26 Feb 2010

Macroeconomic bonanza!

The dark arts of macroeconomics are getting a lot of coverage recently. (Digression: The recession in the US and other countries has not hit Australia very hard, mostly because Aussies export raw materials to China.)

Russ Roberts has been doing some great stuff on it.

Listen to this podcast with Larry White on business cycles and this one with Michael Belongia on the Fed.

And then watch this very good video, in which F.A. Hayek and J.M. Keynes rap about monetary and fiscal policy:

Bottom Line: Keynes may look cool, but Hayek is right. It's all about disbursed information, yo.

Water Chat with Lin Crase

I enjoyed talking to Lin Crase about water economics and politics in Australia. I was amazed at the number of parallels between Australia and California (too many rights issued for too little water, infrastructure subsidies to farmers, environmental collapse, politicians who don't tackle the issues, etc.)

We also discussed how water problems (and solutions) differ from place to place.

I enjoyed Lin's candid views of what has happened, will happen and should happen in the water sector. He placed great emphasis on the failure of leadership by politicians and water industry people -- or perhaps that's intentional?

Listen in to our 41 min chat [14MB mp3]

Bottom Line: Australia's governance problems are VERY similar to those in the western US. We should learn from their mistakes and be braver in reaching solutions.

25 Feb 2010

End of drought! Abundance restored?

This article gives the cheery news -- the US is in its best shape -- in terms of precipitation -- since 1999.

Two troubles remain:
  1. We still need to recharge overdrafted aquifers -- some will need years or decades to recover.
  2. There is no sign of demand control. Even if supply goes to "normal" -- and I am not betting on that with climate change -- demand can still outpace it, leading to shortages of the manmade variety.
Bottom Line: We're not back to the good old days, but our institutions for managing water are. Time to reform, to improve the reliability into the current system. (Yes, markets, prices, etc...)

Water chat with Sergei Schreider

I was pleased to chat with Sergei Schreider, a hydrological engineer who has turned his talents to modeling hydrological demand systems. Since those models did not match reality very well, he joined forces with economists to add market prices for agricultural products. His team is hoping for better results in the future.

This is not the kind of work I do (I think that markets are too complicated to model; and I don't really care who does what, as long as they face clean incentives), but it reminded my of the CALVIN model that Jay Lund and Richard Howitt use for California water. They connect that model to another one with agricultural output, so there must be some similarities there -- and hopefully not as many flaws!

I was pleased to hear that the teams he works on [see Research Grants on his home page] include people from government ministries, which means that the models are built to be used. Sergei was not interested in speculating how politicians might use the models, since this is a touchy subject. (Of course, a bad model can be worse than no model at all, if it leads one to take actions with confidence that turn out to be badly miscalibrated.)

Listen to our 39 min chat [14MB mp3].

Bottom Line: All models are wrong -- some are useful and some are dangerous.

24 Feb 2010

Energy pricing bleg

GM asks:
Do you know whether power plants in the US are charged marginal rates for water withdrawals and "consumption" (e.g. through evaporation)?
I don't know, but I guess that they pay little or nothing, since their water either comes from a stream or their own wells, and marginal prices apply to treated water. (If there was a water market, we'd see the effects of marginal prices.)

Do you guys know?

Reporters doing a good job

An excellent article (via 5 readers!) on agricultural jobs and water.

The west side of Fresno county Westlands is doing badly. The rest of the State is in good shape.

Too bad that Diane Feinstein confuses Westlands with ALL of California.

Politicians doing a good job

This article (via DW) reports how San Diego councilmembers asked hard questions about the performance goals that employees of the city water agency were meeting. It turns out that these employees were setting their own targets, based on incorrect or old "competitive" criteria. When they met those targets, they were paid bonuses.

The trouble is that they didn't earn those bonuses by doing a particularly good job.

It's like students giving each other grades. If the teacher isn't careful, everyone gets an A -- and learns nothing.

Bottom Line: Incentives are important, but they can be abused.

23 Feb 2010

Travelblog: The Castle -- The Review

This 1997 Australian movie tells a David-v.-Goliath story of a man who defends his home -- his castle -- against a State condemnation that would turn his land over to developers.

The movie's theme is similar to the Kelo case, but it differs in outcome. In this movie, the little guy wins, defended by the notion of what's fair.

(If you didn't see the recent news, it turns out that all the pain and suffering in Kelo was for naught -- the land developers who leveled people's houses went bankrupt.)

Unfortunately (as with Avatar), the little guy loses in the real world, because "fair" is discarded in favor of efficiency. And for that tragedy, we have economists to thank. Pretty sad, indeed, to consider that I belong to a caste of accidental killers -- people propounding policies for "the general welfare" that end up benefiting the few at the expense of the many. I wonder what Mssrs. Hicks and Kaldor think of their theory, the one that justifies a move that increases "aggregate social welfare, even if it's at someone's expense, if the winner can -- in principle -- compromise the loser." The trouble is that this compromise rarely occurs after the action, even when it is promised before the action.

Bottom Line: Better to respect people's rights than take those rights away in exchange for some promise of "making them whole."

Travelblog: Aussie beer accounting

It's harder to buy booze in Australia (or perhaps just in Queensland). Grocery stores don't sell it; you have to go to a bottle shop. Bottle shops do not (or cannot) keep long hours. Even when you get there, the stuff is expensive. Taxes raise the price of a six-pack of decent beer to AUD15.

That doesn't keep Aussies from drinking vast quantities of beer, of course. Nor did it keep us from trying to get the stuff. But sometimes we failed, and that was sad.

Thus, we found ourselves on Moreland Island, without anything to drink with our meals. (Yes, water is amazing, but it doesn't quite complement the cheese and crackers.)

Earlier in the day, we saw a bunch of guys guzzling massive amounts of beer; see photo for their floating fiesta. I walked over to their camp, hoping to buy a few bottles form what I assumed to be a vast supply.

Indeed, they had beer. I asked a guy if I could buy a few beers. "Sure, he said," pulling two six-packs out of the fridge. "No," I said, "I just want two beers."

He looked at me like I was from another planet.

"Nope, can't do that. I'll give you this six-pack for 15 dollars."

"But, I only have ten dollars."

"Well, then, take it. No worries, mate."

