior.
Everything boils down to the costs and benefits of actions -- tax, regulate, "educate", or do nothing.

The reason that I advocate higher prices for water (and carbon taxes) is that the case for a ban on outdoor watering, long showers (SUVs), etc. is far weaker than the case for raising the price to reduce water (or carbon) consumption. Of course, these price increases must be large enough for people to notice!

The reason that I advocate per-capita rebates of high taxes is because I do not want to "feed the beast" of government with big revenues.

Bottom Line: Use the simplest instrument possible. Make sure everyone understands it. Implement the instrument transparently. Observe the change in behavior. Adjust.
Readers wanting a longer treatment of this topic should read this 66 page policy paper [PDF] on environmental taxes that is part of the Mirrlees Review of UK taxation policy. Here's part of the executive summary:
The case for using taxes, charges and emissions trading schemes (rather than regulation) to help
achieve environmental goals is primarily a matter of cost-efficiency. Economic instruments may be able to achieve a given level of environmental protection at lower cost, by providing incentives for polluters to choose the most cost-effective abatement mechanisms and by encouraging the greatest abatement effort from those polluters for whom it is least expensive. Economic instruments also provide ongoing incentives for innovation in pollution control; they may also be less prone to influence by polluters themselves than regulations negotiated case-by-case with individual firms. However, they are not a panacea. They can encourage costly avoidance activities, such as illegal waste dumping, and in some cases they may have significant distributional consequences, placing heavy burdens on the poor. They are most useful when wide-ranging changes in behaviour are needed across a large number of polluters – the costs of regulation in such cases are large, and the efficiency benefits of economic instruments are likely to be greater. Little will be gained, however, making the tax structure too sophisticated when the environmental costs are low.

Water Jobs Bleg

Okay folks, I need some help here...

I get emails from students, bankers, professionals, et al. who are seeking jobs in the water industry.

Many of them make the perfectly valid point that "water" is becoming more important. Many of them assume that jobs should surface in proportion to this increasing importance, but many of them are still unemployed.

So -- here's your opportunity to help!

Please comment or Email me with websites, resources, etc. for people seeking jobs in the water sector. These jobs can be engineering, but the largest demand supply is from workers seeking jobs in the "soft" areas (venture capital, environment, economics, management, etc.)

Bottom Line: The importance of a sector is a function of the number of people working in that sector. Do we really value gambling (195,000 employees) more than water (40,000 employees)?

Mos Def's "New World Water"

These lyrics cover a lot of ground....[listen here]

There's nothing more refreshing (that cool refreshing drink)
Than a cool, crisp, clean glass of water
On a warm summer's day (That cool refreshing drink)
Try it with your friends

New World Water make the tide rise high
Come inland and make your house go "Bye" (My house!)

Fools done upset the Old Man River
Made him carry slave ships and fed him dead nigga
Now his belly full and he about to flood somethin
So I'ma throw a rope that ain't tied to nothin

Tell your crew use the H2 in wise amounts since
it's the New World Water; and every drop counts
You can laugh and take it as a joke if you wanna
But it don't rain for four weeks some summers

And it's about to get real wild in the half
You be buying Evian just to take a fuckin bath

Heads is acting wild, sippin poor, puffin dank
Competin with the next man for higher playin rank
See I ain't got time try to be Big Hank,
Fuck a bank; I need a twenty-year water tank

Cause while these knuckleheads is out here sweatin they goods
The sun is sitting in the treetops burnin the woods
And as the flames from the blaze get higher and higher
They say, "Don't drink the water! We need it for the fire!"

New York is drinkin it (New World Water)
Now all of California is drinkin it (New World Water)
Way up north and down south is drinkin it (New World Water)
Used to have minerals and zinc in it (New World Water)
Now they say it got lead and stink in it (New World Water)

Fluorocarbons and monoxide
Push the water table lopside
Used to be free now it cost you a fee
Cause oil tankers spill they load as they roam cross the sea

Man, you gotta cook with it, bathe and clean with it (That's right)
When it's hot, summertime you fiend for it (Let em know)
You gotta put it in the iron you steamin with (That's right)
It's what they dress wounds and treat diseases with (Shout it out)

The rich and poor, black and white got need for it (That's right)
And everybody in the world can agree with this (Let em know)
Consumption promotes health and easiness (That's right)
Go too long without it on this earth and you leavin it (Shout it out)

Americans wastin it on some leisure shit (Say word?)
And other nations be desperately seekin it (Let em know)
Bacteria washing up on they beaches (Say word?)
Don't drink the water, son they can't wash they feet with it (Let em know)

Young babies in perpetual neediness (Say word?)
Epidemics hopppin up off the petri dish (Let em know)
Control centers try to play it all secretive (Say word?)
To avoid public panic and freakiness (Let em know)

There are places where TB is common as TV
Cause foreign-based companies go and get greedy
The type of cats who pollute the whole shore line
Have it purified, sell it for a dollar twenty-five

Now the world is drinkin it
Your moms, wife, and baby girl is drinkin it
Up north and down south is drinkin it
You should just have to go to your sink for it
The cash registers is goin "cha-chink!" for it

Fluorocarbons and monoxide
Got the fish lookin cockeyed
Used to be free now it cost you a fee
Cause it's all about gettin that cash (Money)

Said it's all about gettin that cash (Money) [x9]
Johny cash (Money)
Roseland cash (Money)
Give me cash (Money)
Cold cash (Money)

Cash rules everything around me,

26 Jan 2009

Border Issues

I have lamented the failure to integrate planning for ecological areas that cross the US/Mexican border (e.g., the Colorado River/Delta, Salton Sea and tires (!)), but other areas are also in trouble.

