14 July 2009

What Does Reliable Mean?

A guest post by Jeffrey A. Michael*

I have been reading and listening to California’s agriculture industry a lot lately. Reliable is their favorite word. They need a reliable water supply. They need a reliable labor supply. And they want the government to adopt policies to ensure reliability.

In most situations, reliability problems are solved by paying more, but the farmers do not support higher prices/wages. To the agricultural industry, reliable seems to mean cheap and abundant.

It works well politically. The public is more supportive of “reliable” than “cheap.” Reliability is now promoted as the desirable goal of water policy. The first recommendation of the Delta Vision Report is “The Delta ecosystem and a reliable water supply for California are the primary, co-equal goals...”

I’m afraid this goal will only perpetuate unrealistic expectations of Delta water supply without a clear definition of reliable. In recommendation 10, Delta Vision restates it as “the co-equal goals of ecosystem revitalization and adequate water supply for California.”

So, reliable means adequate? My used car is not reliable, but it is adequate.

Bottom Line: If you want something to be reliable, you have to pay for it. Raise prices now! We may find our "unreliable" supply is adequate after all
* Director (Business Forecasting Center) and Associate Professor (Eberhardt School of Business), University of the Pacific

7 comments:

WaterSource/WaterBank said...

David,

What a novel idea... "If you want something to be reliable, you have to pay for it."

When it comes to water the most important aspect is a reliable legal system that enforces the law upon which you relied when you went to the cost and trouble of perfecting your appropriation.

In a reliable system you are entitled to the conditions that existed when you made your appropriation. Before you ever start a water project in a prior appropriation system, you know who has water rights better than yours and when you could reasonably expect to receive water and in what quantity and quality. If someone didn't do their homework before they started on their water project ... that's the real world.

Few things in agriculture are reliable: weather, water & insects are controlled by Mother Nature while energy costs, labor and government regulation arrive as man made surprises...

As a whole, agriculture has come to rely upon all sorts of government exemptions, subsidies, and special good-ole-boy deals.

The US public wants/demands agricultural products at a reliable, cheap price. Up until now, the generation of vast amounts of debt dollars have been available to satisfy both agriculture and the consumer.

Reality has now arrived in CA ...

Governmental enforcement of laws long ignored coupled with a drought cycle in the midst of economic depression have destroyed much of what was once considered "reliable". (A major earthquake would complete the perfect storm.)

"Reliable" will have to be re-invented. The existing water system is definitely 'broken'. Trying to fix the existing system has become a taffy pull in a gridlock of competing needs and unrealistic expectations.

A "reliable" alternative, complete with "adequate" storage in an "reliable-adequate" facilities has been offered for investigation/verification, but the "cheap" mentality still prevails. In fact, almost everyone wants complete knowledge of "reliable" alternative for FREE.

"Reliable" is no longer cheap or free ...

WaterSource/WaterBank waterrdw@yahoo.com

Mister Kurtz said...

You'll accept a degree of un-reliability in a used car that would not be acceptable in an airplane. Municipal and industrial water users have some flexibility in the amount they consume, but little or no tolerance for interruptions in supply. So with agriculture: someone with substantial investments in a drip irrigated citrus orchard has more "hardened" demand than a row crop farmer who uses flood irrigation. A farmer who provides housing and employee benefits to her workers has can not tolerate the business interruptions that someone who fills his truck with men from the Home Depot parking lot each morning can. It is popular to call for higher value crops, irrigated by sophisticated means. Nobody will make or finance these improvements without believing the water source is reliable. I think we have seen the apex in irrigated acreage in California, although the industry will continue to be important forever, if we are wise. For what will be left, growers simply want to know what they can count on, good or bad, without lurchings in the regulatory or legal landscape that represent a 180 degree change in public policy. It's like going to a doctor who says "Well, you might have a brain tumor, but you might have a head cold. Come back next week."

Jeff Michael said...

Both good comments. It is a simplistic post. It's intention is that people interpret this key word very differently, and that reliable and adequate mean very different things and are used interchangeably here.

MK: I think many growers are hoping for much more than knowing what they can count on.

I would be interested in knowing what growers would choose if presented with cheap and unreliable (current world) or expensive and more reliable.

The current effort is to increase reliability (at high levels of supply), and get someone else to pay for it whether it is public financing of infrastructure or environmental degradation.

Yes, environmentalists are often guilty of the same thing - wanting others to pay for their interest.

Mister Kurtz said...

Jeff, I vote for expensive and reliable. The entire industry is becoming more capital and knowledge intensive anyway, and I prefer to see the barriers to entry kept high. Poorly capitalized knuckleheads are the first ones to go whining to the government to "save the family farm" via handouts or trade barriers.
However, it is important to point out that farming is generally a low margin business. In addition, typically farmers have no pricing power, and therefore have to concentrate on increasing efficiencies (raise yields, lower input costs). Since water is a major input...well, you see the problem. I am hopeful that water sales can compliment crop sales. This should produce an additional income stream which will allow growers to spread their risk profile and to improve their irrigation infrastructure.

Jeff Michael said...

Update: I watched parts of today's (8/18) big water hearing in Sacramento, and this issue came up repeatedly.

Jean Fuller (R-Bakersfield) posed this exact question (What does reliable mean?) to 3 water bill sponsors. All 3 gave different vague answers with the most common sentiment being it meant reducing the reliance on Delta exports (which I read as less water). At the end, Rep. Fuller said "I thought it meant more water."

In a later panel, I saw a Rep ask the panelists if they supported the co-equal goals (ecosystem and reliability). In short, two of them gave a qualified yes depending on how reliability is defined.

Bottom Line: If you don't want courts allocating water, you need to make the meaning of your laws clear.

David Zetland said...

@JM -- the whole co-equal goal thing is not only stupid but impossible. One must choose weights for each; if they are contradictory, then one must choose which to favor.

Eiffel Fine said...

There are important concepts missing in the Delta water supply discussion in the Legislature and with the Administration. They do not ask how much will it cost? Their experts and the $billions spent on CalFed can't tell them that it will work, and of course the really amazing part of all this is the question over how we will afford the bond repayments or continuing appropriations when we have already cut most middle class government "benefits" as well as a huge cut out of the social "safety net". Perhaps "reliable" is not an affordable or even realistic concept to apply to Delta water or any surface or imported supply in the 21st Century. Let's look now a local self-reliance and sustainable solutions!