And thus I discovered how an Aussie would rather take a cash loss than countenance the premature dismembering of a "basic beer unit."*

Bottom Line: Communication is built on standards; make sure you are using the same units.
* I saw the guy on the ferry the next day and gave him five dollars. When we were hitchiking from the port, he picked us us, taking us to the train station and saving us 20 dollars. That's how the ebb and flow of "no worries" makes everyone better off...

22 Feb 2010

Monday Funnies

I've done some consulting, but I tried to tell the truth. I've not been re-hired :)

Speed blogging

  • The Atlas of Water reviewed.

  • "Ethiopia's Newest Dam Suffers Tunnel Collapse Days After Inauguration" Italians and corruption involved.

  • This $700 water filter will save you money after two years (of not buying bottled water), but it looks good now. Get out your platinum card!

  • Cutting invasive trees to decrease demand for water (that can be used for solar). Win win?

  • IBM is helping with Sacramento's sewage [IBM blog], but I don't know if they are preventing spills (storm flows) or removing all waste.

  • Syrian farmers have REAL problems with drought -- thousands of families migrating to cities. They use 90% of the country's water to produce 20% of GDP, but there's no market -- for reallocation or rationing -- in sight. Speaking of that, teaching farmers in the Middle East to use less water without using prices and markets for water is stupid.

  • "Desertification, flash floods, melting glaciers, heatwaves, cyclones or water-borne diseases such as cholera are among the impacts of global warming inextricably tied to water."

  • USGS on how wells get contaminated.
hattips to DL and DW

21 Feb 2010

Making Work Pay Tax Credit

I paid my taxes this morning and realized that I owe $146. Past years have been more painful but this year, what hurt more is my expectation that I had a refund coming. Apparently, the Making Work Pay tax credit lowered withholding levels, but did not change tax rates. The $400 credit therefore makes the lowered withholding amount coincide with the unchanging tax rates. I have two problems with the credit:
  • I did not realize my checks were larger. I get direct deposit, and do not pay attention to small changes in the amounts, especially because they frequently change for other reasons. Therefore, this had no stimulative effect on me.
  • The overall tax rate didn't change - the credit is merely temporary, and it is very nice, but why not permanently lower the rates? See Permanent Income Hypothesis.
Bottom Line: May we have one federal tax which includes both the income and payroll (social security and medicare) taxes, including the share that our employers pay on behalf of us?

19 Feb 2010

Politicians stop redistricting from working

I was hopeful here, but my fears have (via JWT) turned out to be true -- politicians have written the redistricting law -- which would make districts less demographically biased and thus make elections more competative -- to exclude the citizens who may know more.

The most obvious way they are doing this is by excluding anyone who has changed political parties in the last five years, which probably excludes half of California.

Bottom Line: Politicians are not interested in representing us as much as themselves and their donors.

IID finally pays its bill -- kinda

Imperial Irrigation District not only controls 8-10 percent of California's water; it's also dysfunctional -- its "customers" are mostly farmers (they are the reason that IID has great water rights on the Colorado River), but the farmers lost control of IID management and "their" water.

So, when IID sells water to San Diego (CWA), they do not decide which water is allocated, how the "mitigation" funds are spent, or even when they will get paid.

Well, after 2-5 years of waiting for their money, they are starting to get paid.

I know that they are glad to see some of their money, but I am also sure that they are not too hopeful for the future. That's because IID is still controlled by the same folks, and those folks don't care about maximizing the value of that water; they care about using it to subsidize local consumption and porky-projects. (They are also incompetent.)

Bottom Line: IID will not serve its customers until those customers control it. IID governance needs to be reformed. (Insiders know that this means splitting energy and water divisions; read this.)

18 Feb 2010

Are you tired of mis-spent stimulus money yet?

via DW:
The government is spending $40 million in federal stimulus funds to pull water from underground aquifers in drought-stricken California, even as evidence is growing that the well-drilling boom could degrade the quality of water delivered to millions of residents.
Better to have not spent the money at all! (Here's how I would have done it.)

Speed blogging

  • Chlorine in the water may be dangerous, but this advertorial by a water filter consultant at Scientific American shows that scientific integrity is in even greater danger. Shame!

  • The economics of ecosystem services.

  • The economics of wastewater from processing grapes into wine. Insufficient capacity > spills > offers to ship and process waste elsewhere. Amazing.

  • Water use by tourists in hotels is 3-6 times higher than use by locals; hotels have cut water use by 10-20% with programs to reduce laundry.

  • A friend in need is a friend indeed -- or in deed? Read this.

  • Hawaii pushes for 70% renewable energy by 2020, putting California to shame.

  • Water in the WSJ: Water is too cheap (check); Indian farmers prefer rationing to unreliable energy (check); regulators push prices lower, worsening shortages (check, unfortunately).
Hattips to BC, JC, EF and DL

Do you like the new banner image?

Puns and other comments welcomed :)

17 Feb 2010

Bleg for good water books?

KG sends this from his library in India:
I am currently building up the section on "Water" at a public library in Pune, India - the Venture Center library. I have gone through all the book reviews on your blog, and have already bought/ordered some of those books.

Could you please recommend a few others?

Specifically, we are looking for books that define problems related to water, and talk about how innovation in technology or in business models may solve these problems.
Besides these "aguanomic" books, what others would you readers recommend?

Is Feinstein mislead or lying?

Yesterday I pointed out that Senator Diane Feinstein is using incorrect numbers to push for greater water deliveries.

Emily Green points out that her justification for taking more water from the environment and giving it to farmers is actually wrong. She says "we've done this before" when that isn't true.

Bottom Line: Some people will use whatever means necessary to meet their goals.

Poll results -- McDonalds

Hey! There's a new poll (government of the people) to the right --->

McDonalds serves
Food 23%25
Fuel 10%11
Emotion 10%11
Habits 56%61
108 votes total

Fast Food Nation inspired me to run this poll, and I am interested to see this result. I agree that habit is the major reason that people go to McDonald's. They would rather not look around for alternatives, taking the chance that some other place may serve food of an unpredictable (better OR worse) quality than McDonalds.

People like certainty, we know that. That's why they often vote for incumbent politicians -- even when they are corrupt or incompetent or buy the same car, pasta or wine -- even when their friends recommend otherwise. It takes effort to look for another option, among the many; it requires courage to step into an unfamiliar environment. Funny thing is that we are only talking about hamburgers here, but it applies in many other areas in life.

Bottom Line: Practice trying new things, one new thing a week. You will not die if you fail, but success will make your life better (in terms of new choices) and your soul happier (in terms of control over your environment).