CC sent me some information on the water problems at the El Paso/Ciudad Juárez border. Basically, they share an aquifer and surface source (the Rio Grande), but they have few effective ways to prevent over-use and/or contamination. [Navarro -- the blog author who appears very knowledgeable about the area -- offers this information as a motivation for a "solution" of a shared water system.]

Interestingly, the problems with water have parallels with the problems of drugs at the border, i.e., gangs in Mexico fighting each other (and the police) as they move drugs North to the gringos.

The damage from flawed drug policies (1,600 murders in Juarez in 2008; 5,600 drug-related executions in all of Mexico) parallels the damage from flawed water policies (aquifers dry in less than 20 years).

The solution in both cases is to pay attention to supply and demand.

Gringos demand drugs. Because it's illegal to sell them drugs, illegal gangs [yes, redundant, but I am trying to spell this out...] supply those drugs at profits large enough to kill for.

People demand water. Because local monopolists (water utilities) do not have clear rights to water and charge too little for water, water supplies are depleted to the point of endangering the lives and livelihoods of those on both sides of the border.

The solution, in both cases, must recognize economic incentives.

If drugs are legalized, then people can buy them from stores instead of gangs. Without profits, gangs move on (dancing away, West Side Story style), police are less corrupt, and murders fall. [El Paso's city council voted 8-0 to discuss the "Nation's flawed drug policies." They were then unable to override the mayor's veto. Why? They feared losing federal funding. Can I have my Tenth Amendment back, please?!]

If water rights are confirmed and prices are raised to levels that reduce demand to sustainable levels, then the poor will end up with water (via the lifeline), the aquifer will not dry out, the environment will be healthier, and water mangers will be able to nap during their siesta -- instead of engaging in continuous crisis management.

Bottom Line: People will NOT play nice when incentives reward other actions.


MC sent me a link to ZanAqua, a start-up that's selling a small distiller (20gal/hr) that uses efficient technology to "produce" clean water from dirty water at a cost of about $1,300/AF.

There are two caveats to this technology:
  1. You need a source of water -- potentially gray water or other industrial effluent.
  2. You need to get rid of waste. (The system has a yield of 9 gallons out per 10 gallons in, with one gallon of "excrement". ZanAqua helpfully suggests dumping it down the drain :)
Although the technology is not quite as clean as this "dehumidifier" machine, operating costs are 25 times cheaper.*

Bottom Line: Nice product for a special niche, but it can't compete with water falling from the skies or flowing down the rivers...

* I hate this expression, but it sounds better than "one twenty-fifth" or "four percent of"...

Missing the Point

This story (via DW) shows how the right diagnosis can come with the wrong treatment:
The world is in danger of running out of "sustainably managed water", according to Peter Gleick, the president of the Pacific Institute and a leading authority on global freshwater resources.


A key element to tackling the crisis, say experts, is to increase the public understanding of the individual water content of everyday items.
Yes, we are running out of cheap water. No, the solution is not educating people on the water content of a glass of orange juice.

I don't care how much water it took to make my OJ; I don't care where it came from; I don't care who squeezed the fruit; and I don't care about the companies that conveyed the juice from somewhere to the market where I bought it.

What I do care about is the quality of the juice, and -- holding quality constant -- the price of that juice.

Now I may be an exception, but it's more likely that I am typical in my beliefs. What is very unlikely is that consumers will go to the market and shop for food based on price, quality, sustainability, water footprint, carbon footprint, vegetarian constant, harvest labor standards, locality, etc.

What most people shop for is food that they want to eat (taste), that fits within their menu (complementarity, culture and convenience), that looks good ("nutrition"), and that fits within their budget (price price price!).

There are, of course, a minority (<10% but perhaps a larger share among readers of this blog) who DO factor water footprints, etc. into their shopping decisions, but this minority is inconsequential in terms of market forces AND in terms of changing others' decision making. (It they were consequential, the organic and vegetarian movements would have dominated years ago...)

So what's to be done about the water content of food to make people understand that water is no longer cheap? I hate to say it, and it sounds like a tautology, but the price of food should rise to reflect the water intensity of the food. Duh.

Bottom Line: Prices make it easy for people to compare actions and make the "right" decision. Water prices should rise to reflect scarcity, and food prices will duly follow.

Weekend Discussion: River Restoration

NOTE: This post will stay here until Sunday night. Posts for Saturday and Sunday morning go below this post.

Dear Aguanauts,

Discussion posts allow you to discuss your beliefs on a topic -- to share your understanding, experience and opinions -- without worrying about what's right or what others think. (Check out last week's discussion on globalization, food trade and water supply.) Most important, the discussion allows us to learn from each other. So...

Should rivers be restored at a cost to hydropower and agricultural interests?

25 Jan 2009

Fun Times Ahead

I cannot say how happy this Executive Order makes me:

SUBJECT: Freedom of Information Act

A democracy requires accountability, and accountability requires transparency. As Justice Louis Brandeis wrote, "sunlight is said to be the best of disinfectants." In our democracy, the Freedom of Information Act (FOIA), which encourages accountability through transparency, is the most prominent expression of a profound national commitment to ensuring an open Government. At the heart of that commitment is the idea that accountability is in the interest of the Government and the citizenry alike.

The Freedom of Information Act should be administered with a clear presumption: In the face of doubt, openness prevails. The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears. Nondisclosure should never be based on an effort to protect the personal interests of Government officials at the expense of those they are supposed to serve. In responding to requests under the FOIA, executive branch agencies (agencies) should act promptly and in a spirit of cooperation, recognizing that such agencies are servants of the public.

All agencies should adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open Government. The presumption of disclosure should be applied to all decisions involving FOIA.

