31 Mar 2010

Water and human rights -- part 8

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Is this just a property grab?

Thus far, this discussion of human and property rights has conveniently ignored the rights of current water users. In many parts of the world, farmers control 70-80 percent of the “developed" (dammed, channeled, pumped) water. Although it is widely understood that these farmers own usufruct rights, it is also clear that they consider these rights as theirs — and their finances (land values, cash flows) depend on the strength of ownership.

These irritating facts get in the way of a nice theoretical discussion, but they needn’t hinder it. There are several ways to reconcile current and desired rights:

Aging infrastructure and beauty contests

DL* and several others sent me this story on infrastructure from the NY Times (another dispatch from their interesting, but increasingly inaccurately-named, series on "Toxic" Waters).

The story tells us that much of the Nation's water and sewerage infrastructure is overdue for maintenance and replacement. That part is true, but why?

The first reason is simple: Politicians prefer to keep water and sewage prices down, which means less money for maintenance and replacement.**

The second reason is more subtle. In the past, there was plenty of water. With enough water, leaks did not matter for two reasons: Water losses did not result in shortages and pressurized pipes meant that leaked water went out, without contaminants coming in.

In recent years, the end of abundant water means that losses are now more important. Water managers need plug leaks, to make their limited water go farther and keep systems that are running at minimal volume from getting infiltrated and contaminated.

Bottom Line: The cost and benefit of conservation depends on how many resources you have.
* DL makes the excellent point, that "the ageing infrastructure nightmare [of water systems, roadways, bridges & tunnels] with the best PR spin will get politicians' attention." I totally agree -- while noting that PR often exists in a fact-free environment.

** For an interesting - and financially astute -- comment in this issue, read this short piece at Global Water Intelligence.

30 Mar 2010

Water and human rights -- part 7

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Private or public management

Ownership will not mean anything if it does not come with some sort of delivery component. Because delivery is complex, it seems better to leave the details on how this system would work to the local, private or public delivery organizations that will buy trade water in markets and deliver it to customers who pay for service with the money they earn as sellers in those markets.

Market prices will clarify the value of water and increase the competition to deliver efficiently. This competition will not just take place among existing delivery organizations; the transparency of markets will encourage non-traditional organizations to get into water management, one of the most conservative and least innovative business sectors. New blood, ideas and management techniques will benefit customers, in the same way that deregulation of US air transport sparked massive improvements in service and pricing.

But what about those horror stories of abusive monopolies?

Economic oxymorons

Like Damian, I think that this is a good category, worthy of future posts.

Here's an example from the other day: We were hiking around Mt. Cook and passed a girl wearing a t-shirt that said:
Born to freefall [skydiving], forced to work.
This is wrong, of course.*

Except in examples of slavery and fascist regimes, we are not forced to work. We choose to work because we want the wages that come from that work. We may prefer one job over another or one combination of wages, benefits and discretion over another, but -- in the end -- we are free to work or not. As Anne pointed out, the girl wearing the shirt will be prematurely depressed about her work, since see sees it more as slavery than the result of her free choice.

Bottom Line: The glass may be half full or half-empty, but it's your choice whether or not to drink it.
* I will not get into evolution and freefall, except to say that very few wild monkeys are spotted with parachutes.

29 Mar 2010

Water and human rights -- part 6

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Ownership rights or use rights?

Most people forget that water is often owned by the People, and that the State distributes the right to use water — the usufruct rights — such that (in theory) its social value is maximized. For most of history, we owners have not paid attention to how our water was used, but increasing scarcity has piqued our interest and passion. In the developed world, we want to know that our water goes to important environmental protection or food production; in the developing world, we want our water to slake our thirst. When those goals are left high and dry (as in Haiti), we turn our attention to how our water is used, to exercise our ownership rights.

Now the first objection is that most of us cannot use “our share" of water, because we are not farmers or fish. That objection goes away if we are allowed to sell our water to those who will use it. But selling water raises a second objection, that we should not sell water when we need it to live.

Monday Funnies

(via JC) Pat Mulroy (General Manager, Southern Nevada Water Authority) throws out a good non-sequitur:
We threw away a lot of biblical tenets of Western water... Now all of a sudden conservation could be a reality. We said we would have similar pricing structures, which meant we went from a flat rate to a tiered rate structure. No one is different. Whether you are a commercial user or a residential user, you will pay the same depending on the volume of water that you use. Our largest residential customer is the Sultan of Brunei. He uses 17 million gallons a year.
And why does this 17 million gallon figure matter? At all? Pat! You're not making sense!