16 Feb 2010

Yes on tax and rebate

(via DW) California proposes to rebate carbon taxes to citizens -- not lobbyists, energy companies or "green" firms. That's what I've said all along, and the best way to help the people while taxing their sins.

Bottom Line: The best way to handle carbon is to tax it; the best way to "spend" that money is to give it to citizens. If politicians control it, they will waste it or give it to their lobbyist buddies.

Investigating the Russian Mafia -- The Review

I was pleased to run into this book at the book exchange. The author, Joseph D. Serio, writes from experience, having spent about ten years in Russia, working on organized crime as an academic and consultant.

This book will interest water wonks in the ways that it describes how the three players in the Iron Triangle (bureaucracy-businesses-criminals) can overlap and merge in their roles and actions: a businessman working as a criminal, a bureaucrat making money as a businessman, etc. (See my paper on the bureaucrat-politician-developer triangle.)

In the US, we are lucky that most of our police, politicians and bureaucrats are honest. In this book, you start to understand how the world turns upside down when people go outside their defined roles as well as the laws that supposedly constrain them. Economists who study strategies in such a lawless realm use what we call "conflict theory," a superset of game theory. Game theory, of course, has rules. A game with no rules (except perhaps that the one to strike first or hardest is the winner) is quite different in play. Serio therefore clarifies how foreigners hoping to make a killing in the "developing markets" of the ex-USSR were turned from hunter into hunted. They were ambushed, robbed, and deceived at every turn by "partners" who had spent decades surviving -- and winning -- in the bizarre petri dish of the Soviet economy.

Serio pleas for understanding of how different -- and similar -- organized crime is in Russia. He points out that bureaucrats and politicians in the US can also be thieves, but then shows how deep and developed -- the history goes back hundreds of years -- the Russian talent for deception is. More important than anything is your relationships (Chinese are familiar with guanxi). If you now powerful people, you will do well -- unless you are in the way and need to be discarded. It is in this sense, therefore, that Russia really is "Upper Volta with nukes." (See this post for more on this primordial "Natural State.")

Serio's eleven chapters provide an excellent tutorial on crime statistics (nobody has any idea), 80 percent plus police corruption, above- and under-world political maneuvering, the elasticity and loopholes in laws, how criminal, business and political classes interact, and so on. Most important is his claim (totally justified) that the new bosses are the same people as the old bosses. Thus we understand how Putin and other FSB/KGB agents have managed to regain all of the power and wealth that they had in the final years of the USSR.*

Bottom Line: The mafia in Russia is made up of politicians, businessmen, bureaucrats, security forces and criminals who ignore laws (the ones they make!) as they exploit the nation's resources and citizens. If you work or live there, protect yourself as if no law exists and pay attention to your colleagues and partners interests -- especially if they are not your own! I give this book FIVE stars.

* At one point, I was convinced that the Soviets were good for citizens, since their ideological goal of helping the working classes was so different from the Tsars' goal of supporting the aristocracy. Unfortunately, Soviet collectivization probably harmed more people, since it destroyed a rural economy that the Tsars has mostly ignored. Then it got worse, as the communists became the new aristocrats.

15 Feb 2010

The problem with misinformation

...is that people continue to use it.*

As I noted here, politicians (now Diane Feinstein) are using the incorrect numbers on job losses in the Central Valley to justify larger water deliveries to farmers.

Of course, that water will do less to "create" jobs and more to make her campaign contributors happy.

That's a typical baptists and bootleggers bait and switch. Claim to help the poor, but really help the rich.

Bottom Line: More water will create profits, not jobs. The environment? Fuggetaboutit!
I asked Richard Howitt is he knew that politicians were continuing to use his old research. he was surprised to know that they were and said that he'd look into it. Seems that they didn't listen to him. The irony.

Monday Funnies

A Congressman was seated next to a little girl on the airplane leaving from Atlanta when the he turned to her and said, "Let's talk. I've heard that flights go quicker if you strike up a conversation with your fellow passenger."

The little girl, who had just opened her book, closed it slowly and said to the total stranger, "What would you like to talk about?"

"Oh, I don't know," said the congressman. "How about global warming or universal health care," and he smiles smugly.

"OK," she said. "Those could be interesting topics. But let me ask you a question first. A horse, a cow, and a deer all eat the same stuff - grass. Yet a deer excretes little pellets, while a cow turns out a flat patty, and a horse produces clumps of dried grass. Why do you suppose that is?"

The legislator, visibly surprised by the little girl's intelligence, thinks about it and says, "Hmmm, I have no idea."

To which the little girl replies, "Do you really feel qualified to discuss global warming or universal health care when you don't know shit?"

Speaking of that (via JWT), here's a visual alternative:

Are lost "ag" jobs really fishing jobs?

DH sent this article with the following note:
As someone employed in the seafood processing industry in San Francisco, its long been a pet peeve of mine that when ever Ag employment statistics are quoted they include fishing. The Capitol Press article was one of the few articles I've seen that actually points this out.

An annual average of monthly farm employment in 2009 shows 389,225 people working in agriculture, down from 390,850 in 2008. That's a drop of less than 1 percent.

Now consider this note from DFG:

This year’s salmon fishing closures on Central Valley salmon stocks will cost California an estimated $279 million in lost revenue and 2,690 jobs.
He then wonders if "it is possible that ALL of the net loss in 'Ag jobs' is due to the closure of salmon fishing?"

I cc'd Jeff Michael on this question and he said this:
You can't make the argument DH does, that all that loss is accounted for by fishing because jobs data is different. The article is about payroll jobs. It doesn't cover proprietorships and self-employment, which is an extremely large share of fishing employment, and it doesn't include indirect (i.e. multiplier) effects.

The DFG numbers most likely include indirect effects and cover both payroll jobs and proprietorships/self-employment (they are also probably limited to CA losses, even though I think the salmon closure impacts spread north into Oregon). I think the DFG estimate is very reasonable but I bet no more than 10 percent or a few hundred are included in these particular estimates of farm payrolls. DFG is estimating a very believable 10 total jobs per $1 million in fisheries revenue, compared to the very unbelievable 30-50 jobs per $1 million in farm revenue that has been used by DWR and Dept. of Food and Ag for the past year.