The presumption of disclosure also means that agencies should take affirmative steps to make information public. They should not wait for specific requests from the public. All agencies should use modern technology to inform citizens about what is known and done by their Government. Disclosure should be timely.
Bottom Line: Good to see a Government FOR the People replace This One:

Spas, Water and Life

A blogger sent me her post on spas:
I'm interested in developing community around spa and putting the water back into spa. The difference is that I'm talking about doing this on the basis of a set of values and view of sustainability that much of the spa world may have abandoned.

...In the face of the big business that the spa industry has become... I persist because I believe that we need to review and revise the ways we see... spa, not as an industry but as a cultural indicator.
I like the way that she is approaching spas [from s.p.a. or salus per aqua or "health through water"] as a place for connecting to self as well as Nature. It's all too common these days to have "spa in a can" experiences that are more about $45 facials than stepping back for a realignment of self and spirit, community and nature.

It's like parents who have others take care of their kids. Sorry, but I think that parenting (by mother AND father) has more dimensions than making sure there's poptarts and something "good" in the DVD player.

Bottom Line: Ahh -- life can be simple and good, but we tend to find complicated ways to ruin it.

Ethanol and Free Trade

Emmanuel over at IPE Zone [a great blog!] regrets that Obama is likely to continue the twin evils of a subsidy for corn ethanol and a tariff on "unfairly cheap" Brazilian sugar ethanol. A pity, since the best solution to two wrongs is to end both.

Bottom Line: I Hope that Obama will Change the pork barrel policies of special interests to serve the People!

Let It Flow

via JN, we get the flipside of "wasting" water:
Rice Lake officials [are] asking residents to keep water running to prevent pipes from freezing.

The city has asked its 3,400 water customers to leave at least one faucet open with a small stream until further notice — a move that will waste an estimated 4 million gallons of drinking water by spring.
This practice, as the article points out, is not wasteful because 4 million gallons (1 percent of annual use in the area) is a cheap price to pay ($700) for avoiding burst pipes.

Bottom Line: Water management must be appropriate for the situation. Don't waste water in a desert; do "waste" it when there's too much (opening dam sluices) or when spending some now saves a lot later.

24 Jan 2009

British Climate Change Skeptics

...at the Institute of Economic Affairs have put out an 87 page booklet -- "Climate Change Policy: Challenging the Activists" in which they question the conventional wisdom and the policies under consideration:
Certainly, the public pronouncements of politicians and the detailed central planning and regulations that they propose seem predicated upon the belief that politicians, their advisers and their regulators have limitless knowledge about the science and economics of climate change, energy use and the environment.

Or perhaps the political class does not have such knowledge, but nevertheless the precautionary principle demands that something must be done. That is the asymmetric precautionary principle, which demands precaution against the risk that today’s freedoms may harm future generations more than they benefit present generations, but opposes precaution against the risk that today’s constraints may harm present generations more than they benefit future generations.


According to Bertrand Russell, "the whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts." Unfortunately, we expect our politicians to have all the answers, and our politicians expect likewise from their advisers. So we get the policies we deserve, prescribed by fools and fanatics. Fortunately, there are still a few wise people engaged in the policy debate, and the views of several of them are collected here.
They conclude by recommending a tax on the largest sources of carbon (carbon-based fuels and cement) and setting that money aside to mitigate damage from climate change -- should damage materialize.

Bottom Line: This is a good review of the skeptic's perspective. Although I think that climate change IS happening and WILL have disastrous effects, I cannot argue with the flexibility of a tax system that can be cranked up/down as events unfold.

Something Completely Different

(via JWT), we've got some nice footage with lakes and waterfalls....

wingsuit base jumping.

Bottom Line: Don't try this at home :)

More Different

Don't watch this with the kids around...

Bottom Line: Although the French may be able to "increase supply" with this method, the rest of the world is not so lucky. We will have to settle for raising prices to reduce demand at/below supplies.

23 Jan 2009

Ethics and Water

Speaking of water managers out of control, Aquadoc mentions "ethics" in this WaterWired post:
Several years ago, I listened to a talk by a Federal scientist about climate change in the Southwest. After the talk, he was unusually candid. What really annoyed him was seeing Western governors trekking to DC, hats in hands, asking for Federal government help to cope with the drought. But once back home, that message is forgotten, and it is "grow, grow, grow", for local consumption. Is that ethical?

How about water managers who don't want to tell it like it is, or like it could be, or keep doing the SOS, for fear of stifling growth and upsetting the public. Granted, predicting the hydrologic future in the face of climate change is not easy. But it can be done, at least in probabilistic terms. Certainly you can inform people that serious problems may be on the horizon. Shouldn't the public be apprised of this? Shouldn't people/firms who are thinking of relocating to these areas be given more than Reclamation's "all is rosy" graph
Aquadoc is dead-right on this issue, the problem of water managers NOT managing their water in a sustainable way that serves their clients, the People.

In fact, I think that water managers serve two different groups: themselves and their political masters. By serving themselves, they are avoiding the uncomfortable task of telling people "no, you can't use more water." In serving their political masters, they are allowing unsustainable development to continue way beyond appropriate levels.

Although anyone in the water business can tell you a story of how long-term wisdom was sacrificed for short-term profits, I want to highlight what I consider a fact of political-economy and public choice in water: Politicians and water managers are interested in serving themselves -- not the people.

Of course, those water managers and politicians who do speak out for sustainable water use often lose their jobs (e.g., the scientist at the Bureau of Reclamation or the governor of California who was defeated in the 1920s for opposing the formation of the Metropolitan Water District). They lose because their opponents claim that unsustainable growth is possible, jobs will flow, etc. There are plenty of people willing to promise you two burgers tomorrow if you give them one today. Yes, Mayor Sanders of San Diego, I am talking to people like you.