Greenwashing works

I got this via FCRN:

"Sustainability brand consultants Change have published a study in partnership with the organisations Climate Counts and Angus Reid Public Opinion. The study incorporates both actual measurements on climate change action being undertaken by over 90 companies across North America, and perception measurements of these companies’ actions by consumers. Companies include Coca-Cola, Groupe Danone, Nike, Gap, P&G, L’Oreal, Microsoft and Amazon.com.

The actual scoring on climate change action was provided by Climate Counts as part of their annual climate change study of well-known consumer companies. The perception measurements, meanwhile, were provided by Angus Reid Public Opinion, and include over 2,000 American adults in a random sample.

The companies were grouped by sector (food/beverage shown), and the results illustrated in ‘perception / reality’ maps. In total, 10 sectors were mapped. Across every sector, MapChange showed a disparity between actual sustainability activity of brands, and consumer perception of sustainable activity of those brands – some were perceived as being greener than they actually are, while for others the opposite is true."

Here's the full report.

26 Mar 2010

Water and human rights -- part 5

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Property rights

Robinson (2007) discusses property rights as human rights, and Article 17 of the Universal Declaration of Human Rights (UDHR) states that “Everyone has the right to own property alone as well as in association with others." Can water be owned in this way, or is it impossible to possess water as property?

Although Polanyi (1944) and others argue against the morality of water (or land or labor) being commodified as property, many more people have accepted and indeed embraced the idea that land or labor are property that can be exchanged for something else. Indeed, it is useful to pay attention to the difference between land and labor. While most agree that land can be sold or rented to someone else, we also agree that our labor can be rented, but not leased or sold (as with indentured servitude or slavery, respectively). Although it is possible to see how water might be bought or rented, it is useful to remember that property rights in water need not automatically imply that water rights must be sold. This idea leads us to the important point of whose water rights.

Two years of aguanomics

Oh, what a long road it's been! (Updates from six months and one year and 18 months)

The State of the Blog

I've enjoyed blogging thus far and plan to continue into the future.

(As few of you know, I began with a blog called "Another Brilliant Idea" and then moved to "Sex, Drugs and Water Utilities." I copied some posts from that blog to aguanomics. Oh, and I choose aguanomics because aQuanomics was taken. Although some people get confused about the spelling of this blog, I've taken a liking to its name.)

At the moment, there are over 1,000 people subscribed to the blog via RSS. In addition to them (and with some overlap), there are about 200-300 daily unique visitors; the busiest day is Monday and the least busy day is Saturday.

Most of these people (80%) are from the US; the next highest visiting countries are Canada, the UK, India, Australia, and so on, from 191 countries/territories.

Here is a pdf with stats over the past two years.


In the recent past, I've slowed down the pace of posts (only 2-3 per weekday) and stretched out the polls (now every 2-3 weeks). This pace is better, since it gives me more time to do other things and leaves you less buried, but it also requires that I apply stronger filters to my incoming material.

I really DO appreciate all the articles, comments and questions that you send me, so please keep them coming. I try to acknowledge the source of material that I quote, but I may not email you back if I am not using your material. Oh, and I'm always willing to keep sources confidential. (I find that insiders have the best information, and I will protect them from being identified. I'm VERY serious about that [pdf].)

As most of you know, I rarely cover "breaking news" or routine announcements (board elections, price changes). I look for new trends and developments, as well as good examples of politics and economics as applied to water.

Maximizing Your Enjoyment

I try to cross-reference to older posts on this blog that are also relevant, but sometimes I forget. If you are interested in a topic (bottled water, environment, corruption, the environment, etc.), then please DO click on the tags on the right sidebar to see related posts. Alternatively, use one of the two search boxes (top-left or sidebar right) -- they give difference results, so I keep them both.


First, I LOVE to publish guest-posts. If you have something interesting to say about water, then send it to me. I am happy to publish you as an anonymous author.

Second, I REALLY LOVE comments on posts and discussions among readers. I've learned a LOT from these. Please DO comment if you have an alternative opinion, additional facts, background information, etc.