Although I think DH is pushing the numbers a bit too far, I can hardly blame him given the rhetoric from the other side. I think a strong case can be made that the job loss from the Smelt pumping restrictions and the job loss from closing the Salmon fishery are close in magnitude, but it is hard to put precise numbers on them.
I agree with both DH and Jeff: Yes, "ag" job losses include losses in the fishing industry, and yes, those losses are not the ONLY losses in the ag sector.

Bottom Line: Macro statistics are vague and tricky, and it takes considerable effort to interpret them without bias.

12 Feb 2010

A perpetual motion machine

...if you don't count the energy Nature gives :)

"A hydraulic ram... takes in water at one "hydraulic head" (pressure) and flow-rate, and outputs water at a higher hydraulic-head and lower flow-rate... to develop pressure that allows a portion of the input water that powers the pump to be lifted to a point higher than where the water originally started... the ram is often useful, since it requires no outside source of power other than the kinetic energy of water."

Hattip to MG

Ending the water-charity oxymoron

Ned Breslin of Water for People tells it like it is: "Africa, Asia and Latin America have become wastelands for broken water and sanitation infrastructure."

He then goes on to condemn "head counts as a success metric" and the condescending attitudes of "we know better" aid agencies that deliver short term results and long term depression to "the needy."

Ned think that communities should have skin in the game -- not just sweat equity, but real money. He also wants local government to get involved in managing projects that are self-funded (at replacement cost) within 10 years. (It's interesting that many US communities complain that they do not have this kind of money; I think that we are exporting our own unsustainable water practices to these "developing" nations. Perhaps they would have a better chance without our help.)

Read the whole essay [pdf], and enjoy the hard thinking that went into it and hard work that it implies. I wonder if other organizations are willing to discard 80 percent of their flawed "wisdom" in the same way that Ned has.

Bottom Line: Development is not automatic, and it's certainly harder when outsiders "help." It's good to see some recognition of this fact.

11 Feb 2010

Governing the Tap -- The Review

I wrote this review for h-net:

In Governing the Tap, political scientist Megan Mullin describes and tests her “conditional theory of specialized governance,” i.e., that the effectiveness of special districts providing drinking water, relative to water agencies that are branches of local government, depends on certain conditions (political boundaries, water scarcity, the rate of urban growth, and so on). Her contribution is to weave together two opposing theories of special districts: the “efficiency view” that special districts will be more responsive to local conditions and voter preferences, and the “capture view” that pro-development interests will control special districts, to the detriment of established residents and sustainability. Although she addresses special districts in the United States, I think that the lessons in this book can be applied elsewhere.

This thoughtful book certainly contributed to my understanding of local governance, and how--via case studies--political institutions may produce either “good” or “bad” outcomes. My only quibble is that Mullin leans a little too hard on her statistical analysis in seeking support for her theories.

In chapter 1, Mullin sets the stage, showing how the number of special districts (not just for drinking water) has exploded in recent years, driven by the twin pressures of complex regulations and tight budgets in local governments. She also points out that water management is increasingly driven by governance, not technology, and that “public” consumption of water (as opposed to irrigation or industrial uses) has increased at the same time as per capita consumption of fresh water has flattened out. (I particularly enjoyed her observation that 56, then 69, then 83 percent of people “tried to use less water” even while per capita consumption did not fall [p. 16]; seems they need better feedback.) Both of these observations support her claim that it is increasingly important to understand how special districts work. Mullin sets out her thesis (“special district officials are motivated by the same reelection and policy goals as other political actors,” p. 8), and then proceeds to examine it.

In chapter 2, Mullin describes the two competing theories of special districts. The Metropolitan Reform Theory holds that special districts need to be absorbed into local governments to counter wasteful duplication, regulatory capture, and uncoordinated actions. The Public Choice Theory holds that special districts are going to be more responsive to local needs with respect to water management, without facing the compromises and logrolling common to general-purpose governments. She then reconciles the two by adding the “conditional modifier” that special districts are relatively better at water management when water issues are not so important (i.e., general governments deliver the goods to developers), but that an increase in salience--water scarcity--brings politicians’ attention, at the cost to developers and benefit to citizens. At this point, Mullin also makes a strong assumption, that developers may affect the governance of special districts at their formation, but those districts’ policies in later years. The assumption helps her with later statistical work (she can pretend that reverse-causality--endogeneity--is not driving her results), but I am not buying it--most obviously because there is no reason to think that developers would exert effort to set up special districts and then abandon them. Even in built-out areas, real estate prices (and business income) can depend on continued provision of cheap water.

In chapter 3, Mullin tests her hypothesis that special districts will set water prices more aggressively in “normal” conditions but special and municipal agencies will set similarly aggressive prices in hotter, drier places. It is in the testing of this hypothesis (and those in chapters 4 and 5) that Mullin’s book enters its weakest stage. Besides her numerous assumptions, imperfect data, and complex econometric analysis, there are also her statements “in support of her hypothesis” that violate the most basic rule in econometrics: Thou can only reject thy null hypothesis; thou canst not find support in favor of or prove it. Although I commend Mullin for her good statistical work, she should not make such bold claims “in support” of her hypotheses. More caution and less reliance on tentative statistical relationships would leave her less vulnerable to the easy--and perhaps accurate--criticism that she is managing the model to fit her priors and theory. I feel that this book would be much stronger without these weaknesses, i.e., less econometrics and more qualitative support for her theories.

In chapter 4, she tests her hypothesis that special districts are more likely to charge developers high impact fees when the community is growing more slowly. As above, she strains her empirical work to “support” this hypothesis. Among her numerous assumptions is one howler (p. 93): “The model assumes that growth affects impact fee levels, but not the reverse.” Try telling an economist that demand does not slope down (fall when price rises) and see what response you get!

In chapter 5, she uses the same structure to examine the relationship between noncontiguous political boundaries and cooperation among government agencies, “finding” that special districts are more likely to sell their services when they cannot change their boundaries, and more likely to share costs when they can change boundaries.

Chapter 6 gets us back into interesting territory. It is the longest chapter in the book (fifty pages) and the most enlightening. She goes over four case studies (two in California and two in Pennsylvania), exploring how pro- and anti-growth forces battle over urban expansion. I enjoyed this chapter very much, and Mullin's qualitative analysis does not suffer the overreach we saw in the earlier three chapters. She concludes that multiple boundaries and authorities make it easier for each side to prolong conflict. In all cases, development happened, but at a higher cost and (often) reduced scale. When land and water governance are managed under one roof, the disputes are smaller and shorter, and a middle ground is more likely. This is because insiders “work things out” before outsiders can stick their noses in through media, legal, and regulatory channels.