I've actually done research on this topic, i.e., "how selfish are water managers?" My conclusion (see chapter 5 of my dissertation) is that water managers are basically the same -- in terms of selfishness -- as random groups of undergrads. When managers are motivated by self-interest like everyone else, they are unlikely to take the high road (Serving the Public Interest) when the low road ("sure -- use as much water as you want") is so much easier, the tradition, etc.

Of course, few water managers lose their jobs when rationing was declared, so their inaction is completely rational. The incentives are to keep your head down, collect developer fees, and ration water when the shit hits the fan.

Note that the shit just hit the fan -- and water managers say rationing is coming.

Also note that these incentives and dynamics are in place worldwide. California is facing a man-made shortage now, but other western states and regions in the world (China, India, Bolvia, Spain) are facing shortages from water managers and politicians unwilling to sacrifice today to secure a better tomorrow.

Bottom Line: Believe it or not, there's a solution to this messed-up situation that does not involve men turning to angels.* It's to use insurance and prediction markets to monitor water managers, rewarding success and punishing failure.

* The Federalist 51 (by James Madison 1788):
If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

Where Did All the Water Go?

In response to my post on water billing, JWT sent this:
I note your water usage with interest. There are two of us living in a single story 2,000 square foot house. We have water saving everything, but beyond that, we don't make any special effort to conserve water. We do have two sets of outdoor sprinklers that keep bushes growing on two rather steep slopes. I have tested the sprinkler water use and it comes out at 4 units a month. Here is our billed use for the last two years.

12/08 7
11/08 11
10/08 18*


10/07 13
09/07 10
08/07 33**
07/07 14

* I hired the two best plumbers I could find to search for a leak to account for this doubling of water use. They spent two days and used every high tech listening device to search for the leak. Their conclusion is that there is no leak. That cost $300 or more than my total water bill for the year... The City sent a technician and he tested the meter, and proclaimed it exactly correct.

** This bill scared the crap out of me. It says we used about 16,000 gallons more than average. This could slide us down the hill (not a good thing). There was absolutely no evidence of external water use. Nothing changed in the house. The City Water Department just shrugged their collective shoulders and refused to pursue the question.

So I draw two conclusions from these data. 1) You guys use a lot of water. 2) There is a water measurement problem that no one is willing to address, but will make residential water pricing some sort of insanity.
Let's amend Mr. Deming's wise words to the following:

What gets measured and matters financially gets managed.

Bottom Line: If water prices go up, you can be sure that MANY more errors in bills will come to light.

22 Jan 2009

The End of the Western Population Boom?

[Warning! Feisty post today. This Mississippi thing pisses me off!]

Phoenix is losing people from a slowing economy -- not because of water shortages.

When will scarce water slow or reverse growth in dry places? I don't think it ever will -- mainly because there is so much slack in the system. Many crops are grown in dry places, and many urbanites have irrigated lawns. Even assuming that environmental water demand is met, potential reductions in these uses should leave plenty of water for city dwellers. Of course, their environment will get hotter and dustier (more and more with global warming), so they may not be happy with more sweat, sunburn and asthma.

It's interesting to me that the water manager most-closely identified with "endless" growth is sounding more and more, uh, unbalanced with her "solutions" to the fall in supply and rise in demand. Pat Mulroy's defense of the status quo (same sprawling lifestyle PLUS more growth) requires that more water be brought from less appealing places.

Although her support for importing water from Mexico sounds pretty silly, I think her idea of piping water from the Mississippi is batshit crazy. (I don't bestow this title lightly -- she's competing with Jeff Sachs here!)
The general manager of the Southern Nevada Water Authority said now may be the time to take a serious look at a decades-old idea of capturing floodwater from the Mississippi River and using it to recharge the massive groundwater aquifer beneath the Central Plains.

In terms of jobs and investment, the project would dwarf the Hoover and Glen Canyon Dams, and some believe it could secure the future water supply for a vast swath of the Midwest and West, including Nevada and six other states that share the Colorado River.
Oh -- did you say "Green Jobs"? Oh good -- that would make this stupid idea much more acceptable!

[Aside: Hoover Dam was supposed to secure water for the parched West and provide employment during the Depression. It was actually built to bring more electricity to LA; the water was dumped in Southern California at subsidized prices -- contributing to both sprawl and unsustainable population growth. Read Sections 3.2 and 3.3 of my dissertation.]

Frankly, I'd rather see that kind of money spent on replacing every lawn and pool in the Southwest with local landscaping. Yeah, demand destruction!

[Of course, the real solution is to raise water prices at the retail level and auction water among sectors at the wholesale level.]

Mulroy concludes with a stirring invocation of FUD: "Mark my words. Unless we do something considered outrageous by today's standards, the West is going to run dry."

No Pat. The West IS dry. Now is the time to recognize that fact and end the Vegas delusion.

[This discussion will be continued -- and solved(?) tomorrow.]

Bottom Line: People who live in a desert should live a desert lifestyle within the constraints of the desert water supply. To do otherwise is to damage the quality of life, business patterns and the environment elsewhere.


"Plants do not make the powerful greenhouse gas methane, according to new research that contradicts a controversial finding made in 2006. Instead, plants appear to merely be passing gas, so to speak, originally made by soil microbes."

More interesting is this report, which
analyzes the impact of growing four crops--corn, soy, wheat, and cotton, which account for 70% of farmed acres in the Unites States--from 1987 to 2007. One key finding is that the amount of land required to grow a certain amount of food has fallen. Because of yield gains, for example, it now takes 37% less land to grow a bushel of corn than it did in 1987. In addition, the rate of soil loss per amount of grain or cotton grown has declined between 30% and 70%. This is due mainly to the adoption of no-till farming, in which the fields are not plowed multiple times for weed control. Less plowing means less soil blows or washes away.