Third, I want MORE readers. If you have friends, family or colleagues who are interested in water (economics, politics, agriculture, environment, etc.)

The Future

As some of you know, my Wantrup appointment runs out in August. I am not sure of where or what I will be doing for work next, but it WILL be water-related. I get back to Berkeley in a few days, after three months in Indonesia, Australia and New Zealand; the photo above is from Litchfield NP in Australia's Northern Territory. Note that I am standing on the bridge! I plan to spend 80 percent of my time writing my book in April and May -- I look forward to hearing your thoughts on its draft -- but will continue to blog here, and as I make additional plans.

Bottom Line: It's great to have you, and I look forward to more in the future.

25 Mar 2010

Water and human rights -- part 4

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Do human rights deliver results?

Many people support a human right to water, especially with the number of people dying from dirty water and the far greater number suffering from water shortages. But do good intentions lead to good results?

Some data

If a constitutional right to water is going to be meaningful, then it should have an impact. One way to test for such an impact is to compare statistics for “access to an improved water supply" before and after that right is added to the country’s constitution. We begin with countries that guarantee a de jure human right to water in Table 1. In the twelve countries for which we have full data, we see that the share of the population with access increased from 74 percent before the right was enacted (the base year, which varies by country) to 81 percent in 2006 (the most recent year for data). Can we credit this improvement to a human right, or is some other factor at play? Although the dynamics of development are extremely complex, we can get a ballpark answer by matching these human rights countries to other, non-rights countries at a similar level of development in the base year, to see how access changed for each group.

Speed Blogging

  • Indian water authorities are fighting to increase tariffs to recover costs.

  • Thanks to the Supreme Court, we have this: "Vote for Murray Hill Incorporated for Congress -- for the best democracy money can buy."

  • The Chinese government is moving people for the North-South canal; those people are losing income, being robbed of assets, and are NOT settling into new lives.

  • "Wholly H2o’s mission is to equip Californians with the information and skills necessary to normalize water conservation and efficiency, as well as the adoption of rainwater, graywater, stormwater and black water reuse/recycling in the residential, commercial/institutional, industrial and agricultural sectors. With that in mind, we are proud to announce" this website. Please look and give feedback and suggestions.

  • A judge halts Reclamation before they can built yet another crap (my words) project.

  • "The new version of Stakeholder Analysis for the Mekong River Commission Basin Development Planning, March 2010 is here.

  • A new report [pdf] on the worldwide value of biodiversity and ecosystem services -- in terms of the $billions being spent.
Hattips to DL and JWT

24 Mar 2010

Water and human rights -- part 3

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Human rights in water

Rights create obligations and guarantees. If these are violated, civil and violent conflict can result. Thus, we have to be careful about who gets what rights. To understand the costs, begin with the difference between negative and positive rights. Negative rights (e.g., the right to free speech) should not be taken from you; positive rights (e.g., the right to “clean and accessible water, adequate for the health…") should be given to you. We can immediately see that it is easier to protect negative rights from violation by an outsider than positive rights, which as violated by a lack of action. Even worse, we cannot tell when action, of a certain quality, quantity or price, is enough. Finally, consider that the cost of positive rights grows with demand (e.g., population); it costs nothing to supply an increased demand for negative rights.

Collective action at home

In another extra credit assignment for my EEP100 students, I asked them to solve a collective action problem in their [group] household. These problems are the kind that drive roommates crazy: one person never washes his dishes, leaving them for others; another one claims that she doesn't have time to take out the trash, etc.

(The assignment required that the student identify a problem, propose a solution, and get all household members to sign an agreement to implement that solution. In hindsight, I should have given this assignment at the start of the semester, to see if promises turned into actions.)

Once again, there were many interesting problems and solutions. (I observed that girls are no better than boys at these types of cooperative games, and that a lot of people have trouble with trash :)

Julia had a great solution [doc] to her household's trash and recycling problem: All five roommates deposit money into the chores jar in advance. As they fulfill their promises, they get their money back. Instead of the typical solution (take money if people for not doing their work), this one created a positive incentive -- payment for doing the work.

Although mathematicians and (some) economists may observe that paying someone with their own money makes no sense, psychologists and economists familiar with prospect theory will see how useful this idea is. People HATE giving up money as fines, but they are pleased to give it up with the promise of getting it back. Once the money is gone, they forget about it, and are HAPPY to be paid -- with their own money -- for doing the task.