Chapter 7 concludes, adding notes on climate change and generalizations on others issues for special districts.

This book is a must read for people interested in governance, democracy, or urban growth. Mullin’s hypotheses and discussions of the different forms, actions and impacts of local governance are interesting and thoughtful. They will help the reader understand how things work in practice, and how easy or hard it may be to change them.

Bottom Line: I give this book FOUR STARS (one less for empirical weaknesses).

USACE is hiring

Here are the required duties in what appear to be 6 different positions:
Serves as technical advisor/subject matter specialist in the specific area or areas of expertise for which recruited, i.e., plan formulation; collaborative planning and public involvement; economic analysis; environmental and ecological evaluation; social impact assessment; civil works policy development; multi-objective water resources planning; or other aspects of integrated water resources planning and management. Responsible for policy research and analysis, and the development and application of new planning procedures, methods, and practices as applied to complex water resource management programs, involving one or more major regions or requiring international coordination; performing special studies with exceptionally sophisticated, and often politically difficult plan formulation problems, pertaining to all phases of long-range water resource planning; and, utilizing state-of-the-art methods for projecting and analyzing future US water resource development needs.
If you understand that and still want more, google "DEPARTMENT OF THE ARMY Vacancy Announcement Number: NCFL10010047D" and good luck!

Speed blogging

Hattips to SJ, DL NS and DW

New director, same failures at DWR

(via DW) This "vision statement" [pdf] by Mark Cowin, 30-year employee of California's Department of Water Resources, says nothing. In two pages of bureaucratic "keep it up, folks," Cowin reveals that nothing will change.*

Bottom Line: DWR will continue to fail in managing our water.
Addendum: You know, things like this (via DW) -- Is the Department of Water Resources Trying to Shut Down the State Water Project? -- will continue.

10 Feb 2010

This is TRUE

From PhD Comics:

Future of Irrigated Agriculture pt2

David Zoldoske and Juliet Christian-Smith spoke about irrigated agriculture on Tuesday. Some thoughts on his talk:
  • Lower Tule River Irrigation District applies water in perhaps a "wasteful" manner. But what he showed was that Pixley Irrigation District next door pumps heavily from the aquifer that the two districts share, and pumps most heavily near the border. So while making LTRID more efficient may seem like a good idea, in this case basin wide efficiency is higher than field level efficiency because PID reuses LTRIDs percolation. I have learned recently that LTRID and PID also are jointly managed. Although there are many water districts in California, they are not all independent. Many are members of water associations or broader districts that facilitate groundwater recharge and use. I have heard different economists puzzle over why California has so many water districts, but my impression is that many independent districts are independent in name only. While there may be a few hundred on paper, many share general managers, resources, etc.
  • He says that between 2003 and 2008, $1.5 billion has been spent for on-farm water conservation. Impressive, I think, but I have no context for that number.
  • He mentioned that farmers can use more water within an Integrated Pest Management framework and refrain from using as many pesticides, etc. This is a very important theme in understanding agriculture - we want agriculture to be efficient overall in its use of resources, not just efficient in its use of water. Hopefully if the prices are right the farmer makes the correct decision.
  • Zoldoske mentioned in the Q&A establishing a fixed amount of irrigated acres, and then setting aside the water to farm those acres, and essentially letting agriculture do its thing without continual meddling. I think he is implying getting off the alfalfa farmers' backs... I think this is an odd approach though because I doubt it is possible to come up with any single number that makes sense, especially as conditions change each year. The benefit we get from having agriculture use 80% of the developed water supply is some degree of flexibility if in dry years people need a bit more.

Juliet presented her joint work from the Pacific Institute about water conservation in agriculture. Here are my brief thoughts (David has expounded quite a bit on this issue already):
  • She wants to reduce barriers to irrigation investment. Large upfront costs may discourage farmers from adopting more efficient irrigation technology. While true, upfront costs are supposed to discourage. Those farmers that have trouble getting financing (because of uncertain crop prices, poor water reliability, whatever) should think twice about investing more in their business. That is good for society as a whole - it prevents wasting of all resources, not just water. As the recent housing bubble hopefully made clear, subsidizing homeownership can impose large costs upon the rest of us when inhabitants no longer can pay. Admittedly, neither of us knows why the non-adopters aren't adopting (I asked), so I could be wrong. But given that many farmers in California have adopted more efficient technology, it seems unlikely that A) non-adopters need an extra push from government (let the district do that on its own), or B) the extra push would be cost-effective.
  • She calls for "a new way of thinking" in dealing with water issues in CA. Her report mentions how important low prices are in discouraging change, so how do we get farmers to consider the value of water in alternative uses? Better water markets? Something else?
Bottom Line: Given the history of water policy at the state level, why still look to Sacramento for some sort of fix?
Addendum from DZ -- Dan Vink wrote me with this:
I am the General Manager of both Lower Tule and Pixley and I can assure you that both Districts are very independent with separate Boards that meet regularly and hold distinct and separate opinions and positions. There is no cross-over between the two Boards. We are also jointly managed which allows for increased efficiency that some of the smaller, singularly managed Districts don’t have. I would put our operation up against any public agency in this state and most private sector operations.

California Water Law Forum (Feb 22, Sac)

Free! All-star cast!

9am to 1pm

Pacific McGeorge School of Law
3227 Fifth Avenue, Sacramento

Addendum (whoops!): website

Bureaucracies are not businesses

This article says:
California’s energy crisis in the winter of 2000... may seem like a thing of the past for electricity customers. It’s not. They’re still paying the price: About $3 billion each year for the next three years.
Bureaucrats are not good at making business decisions because they do not face bankruptcy, have no competition, and have others to pay their losses.

Oh, and the disaster of California's energy deregulation cannot be blamed on markets OR Enron -- it is the fault of the bureaucrats who deregulated wholesale but not retail markets. In other words, wholesale price spikes did not lead to retail price spikes. Because they did not, customers did not use less, and utilities got squeezed into bankruptcy.

Bottom Line: Deregulation can work, when it REALLY means deregulation!

The frauds of Cadiz water

Emily Green notes that Cadiz is claiming to have "found" more water that it can now sell. That's before those resources are quantified, certified and approved. She makes a good point -- the claim is probably aimed at pumping up the price of Cadiz's thinly traded shares -- most of which are held by insiders.