The analysis, led by agronomist Stewart Ramsey of the consulting firm Global Insight, also finds that the amount of energy spent on farming has fallen by 40% to 60%, probably because farmers who plant genetically modified crops are driving tractors less frequently to spray pesticides and herbicides. Irrigated water use dropped by 20% to 50%, the report found, and carbon emissions fell by about 30%. Wheat was the only crop of the four surveyed that did not post big gains in efficiency. More water is being used, and an increase in application of nitrogen fertilizers has meant an increase in energy use and climate impacts per bushel.
The post also mentions two key factors: First, because it was prepared by 17 authors from agricultural and environmental backgrounds, it is bi-partisan. Second, greater efficiency for a given crop does not mean that a given crop is better than another crop, i.e., it is still unsustainable to grow corn for ethanol when corn displaces a lower-impact crop.

Bottom Line: Knowledge and efficiency are good. Now let's stop stupid policies (ethanol).

Shower Incentives

A reader who works at a utility sent me this letter [click to enlarge]:
The writer is anxious that clubs do more to conserve water because other members do not have the intrinsic desire to conserve that he has (the "20/80 rule"). But clubs may not want to ask members to conserve if that will drive them to the competition (the "plastic bag problem").

The command and control solution would have all clubs install water-saving devices. The market solution would have them pay more as water consumption/member rose above the median for similar businesses (benchmark competition).

Bottom Line: It's hard to force people to do the "right" thing when the "wrong" thing is so easy and/or cheap...

21 Jan 2009

Feedburner/RSS feeds

In its quest for galactic domination, Google bought Feedburner, the service that provides RSS feeds and email subscriptions to this blog. Moving to the googleplex is supposed to be trouble free. Comment if you've had any troubles.

(Also comment if any other widgets on this blog are not working right or as well as they could...)

Poll Results -- Obama's Crowds

Hey! There's a NEW POLL (Why $140 oil?) to the right --->
Obama's Inauguration Will Have How Many People on the Streets?
under 1 million 22%15
1 - 2 million 27%18
2 - 3 million 13%9
3 - 4 million 9%6
4 million plus 28%19
67 votes total
There is no official count of the crowd because counting is political. (WTF? Seems to be a little like "my crowd is bigger than yours") The NYT says over one-million; CNN says 2 million. (The record is 1.2 million for LBJ's 1965 inauguration.)

I am concluding the 1-2 million is right. If you said so -- high five!

Bottom Line: A lot of people were happy to be there.

Water Markets [sic]

So, a few days ago Mike Wade said that "water markets" already exist in California, but facts appear to contradict that assertion.

As a businessman once said to me "Water markets? Great -- where does the WSJ publish the price?"

In fact, water IS traded here and there in California, but there are so few trades, among so few actors, at such heterogeneous terms that it's hard to conclude that a water "market" exists in anything like the form we are used to seeing with, say, oil or corn or houses.

Taking that disclaimer as given, let's look at what data DO exist on water markets.

First is this 2002 PPIC paper [PDF] by Ellen Hanak. Here's the money quotation:
consider the size and scope of the market from three other perspectives. First, at current levels, the statewide market represents only 3 percent of all water used by Californians for municipal, industrial, and agricultural purposes (DWR, 1998). Second, although there has been an increase in the number of long-term transfer agreements, the market continues to be dominated by short-term transactions, negotiated on an annual basis, which account for about 80 percent of the total volume transferred. Finally, the size and scope of the market are strongly influenced by the intervention of state and federal authorities. This influence stems not only from an important direct role in purchases, but also from the relative ease water users have in gaining approval for transfers within the confines of the state and federal projects.

Since 1988, direct government purchases have accounted for nearly one-third of the total volume traded. Transfers among contractors within the same projects (SWP, CVP and the Colorado River Project) account for more than half of all water sold... By contrast, the “open market,” a residual category defined broadly to include any transfers between water users not associated with the same project, accounts for only 15 percent of the water transfers recorded over the 14-year period. This share initially increased immediately after the drought, but it has been on the decline again recently, as direct government purchases for environmental programs have been on the rise.
So 15 percent of 3 percent means that basically no water is reallocated in what would be considered arms-length transactions.

The reason, as Hanak indicates, is that the transactions costs of trades (paperwork, infrastructure, etc.) are so high. That's perhaps why California's Drought Water Bank looks likely to handle only 150-600TAF of water in a year of very high demand. (The State's "developed" water supply is 40,000TAF, so that's less than one percent.)

Note that the temporary nature of these water trades is not necessarily a problem. Few transactions would occur if the only option is permanent sale. Seasonal leasing of water (generally from agricultural to urban sectors) can be helpful in the short run, and cities would rather have some water for a season than none at all.

Second, there is a comprehensive database maintained by Zack Donohew and Gary Libecap, i.e.,
This is a dataset of [over 4,000] water right transactions in the western United States. The data are drawn from water transactions reported in the monthly trade journals the Water Strategist and its predecessor the Water Intelligence Monthly from 1987 through November 2008. The Water Strategist publishes a section called “Transactions” that lists, by state, water transfers. From these publications, all or a subset of the following are collected: the year of a water transfer; the acquirer of the water; the supplier; the amount of water transferred; the proposed use of the water; the price of the trade; and the terms of the contract.
So there is some kind of data available, but prices are not often comparable (within season, there are differences in quality and transactions costs; across seasons, supply and demand shift quite a bit). So, no, there are no water markets in California (or much of the West, for that matter).

Note 1: My All-in-Auctions would change all this, btw, because water would be seasonally reallocated -- by price -- among all members of a given water organization (MWDSC, IID, CGID, et al.)

Note 2: If anyone has a good description of water markets elsewhere in the world (e.g., Chile, Colorado), then please email it to me!

