26 March 2009

Report: Water Conservation Forum

As promised, I went to PG&E's forum in San Francisco. I had the chance to attend two talks, and neither was very satisfactory.

(Someone just told me that it's hard to blog when you may say something that upsets the boss. My boss is dead, so I get to say what I want.)

Blaine Hanson from UC Davis basically said "if you like food, don't take water from farmers" -- a form of FUD that I find particularly galling. Of COURSE farmers will grow food if water is reallocated (via markets):
  1. There's NO WAY that cities could absorb all the water, and environmental flows can co-exist with agricultural application.
  2. Farmers will always grow the most-profitable crops. If they have less water left after welling some, they will stop growing the least-profitable crops.
  3. Food prices will rise if land is taken out of production, drawing in supply from other states and countries -- as well as bringing California land back into production.
I got in trouble for interrupting him so often, because his presentation [PDF] lacked the most-basic qualifications of economic costs and benefits. It would have been better if Hanson spent more time on what he knows (irrigation) and less time on what he doesn't (markets).

Rick Soehren from California's Department of Water Resources gave a typical drought presentation [PDF]. When I asked him about groundwater, he deferred to the Legislature. (He did say -- as a private citizen -- that groundwater and surface water need to be co-managed.) When I asked him if DWR has done a white paper on the value/consequences of groundwater monitoring, he fell silent. I can predict that legislators want information on groundwater from DWR. If DWR has nothing to offer, either nothing will be done, or some political hack job will make matters worse. DWR needs to at least PRETEND that it understands Water Resources!

Bottom Line: This forum was heavy on low-flush toilets and weak Weak WEAK on the economics of water conservation. If I was presenting, I would say one thing: There's a water shortage because demand exceeds supply, and the way to fix that is by raising prices!

6 comments:

  1. That Blaine Hanson pdf is indeed awful. "Do you like ice cream?" "There's no other choice." Unbelieveable.

    What is it with UC-Davis civil and environmental engineers pretending to be economists.

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  2. Well, Jeff, it's kinda like when economists try to be engineers and biologists...yes, David's observations are correct. Mr Hanson really does know a lot about irrigation, and those who want to understand the trade-offs and complexities would do well to listen to him. I have heard many self appointed experts who wouldn't know the difference between a headgate and a headache flannel on about agricultural water waste at great length. Where Hanson goes astray in the Powerpoint is in attributing too much good to agricultural output. But much of the rest of his presentation is food for thought.

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  3. It needs to be said that the "fix" you prescribe to the demand/supply imbalance is not the only one. Yeah, one way to get back to an equilibrium is to raise prices. But another way is shift the supply curve outward by building new infrastructure.

    As I have said, I prefer the latter because it does not cause a systemic shock to agriculture. Sure, raising prices will also get you a solution to shortage, and sure, there are (duh) farmers out there who will sell out to urban interests, but what ends up being sacrificed is current agricultural output.

    Maybe that's a good thing if you like nice market solutions, and if you don't care about rough transitions in the farm sector, and if you're willing to turn a blind eye to the reality that the demand for food and fiber will be serviced elsewhere - i.e., from third-world outsourcing, under conditions more problematic from a water and environmental perspective than exist here in California.

    The market perspective espoused here on Aguanomics is, largely, to just buy out the farmers to solve our water problems. How about the alternatives? One, stop urban growth unless it brings corresponding water supplies to the table. Or two, bring the demand for environmental flows into the economic model.

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  4. @CF -- new infrastructure makes no sense until we use our OLD infrastructure, and current institutions (e.g., prices and regulations) have not allowed that.

    As you know, I have no attachment to "current agricultural output." What's more important is that output go up and down according to costs and benefits.

    I will pass over your FUD comment on foreign food (wait for tomorrow afternoon!), but I WILL agree that urban expansion and enviro payments need to be brought into the model. How? By markets, of course!

    (So we agree, after all...)

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  5. Dave, why the "FUD" comment on foreign food? I'm not so much talking about "food security", which is one of those fear issues I think has been overplayed, but about what I intuit as the basic logic that constant demand for food and fiber played up against diminishing supply of that food and fiber from domestic sources will inevitably mean that we outsource come of our supply, unless you favor trade barriers to remove some of that demand by driving prices up.

    Assuming you don't favor trade barriers, what I see is the unserviced demand being serviced by the third world. I am unaware of many (or any?) third-world countries that require farmers to produce under the host of environmental protections that we do. Can you name some?

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  6. @CF -- I was referring to FUD in the service of trade protection. Taking phyto-sanitary standards as given (and applied across the board), I am happy to eat food from anywhere -- including China and Mexico. I am sure that you would do the same...

    If you are interested in higher food standards, then visit the EU. After you visit them, check out most of the developing world -- where "organic" means "normal."

    Agro-business production in this country and elsewhere is constantly pushing against enviro standards. That's a pity, since self-regulation would have been far more sensible -- had farmers been proactive about growing healthy food instead of cheaper food. (Note the parallel with farmers' regard to groundwater and water markets. )

    REAL farmers (recall the recent post) ARE enviros who grow healthy food, guard their groundwater and welcome markets as a means of getting water to those who "need" it most...

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