9 Feb 2010

Is Washington being overtaken by Treehuggers?

On December 3, 2009, the White House Council on Environmental Quality released a proposal to the National Academy of Sciences (NAS) for their review that would significantly change the principles and guidelines that govern America’s water resource planning. The proposal would require that such projects help to improve the economic well-being of the Nation for present and future generations, better protect communities from the effects of floods and storms, help communities and individuals make better choices about where to build based on an understanding of the risk, and protect and restore the environment.

The proposal calls for the development of water resources projects to be based on sound science, increased consideration of both monetary and non-monetary benefits to justify and select a project, improved transparency, and consideration of nonstructural approaches that can solve the flooding problem without adversely impacting floodplain functions. The proposal would also expand the scope of the Principles and Guidelines to cover all Federal agencies that undertake water resource projects.
Read the whole thing (and accompanying documents).

Water Chat with John Quiggin

I spoke to John Quiggin of the University of Queensland about water issues in Australia and Queensland. I learned that California and Australia are similar in many ways (dams, salinity, politics, paper water rights, ag trading, desalination, etc.)

I was quite surprised to hear that Brisbane's dramatic drop in per capita use (to 130 liters/capita/day) was accomplished with regulations more than prices. (BUT, they -- the water managers -- did pay a lot of attention to metered water volumes.)

Here's our 50 min chat [17 MB mp3]

It turns out that we agree on "some water for free, pay for more" (per capita), so he's obviously a great guy :)

John keeps a very busy and important blog on Aussie economics and politics here.

"The Future of Irrigated Agriculture - Where's the Water?"

On UC Berkeley's campus Tuesday, Juliet Christian-Smith from the Pacific Institute will be speaking along with David Zoldoske from Fresno. There is no abstract yet, but hopefully it will be be informative. If you have questions, put them in the comments and I will try to ask one or two and write up the details tomorrow...

8 Feb 2010

Profit seeking

Jack Ceadel over at Global Water Intelligence wonders what is going on:
Mostly we talk about market consolidation, but over the past decade, the reverse has been happening in the desalination industry. Growth has sucked more and more players into the industry, to the extent that the market leaders have actually been losing market share. It is such an unusual phenomenon that I am not sure there is a word for it. I call it market proliferation.
No Jack, it's called profit seeking, as in... businesses with extraordinary profits attract entrants, and these entrants drive down profits for incumbents.

Read Schumpter :)

Bottom Line: Easy money attracts attention, and the fear-driven rise in demand for desal has got a lot of corporate attention.

Monday Funnies

Wasting our most precious resource?

"California's Central Valley will be the Appalachia of the West" says the Economist. It won't be if California's scarce water is traded at market prices, instead of allocated to historic users. That's the fastest way to maximize the value of our scarce asset. No change will merely enrich a few while producing crops (and goods and services) is lesser value.

Speaking of precious resources, this conservative pundit says that "economic growth depends strongly on an expanding population." He goes on to equate more babies with more prosperity. I've got four objections to his line:
  1. He's got it backwards: More prosperity leads to more babies, and even that trend has its limits.*
  2. "Growth is good" depends on your acceptance of GDP as a measure of happiness, which it isn't. (It measures trade in the cash economy.)
  3. He's missing the (negative) environmental impact of more people.
  4. Many economic "problems" with smaller populations result from Ponzi scheme policies that require the young to pay for the old (as with social security). Those polices can be reformed, defusing "demographic timebombs."
Bottom Line: Many of our problems result from the perverse incentives of bad policies, not human stupidity or natural constraints.

* Unless ignorance reigns:

5 Feb 2010

Speed blogging

  • Emily Green tells how Pat Mulroy's obsession for imported water and growth got too sloppy and hit the wall (a recent court ruling that may undo 20 years of Mulroy's maneuvers.)

  • Aquadoc lambasts water cliches. I'll drink to that!

  • Scientists create a test to identify contaminated water CHEAPLY [in Spanish]

  • Dams affect rainfall. Lessons for climate change?

  • Stanford gets into the water research business (groundwater and re-use). I'd bet my lunch that they just got a grant funded; let's see if they have IMPACT :)

  • Russ Roberts talks about many economic questions with Mike Munger. Their first topic (6 min) is water sanitation -- Mike is horrified that toilet use potable water -- but the other topics are also interesting. This talk with Mike Spence on development is EXCELLENT.

  • Speaking of toilets, here's how the toilet on the 110th floor works.

  • In this interview, Mike Young talks good sense about water in Australia and elsewhere. Listen to him! He also says that reclaimed water is better than desal.
Hattips to AC, DL, EP and DW

Avatar and King Leopold's Ghost -- The Reviews

Coincidental juxtapositions can be interesting.

Today I finished King Leopold's Ghost, a book about the Belgian king's ruthless exploitation of the people living in Congo (then Zaire, now Democratic Republic of Congo). The story is one of a colonial owner using force and cruelty to extract wealth (ivory, slaves, rubber) from vulnerable land and people. Rape and pillage was the norm, and the white colonials who raped, maimed and pillaged justified their acts by claiming that the natives were not human and the land was without owners. 10 million people died during Leopold's regime of terror (about 1880 to 1910). Unfortunately, that pattern was repeated in many colonies -- in the same period and even in recent years.

James Cameron's Avatar is a movie worth watching for its fabulous visual effects (and even the love story), but the plot echoes the colonial story: Earthlings invade another planet to get a valuable mineral ("unobtanium" is its cartoon name). Along the way, the natives are seen as beasts and Nature raped.

Of course, this is Hollywood and it includes a love story and happy ending. Formerly colonized people on this planet did not get the Holly-Happy ending. The Belgians established a pattern of corruption and lawlessness and a system for concentrating and abusing power that local "leaders" have adopted, with poor results for their "free" brothers and sisters.

Addendum: Here's a "Pandora" view on dams and rivers.

Bottom Line: People are much quicker to destroy what's not theirs and abuse people who are powerless. Stronger property rights and human rights are the key to the sustainable use of resources and progress in human development. I give the book and movie FIVE stars each.

4 Feb 2010

Need I say more?