Bottom Line: Most places in the world (!) do not have water markets. Because of this, most people do not know the "value" of water, water misallocation is hard to detect, and the social benefit from water is NOT maximized. Markets please!

hattip to ZD

The Frat Boy Ships Out

The Economist's sendoff is brutal but deserved:
His energy policy was written by Mr Cheney with the help of a handful of cronies from the energy industry.

His lacklustre attorney-general Alberto Gonzales, who was forced to resign in disgrace, was only the most visible of an army of over-promoted, ideologically vetted homunculi.

The Iraq war was a case study of what happens when politicisation is mixed with incompetence.
Don't let the door hit you on the way out...[Prior posts on Bush]

Bottom Line: Absolute power corrupts absolutely -- and transforms stupid into dangerous.

International Cap and Trade

Linkage of Tradable Permit Systems in International Climate Policy Architecture
Abstract: Cap-and-trade systems have emerged as the preferred national and regional instrument for reducing emissions of greenhouse gases throughout the industrialized world, and the Clean Development Mechanism - an international emission-reduction-credit system - has developed a substantial constituency, despite some concerns about its performance. Because linkage between tradable permit systems can reduce compliance costs and improve market liquidity, there is great interest in linking cap-and-trade systems to each other, as well as to the CDM and other credit systems.

We examine the benefits and concerns associated with various types of linkages, and analyze the near-term and long-term role that linkage may play in a future international climate policy architecture. In particular, we evaluate linkage in three potential roles: as an independent bottom-up architecture, as a step in the evolution of a top-down architecture, and as an ongoing element of a larger climate policy agreement. We also assess how the policy elements of climate negotiations can facilitate or impede linkages. Our analysis throughout is both positive and normative
Bottom Line: As a carbon tax fan, I was originally annoyed by this problem (how to link tax systems), but revenue from a domestic carbon tax can be used to reduce carbon emissions in another country (on a bilateral government basis) in the same way that international carbon permits can be traded -- without the games/fraud that disaggregated permit trading invites and with the binding consequences on national caps/emissions that governments can agree to.

20 Jan 2009

Simple Policy Guidelines

Belief is private; knowledge is public.
Religion is belief; science is knowledge.

Make public policy accordingly.

Something Outrageous

Pat Mulroy, of the Southern Nevada Water Authority, is worried about her region's water supplies.

"Mark my words," she continues, "unless we do something considered outrageous by today's standards, the West is going to run dry."

Las Vegas gets to withdraw another gallon from Lake Mead for every gallon it dumps in as treated wastewater. Therefore, her focus has been outdoors, where she has tried many different ways to reduce water use. Some worked, and some did not (outlawing car washing and fountains). But when I asked her about pricing, she seemed to indicate they were doing what they could on that front too. I disagree.

The first tier water price in Vegas is $.87 per HCF for the first 6.7 HCF (5000 gallons). Their next tier doubles that, which is still less than the major California urban areas charge: LA charges close to $3 per HCF for the first 13 HCF (step point is variable depending on household characteristics), Berkeley and San Francisco closer to $2.

Bottom Line:
She may want to try something outrageous (meaning pipelines) but perhaps charging more than $.87/HCF is a better option.

Water, Art and People!

I will be speaking at this fund raiser for the Black Rock Arts Foundation in San Francisco on February 5th.

David will discuss bottled water; four BIG things that you need to know about water; water issues in the developed and developing world; and why water provision is the litmus test for a functioning, civilized community.

Elemental Interactions: WATER!

In appreciation of our Members and Donors, and of the support of our community, we're pleased to bring you yet another fascinating and engaging evening of demonstrations and lectures. The last of our Elemental Interactions series, our guests will speak on the topic of 'Water'. In this series we've brought together an eclectic mix of speakers, other artists, scientists, social historians and others from our extended community and beyond.

February 5, 2009, 6:30 pm
BRAF/Burning Man offices
1900 Third Street, San Francisco, CA, 94158

Admission is free to Members, with a suggested donation of $10.00 from non-members.

Bottom Line: Water has many dimensions besides economic and political!

A Word from the Farmers

As promised in the comments to this post, I spoke to Mike Wade, Executive Director of the California Farm Water Coalition (CFWC) about water pricing and water markets.

We had a long conversation, but here are the comments that Mike wanted on the record:
  1. CFWC favors a "fix" in the Delta that serves the interests of the environment and water users in the Delta and south of the Delta.
  2. Water markets already exist and should be controlled by local entities that arrange trades between willing buyers and willing sellers.
  3. Groundwater should not be metered or monitored statewide. Local water users already know how much water they use.
Readers of this blog will know that Mike and I didn't exactly have a meeting of the minds, and here's why:
  1. A Delta fix is going to have winners and losers. My opinion is that Delta farmers need to be bought out, and that south of Delta farmers (and water users) can do without Delta water.
  2. Existing "markets" are terribly underdeveloped [the Water Bank is a joke], and the biggest trading gains are yet to be realized: There is very little trading across political boundaries in the agricultural sector.
  3. Groundwater needs to be metered/monitored statewide to prevent "theft" of water shared by different user groups and to prevent overdrafting to replace forgone (or sold) surface supplies.
Mike is obviously in a tough place, since he needs to "serve" farm groups with different interests.

He did point out that the current shortage is resulting in land fallowing -- NOT a move to higher-efficiency water use (something that the Pacific Institute predicted would happen) because it's not profitable. I agree that this result is sensible and shortages are hurting agricultural communities (third party impacts), but I also think these changes are inevitable. (According to this article, farmers are also shifting to different crops.)

Bottom Line: In this "New World Order" (so bombastic!), there is less water in total, and everyone (ag, urban, environment) will have to do with less. The best way to reallocate less is with markets -- and markets will send price signals that will help everyone decide how much they "need."

