25 Mar 2009

Trivial Lattes

Thirsty in Suburbia questions water footprints -- with good reason. They are useless if opportunity costs are not explicit (i.e., if we do not have to choose between different "water consuming" actions).
One stat burning the wires over the past several months: one cotton t-shirt = 2,700 litres of water.

[snip]

Many “water footprints” strike me as dumb and dumbed-down in the same way. Your not buying a t-shirt will not directly benefit the water-deprived of the world. And by oversimplifying a complex system, we encourage disbelief or worse, apathy.

My bottom line? Too much “GEE WOW,” very little “WHAT NOW.”
Note: When water prices reflect scarcity, we will make the "right" production/consumption decisions -- in the same way that we would make the right decisions when the cost of pollution (a negative externality) is reflected in the price of the product.

Meanwhile, MIT Sloan's blog comments on the significance of the 200 liters of water required to produce a latte:
The issue isn't that we should stop using water but that we should start using it more intelligently, to avoid shortages and water resource wars in the future.
I left this comment:
These trivia are interesting, but non-actionable (do you want to save water or drink coffee?)

If the price of water (energy, etc.) reflects the resource's "true value", then the price of the latte is appropriate -- and no further action is required. Read Hayek to understand why.
Bottom Line: Water footprints are great for generating consultant fees, but they are useless unless we are going to use them in some way. It's much easier to price water at a sustainable level (so we have neither shortages nor surpluses in the long run) and then let people make decisions based on price alone.

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