JF send this:
Restore the Delta revealed this week that Phil Isenberg, chairman of the Delta Vision group - the supposedly objective group that recommended the Peripheral Canal - lobbies for a Southern California water district. In other words, the man tasked with finding a solution to the destruction of the Delta works for an agency that benefits from the destruction of the Delta.
Bottom Line: It's hard to remain objective (or be perceived as objective) when you are getting paid by one side of a dispute that you are mediating.

More policies for People, not special interests

...and here are five more ideas for solving collective action problems (see yesterday's post) that caught my eye.

Anna O. suggested that carbon taxes be introduced, and that revenue used to offset a end to/reduction in income taxes for people making less than $22,500/up to $77,500, respectively. I liked this idea because the majority (of voters) would probably understand their net benefit and vote for it, in the face of lobbying by the minority -- high carbon consumers. The tax is fiscally neutral but environmentally helpful.

Candace A. introduces a different nuance to carbon taxes, suggesting that above-median polluting firms pay a tax and below-median firms receive a rebate. Instead of creating a united opposition to taxes on all carbon, this idea would split the opposition, since low-carbon firms would lobby for it, in opposition to their heavy-pollution cousins.

Julia A. suggests broadening the pool of those eligible to work on renewable energy (wind farming, for example) to include scientists, non-profits, schools and communities. Since they are currently excluded from power generation (my impression is that it's "managed" by utilities and bureaucracies), this additional involvement would increase innovation and public support for these programs.

Ryan L. goes straight for propaganda, suggesting that environmental programs (carbon taxes, wind farms, etc.) be branded, so that people can have stronger positive feelings towards "save the kids" programs. In Brazil, for example, the "bolsa familia" (family grant) is part of its Zero Fome (zero hunger) campaign. It seems that rebranding "taxes" would also be useful.

Stephanie L. promotes environmental justice by "empowering" poor people likely to suffer from local pollution. She suggests that local community organizations be mobilized to educate locals on issues, increasing feedback to bureaucrats and votes to politicians who will be forced to respond to this democratic noise.

Bottom Line: New ideas require new perspectives. What have you learned from "amateurs" lately?

3 Feb 2010

Electric pipes for water

"Steve Shoap has invented a rapidly deployable system to move large quantities of water over long distances. The invention can rapidly bring water, electric power, and communications to areas that have lost them. Haiti shows how an earthquake can destroy the water supply to a large population. If you know anyone at FEMA or Homeland Security, please forward this post to them. The invention can also be used to fight wildfires.

He has also invented a new type of irrigation system. The idea is to embed the wire pair from a two-wire irrigation system into PVC pipe .When the pipe is installed, the control system is installed with it. No additional wires need to be trenched. The wires pair also supplies power to the valves by trickle charging rechargeable batteries at the valves. His proposed system has the potential to reduce the material, installation, and maintenance costs of advanced irrigation systems.

Steve believes that changing rainfall patterns and will force more farmers to use irrigation. Many regions are suffering droughts and then occasional deluges. Hopefully, the water from deluges can be stored and then later used for irrigating crops."

You thoughts? Comments?

Policies for People, not special interests

During my class at Berkeley, I gave my students "the hardest assignment in the world," i.e.,
Please explain how a leader can promote an environmental program that will benefit the average citizen --- but not special interest groups --- and still get re-elected.
Although I provided numerous clarifications to my students, this assignment is pretty straightforward: solve a collective action problem.

Collective action problems are rife in the water sector, and -- you will see -- many other areas of social and political action. They arise from two factors. First, there is the misalignment of costs and benefits. A collective good gives benefits to everyone (as a "public good" like a radio station or "common pool good" like a community reservoir), and it's hard to exclude those people from enjoying it. Because of this non-exclusionary characteristic, it's hard to force those who benefit from the good to pay for its provision. Thus, we may see (and do see) that people "free ride," enjoying the benefits but avoiding the costs. Because of this free riding, the good may not be provided at all, creating our collective action problem.

While people commonly assume that collective goods will only be provided when the government taxes everyone and uses those funds to create them, there are numerous examples of social and private provision of these goods. (Religion often plays a part in motivating people.)

Right. So that's the context for the assignment I gave my students. Although many of them thought it unfair that I ask them to give a solution to a collective action problem (in one page, no less!), several of them gave interesting suggestions. These are what I wanted when I gave the assignment: some new thoughts from people didn't know how hard their assignment was supposed to be!

Before I get to those, note this further wrinkle: Their brief was directed at a politician who was going to face re-election, and -- it is assumed -- an opponent who would be able to draw support from whatever special interests were free-riding on the currently provided collective good or would suffer if that good (e.g., a clean environment) were to be provided.

And here are the first two ideas:

Andrew C. introduces an interesting idea to promote open spaces. Developers want to build houses, but home-owners (and enviros) want open space next to their properties. Politicians are caught between the two, but they often bow to developer interests. Andrew suggests that residential properties pay a higher tax, that this tax be used to retire undeveloped land, and that developers have the option of selling their parcels for open space -- or developing them -- via a tradable development permit that builds in the open space. This scheme works by linking present and future values, allowing future homeowners to pay off present developers.

Daniela C. has an easy answer to the problem of water that's too cheap -- let rate payers decide what the prices will be. Given that the current system tends to favor a minority -- water hogs -- at a cost (in terms of reduced reliability) to the majority, this makes a lot of sense. Of course, there's the problem of "let's charge nothing!" but that's easily overcome by presenting voters with a series of "break even" price decisions. I like it!

Check in tomorrow for five ideas to address climate and environmental issues..

2 Feb 2010

Water is Boring

JG sent this column by Ben Baeder. It's funny -- and pointed. You can write your own bottom line...
Is it just me, or have we been in a water crisis my entire life? No joke, some of my earliest memories are sitting with my dad watching super-spooky "WATER CRISIS!" stories on the local news.

People in California's water business are constantly screaming that the sky is falling - or that water or snow are not falling from it fast enough.

"Wolf! Wolf!," they scream.

But every time I turn on the faucet, water comes out.

It's cheap. It's sort of clean. And it seems like there's plenty of it.

I'm tired of hearing about water. It's so boring.


If water agencies are so hard-up, they should stop giving their workers big pay raises.

And if they are still broke, they should raise rates.

Otherwise, I don't care anymore.

Seriously, Azusa Light and Water employees just got a one-time payment of 3.75 percent of their pay from the city. LA's utility workers recently got a similar deal.

Maybe they were due for a raise, but they got it when everyone else in the private sector is getting hammered.