Zero Emissions by 2050

via YubaNet, the Worldwatch Institute's 2009 State of the World Report says that we've locked in a 1C increase on top of the 0.8C temperature increase since the industrial revolution began.
To avoid a catastrophic climate tipping point, global greenhouse gas emissions will need to peak before 2020 and drop 85 percent below 1990 levels by 2050, with further reductions beyond that date. Emissions of carbon dioxide would actually need to "go negative" -- with more being absorbed than emitted-during the second half of this century... even a warming of 2 degrees Celsius poses unacceptable risks to key natural and human systems, including significant loss of species, major reductions in food-production capacity in developing countries, severe water stress for hundreds of millions of people, and significant sea-level rise and coastal flooding.
How are politicians going to deal with this scenario? Perhaps with small steps. The winning idea of the "On Day One -- Ideas for Obama" contest would have the president plant an Organic Victory Garden. After planting, the President's Secretary for the Garden may have to "motivate" the Congress into considering some more radical ideas.

Bottom Line: Do something, but make it fast, simple, scalable and reversible. (Oh, yes, that IS a carbon tax!)

19 Jan 2009

Stupid Water Bills

A few months back, I blasted East Bay Municipal Utility District (EBMUD) for their badly-designed water conservation scheme. Last week, I got my water bill for the past two months, and now I see that I was too kind.

EBMUD is really NOT doing a good job at handing the water shortage.

Here are some facts:
  • Our water and sewer bill is $125. Of this, $36 is variable (metered water use), and $89 is fixed.
  • Of the $36, we paid $26 for 13 units (748 gal/each), and $10 for "excess" use of 5 units.
  • That 100 percent surcharge works out to $5/month, i.e., one more latte/month.
First, I don't care about $5/month surcharges. EBMUD's "penalty" pricing is not incentivizing me, and I will continue to use as much water as I want.

Second, we used 145 gal/day, which is above our "allocation" of 89 gal/day. We are two guys who don't water the lawn. We wash clothes and dishes in the machine (about 3 loads/week) and take occasional showers -- I shower at the gym; Nick stays with his GF a lot. So where should our water "savings" come from?

Third, our allocation for the next two months is 99 gallons/day because EBMUD is giving us the same number of units (8), but the billing period is 60 instead of 67 days. (BTW, I checked the meter -- it has 1.00 unit accuracy!)

Why are accounting details driving water use quotas?!? It seems that EBMUD is more interested in a billing cycle than a sensible communication on water use.

Further, EBMUD has NO IDEA of how many people are in this house (a per capita allocation) and NO IDEA of our water habits. EBMUD just looked at historic use at this meter and knocked 20 percent off that use.

I am NOT a meter! I am a human, and humans need to have water budgets and charges posed to them in HUMAN terms.

Here's how (doh!)
  1. Count the number of people at the meter.
  2. Each person gets x gallons/day (say 50) at a cheap rate.
  3. Use above that rate pays a 100-200 percent surcharge.
Bottom Line: Water utilities can fail at execution because they are monopolies, and the penalty for failure is just rationing.


Anyone can download this book for free, and the contents appear to match my own views on the economics of energy policy, i.e., "tax carbon and refund all the revenues on an equal-per-person basis;" "transfer payments from countries with high emissions per capita to those with low emissions per capita. This leaves China at the neutral point;" etc.

What I like more is the author's business model:

So why give it away?
  • It collects America’s best ideas, and Dan and I want to get the word out.
  • If it’s not right for you, we don’t want any unhappy customers.
  • The sooner it catches on, the more books we’ll sell.
  • And I hope you’ll pass it on to anyone who might like it.
Why should you buy this book?
  • To get the endnotes and index.
  • Printing it will cost you about 4¢/page (ink & paper), or $11.
  • For very little more, you can get it nicely bound, with a color cover.
Bottom Line: I hope that this book works as a business model and as a means of spreading ideas. Tell me what you think!

Soda Taxes

This NYT column is about a month old, but the question is interesting, i.e., "should we levy an 18 percent tax on soda?"

Here are the claims:
  1. Americans drink 35 gallons/year of non-diet soda.
  2. America's obesity epidemic can be traced to soda.
  3. Obesity costs the public via higher health care spending.
  4. Soda is "too cheap" because corn subsidies make High Fructose Corn Syrup (HFCS) cheaper.
  5. New York's budget deficit makes it desirable to find new revenue sources.
Gee -- corn subsidies are stupid for another reason besides ethanol? Damn.

So the libertarian argument that people should be allowed to do what they want (1 and 2) is weakened by (3), and taxes (5) are better than a ban (marijuana anyone?) because they still allow people to consume at a higher cost. Is (4) a valid reason to raise taxes on soda? Not really -- it would be better to end subsidies and allow sugar into the US at world prices -- but, as Ben Ho would say, some people think that one stupid idea deserves another...

Bottom Line: If soda is bad for you like cigarettes are bad for you, then tax it.

hattip to DW

18 Jan 2009

Weekend Discussion: Globalization

NOTE: This post will stay here until Sunday night. Posts for Saturday and Sunday morning go below this post.

Dear Aguanauts,

Discussion posts allow you to discuss your beliefs on a topic -- to share your understanding, experience and opinions -- without worrying about what's right or what others think. (Check out last week's discussion on commuting.) Most important, the discussion allows us to learn from each other. So...

Do globalization and liberalized farm trade favor more sustainable water use globally?

Water and Lifestyle

I've had several emails from people describing how important water is to their community's culture and lifestyle.

Water has defined us for eons. Water determined where we lived (London, San Francisco, Mumbai, etc.); what we ate (fish or camel? cactus or watermelon?); the location of our borders; and so on...

It is thus terribly upsetting to consider a world in which water patterns change. We have tried to control those flows for many years, through dams, canals, etc., but now our voluntary changes are being reversed by involuntary changes.

Global warming is disrupting precipitation patterns and changing the spacial and temporal patterns of demand from Nature as well as from us. It is now common to find that the demands for water resulting from our lifestyles exceeds available supplies.

After centuries of us forcing water to do what we want, water is now forcing us to do what it wants, and nobody is happy about it.

Consider similar instances of change coming from outside: invasion, job losses, political policy shifts. Nobody is happy when an occupying force arrives, when they must move or retrain for anther job or when some activity changes from legal to illegal. But they often are forced to "deal with it" and move on, using different methods (drugs, counseling, crying, violence) to minimize the pain.

People need to adjust to changes in their "water lifestyle" in the same way that they need to adjust to other changes. They don't want to, and it's not easy, but they must.

One of the big reasons I write this blog is to offer help in making those adjustments. There are easy and hard ways to adjust: Prices are better than rationing; markets are better than zero-sum political reallocations.

Of course, people may not like my advice, but they will have to deal with change in some way. Pretending that it's not happening or that no action is needed is not an option.

Bottom Line: People don't like change, but sometimes they must change, and the cost of that change can be much higher than necessary.

Food, Land and Water

via FCRN, we get this article:

"Food and land use. The influence of consumption patterns on the use of agricultural resources," Appetite 45 (2005) 24–31

Abstract: This paper assesses the relationship between food consumption patterns and the use of agricultural land. First, it calculates the amount of land needed to produce singular foods, and second, it assesses land requirements of food consumption patterns. The paper observes large differences among requirements for specific foods. Especially livestock products, fats, and coffee have large land requirements. The consumption of specific foods can change rapidly over time, causing shifts in land requirements...

Per capita land requirements differ among countries. In Europe, Portugal showed the smallest requirement (1,814 m^2), Denmark the largest (2,479 m^2). The Danish pressure was mainly caused by large consumption of beer, coffee, fats, pork, and butter. The trend toward food consumption associated with affluent life styles will bring with it a need for more land. This causes competition with other claims, such as infrastructural developments or ecological forms of agriculture.

Readers may also want to check out a related paper by the same author: "Energy from agricultural residues and consequences for land requirements for food production," Agricultural Systems 94 (586–592).

Bottom Line: Our demands for different types of food affect productive resources (land -- and water!), and market demands for nutritionally "wasteful" foods (coffee, corn-ethanol) can reduce available resources for "socially efficient" crops.

17 Jan 2009

The Real Estate Market Index

When one wants to describe the real estate "market," it's important to consider more than just price. Two important features of any real estate market are the number of houses sold and speed with which those houses sell.

Unfortunately, most people describe the real estate market like a typical commodity market -- by price alone. While this may make sense for deals that begin and end in seconds or when volume fluctuates in a narrow band (stocks, corn, etc.), it does not make sense with real estate -- where deals may take months to complete, and mismatched supply and demand are very important.

So that's why I created a Real Estate Market Index (REMI) as a better indicator of activity in "the market" [prior post]. The REMI combines median price, total number of sales and median days-on-market (DoM, how long before the house goes into escrow) into one statistic. It gives a much better indication of market liquidity -- a characteristic that is very much en vogue during this credit crunch.

For Example: Compare Mission Viejo's market conditions in February 2004 and February 2008: Although median prices are nearly identical ($495,000 versus $500,000), sales and median DoM are nearly reversed (142 sales averaging 8 DoM in 2004 versus 70 and 148 in 2008). REMI values reflect those differences: The 2004 REMI is 229, but the 2008 REMI is only 15.

Here's what the 2000-2008 REMI for Mission Viejo, CA looks like [click for larger image]:

Note that the market bottomed out about one year ago. Since then, prices continue to fall, but more transactions and fewer days on market mean that "the market" is working better.

Anyone with data and a spreadsheet can create their own REMI. Here's a template [XLS] that shows monthly data, weights and REMI values.

If you are interested in reading my paper on the REMI, click here.

Bottom Line: We cannot understand something until we measure it, and price measures miss important components of the real estate market. The REMI will help you understand.

Cultural Evolution

I just bought my tickets to Burning Man (a festival in the Nevada desert -- one of those "you've got to see it to know it" things).

This year's theme -- Evolution -- is pretty interesting:
The human species, Homo sapiens, has existed for approximately 200,000 years. The genus known as homo has a lineage stretching back two million years. Homo erectus, the first human ancestor to walk upright, and Homo habilis, the toolmaker, are among our relatives. We are a bud belonging to a twig of this ancestral tree.

The process of trial and error that has made this possible is called Natural Selection. Genetically encoded traits that aid survival tend to spread throughout entire populations. Living entities that bear these genes endure and reproduce, but maladaptive traits are not passed on. This causes species to evolve to better fit the world in which they live. However, this rigorous weeding out of 'unfit' individuals has gradually ceased to occur within our species. Medicine and mutual aid assure that nearly anyone is able to survive and reproduce. Now adrift in our own gene pool, we have encountered a new phase of evolution. We've become a conscious breed of culture-bearing animals. Black Rock City is a kind of Petri dish, and Burning Man is an experiment in generating culture. We've learned that culture's a spontaneous phenomenon. It thrives as a result of numberless and unplanned interactions. All that's really needed is a fitting social vessel to sustain it. This happens best within communities that harbor many different modes of self-expression. We've also learned that cultures effloresce when human beings feel free to offer up their gifts.

Our theme this year prompts three related questions: What are we as human beings, where have we come from, and how may we adapt to meet an ever-changing world?
Bottom Line: Interesting questions that make life worth living contemplating...