And, before its board buckled under political pressure, the Metropolitan Water District in October was on the verge of giving employees a 23-percent raise over the next five years.

So, do water companies have ample water and lots of money, or don't they? I can't tell.

If water is so scarce, why is the Inland Empire full of homes and mega malls?

Why are Southern California lawns lush and green?

Why, when my kids get bored, do I make their plastic slide a little more interesting by running the hose at the top?

All the while, farms in the Central Valley are going fallow and pumps in the Sacramento River Delta - at least until last year - were grinding up fish that are the bedrock of the area's ecosystem.

Logic and economics aren't applied to water issues. And I think I know why.

Quick, name the directors of your water district.

See. You don't know. In the desk that is the human mind, water districts are just clutter that gets tossed away.

It's so boring that our elected water board officials flit away public money on booze and conferences, and we don't even pay attention.

Someone needs to do away with the whole system.

I wish I could say right now the best way to fix everything. My first instinct is: keep water rates low for businesses, farms and most residential customers, then jack the rates up super high for big consumers.

Hit extravagant people in the pocketbook.

If you want a Ferrari of a front lawn, you're going to have to pay for it.

Maybe the wasters can pay for all the new water infrastructure we supposedly need.

Secondly, we need to get rid of water districts. Nobody watches them, and they're inefficient.

I would offer more solutions, but my mind got too bored.

It's on to something more exciting: prime numbers! Three, five, seven, 11, 13, 17, 19, 23. . .

Travelblog: Incentives on islands

We are were on another island. Gili Trawangan -- like Nusa Lembongan -- has problems with fresh water shortages. As before, there is a fixed supply that is exceeded by demand. This demand -- given no constraints on new developments, visitor numbers or use by visitors -- is only likely to increase. (There are no signs in rooms saying "please use less water" and there are certainly no meters on rooms, to charge guests for the water they use.)

Hotels and guesthouses have responded to shortages in three ways:
  1. The expensive and big places have desalination units (cost about $25,000 for the machine and one-half their monthly electric bill). All their guests have "fresh" water at the tap.
  2. Luxury bungalows (we paid $40/night) have fresh water from 5 gallon jugs ($3 each) or big tanks that are shipped from shore; see photos. Again, fresh water from the tap.
  3. The other places (and local people, in their homes) have brackish water from their wells. We are now in one of those, and the salinity varies from noticeable to "way too much."
Right, so that's a little more information on water.

This island is interesting for two other features: One rare feature is that they are trying to "regrow" their reef by sinking cages offshore and then connecting electrical cables to them. A small current encourages corals and other beasties to perch on the cages and grow at a much faster rate than normal. This effort is supported by the local dive industry (big money) as a means of recovering from a past of sloppy anchoring and dynamite fishing. Fish here are VERY expensive: lobster cost about $60/kg; prawns slightly less.

One common feature is rubbish -- everywhere. I picked up plastic bags and other stuff while snorkeling. There are plastic bottles everywhere and a surprising number of flip-flops and other shoe pieces. One thing that you do NOT see is empty beer bottles -- that's because they have a $0.20 deposit.

The reason that there's so much trash around is that locals are not used to dealing with plastics. In the past, they would use bamboo or leaves and then toss the old stuff on the ground to wash away or get eaten. Now that stuff doesn't "disappear" and the shoreline and reef is clogged with it.

Given the importance of tourism on this island (90+ percent of the economy), it seems like they should tackle trash, but they are probably not due to a tragedy of the commons: If one hotel cleans up its beach, then the trash of others just washes (or is dumped) there. So why clean?

It would be easy to fix this problem with a visitor trash tax that paid for trash to be hauled back to the mainland. Even better, locals could hold "trash olympics" with bounties and rewards for the largest volume of shoes, plastic bottles, etc. that were retrieved from the environment. I'd guess that a bounty of $0.01 per plastic bottle would result in HUGE piles of empty bottles -- those that are currently scattered throughout the island. (Miscellaneous plastic would have to be rewarded by weight, of course.)

Bottom Line: Incentive matter. This island has water "shortages" because tourists do not pay for fresh water consumption; it has garbage everywhere because there is no reward for collecting it. Locals understand why beer bottles are worth returning and reefs worth rebuilding; they can apply the same knowledge to reduce the stress from over-drafting fresh water and dumping garbage.

1 Feb 2010

Sustainability and equity

TS sent this paper [pdf], which describes "The sustainable residential water use [sic]: Sustainability, efficiency and social equity. The European experience," but you probably will want to skip the obtuse discussion of sustainability. The author wades through three pages of confusion before settling on (paraphrasing) "sustainable water use means that you use as much water (or less) than you receive." No duh.

There's a mildly interesting description of retail water pricing mechanisms (not prices) in Athens, Amsterdam, London, Seville and Tel Aviv. The author also points out that increasing block rates are not "fair" if they do not take the number of household members into account. No duh. Again.

Monday Funnies

JWT sent this reminder [pps] that SOMEONE cares about you!

Water managers can't make a shake

David Foster sent this guest post, and he wants to know if the Lassi Shop (see below) should be (can be?) turned into a skit to teach people about water provision.

Just a few days ago, I watched Christiana Amanpour interviewing Robert F. Kennedy Junior, founder of the Water Keeper Alliance and all around friend of the poor and the environment. Kennedy began by quoting a clever observation by Mark Twain that: “Whiskey’s for drinking and Water’s for fighting”. Unfortunately, he left out another Mark Twain quote that I believe is just as applicable: “It ain’t what we don’t know that gets us in trouble. It’s what we know that ain’t necessarily so!”

Kennedy then began speaking on the many ills that confront the water sector and right at the very top was the Evil Threat of PRIVATIZATION. Now in my opinion Kennedy was absolutely right that sometimes private companies have done terrible things to the environment. Where I would fault him (and Amanpour) is in leaving the impression that private water systems have done more harm than public ones or that the poor and the environment would be just fine, if only we could keep the private sector out.

Now I know that I can’t get Kennedy or Amanpour to really visit the thousands of publicly run water systems throughout the developing world but I have this pipedream of having them come meet me at a “Lassi Shop” that is run on the same basic principles as a public water supply system in India.

There follows a brief description of the policies followed by the Lassi Shop -- all of them close replicas of their respective counterparts in the typical municipal water system over here:

Meet Me At The Lassi Shop*

Imagine, if you will, a lassi shop that was run on the same basic principles as most Indian water supply systems...