Imagine, for example, if people pledged $100 per year toward driving safely. Those who got tickets would get nothing (and maybe pay more); those who did well would get a $100 check at the end of the year :)

Bottom Line: Incentives matter, but timing and flows (fines versus rewards) can turbocharge these incentives.

23 Mar 2010

Water and human rights -- part 2

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

People need water --- why? how much?

The Earth has abundant fresh water but not abundant clean water (Whittington et al., 2008). The World Health Organization (WHO) estimates that there are 2.4 million deaths each year from problems with water supply, sanitation and hygiene, or WSH (Prüss-Üstün et al., 2008). Within this number are 1.5 million deaths due to diarrhoeal diseases, an estimate that WHO has just increased to 1.9 million — implying that 2.8, not 2.4, million people die annually of WSH-related causes (Lewis, 2009). 2.8 million deaths is a lot, but it doesn’t seem like a good reason to make “access to clean affordable water" into a human right. After all, 1.02 billion people lack access to clean affordable food (FAO, 2009), and over 6 million children under five starve each year, but we have no human right to food.(Squires, 2009).

So why water, and not food?

That's DEEP!

The Mariana Trench is over 11km deep. It lies between Japan and Papua New Guinea.

Check out this image for perspective. (Click to enlarge)

Who are beggars?

My EEP100 students wanted some extra credit assignments. In a flash of brilliance desperation, I told them that they could interview three panhandlers (beggars), to find out more about this particularly different class of people.

(The assignment allowed for 2 points for three interviews, up to four points total, for one or two students -- I wanted the students to be safe, so per student points did not fall if they were a pair. There was no requirement that they give any money.)

I said that they needed to ask panhandlers name, age, where they were from, how much they made and their plans for the future.

My students did an amazing job, and many of them wrote side notes on their feelings about what they learned; this assignment taught us all a lot.

Sungmin and Hak Ryul did a particularly good job. I recommend that you read their full report [doc].

Seriously, read it (four pages). You'll learn something.

Bottom Line: You really don't know much about people until you talk to them, to learn their version of the story. (Even then, you have to remember that it's their version.)

22 Mar 2010

Water and human rights -- part 1

This post is one of ten in the serialization of my paper on human rights, which is introduced here.


Ask anyone if there is (or should be) a human right to water, and most will say yes. Tell them that millions die each year for lack of access to clean and affordable water, and their support for a human right will increase; they may even become agitated, pressing you to tell them what they can do. What, indeed, can they do? Will a petition fix the problem? Will money? Will political pressure? Will a constitutional right to water save lives? Maybe the Universal Declaration of Human Rights adopted by the General Assembly of the United Nations (1948) should be amended to include a 31st Article that says:

Monday Funnies

My dad sent this to me ("National Geographic, Best of 2009") but he wonders if it's photo-shopped. Anyone know?

Water Conservation Showcase in SF

March 23rd!

Water and human rights -- overview

I have written a paper on this topic* that's entitled "Water rights and human rights: The poor will not need our charity if we need their water"

Many people have strong feelings on this topic, and I hope that they will read, contemplate and comment on it.

I have decided to present the paper in a serial manner, posting a chunk each weekday on this blog (starting this afternoon), to give everyone the opportunity of reading it in bite-sized chunks. There will be ten more posts.

In the serialization, I have omitted footnotes and references for the sake of flow.

If you want to read the entire paper or see those extra details, go ahead and download the paper from here. (You can comment on the paper at this post or by email.)

Addendum: This one-click download should give you the PDF directly.

So, let's begin with the abstract:
Each year, about 2.8 million people die due to problems with poor water supply, sanitation and hygiene. Over three-quarters of the dead are children. Some argue that a human right to clean water would improve this situation. This paper shows that human rights have not improved access to clean water and argues that it would be more productive to give people a property right to water. Because property rights - unlike human rights - are alienable, some portion of an individual's rights can be exchanged for access to clean water. Besides this basic equity outcome, property rights could enrich the poor, increase the efficient use of water, and improve water supply reliability in countries with poor governance.
In tomorrow afternoon's episode, we'll see why Article 31 (A UN Declaration of a human right to water) may sound good on paper but accomplish nothing.

* This paper was partially supported by the SmartMarkets Inc. Global R & D Bootstrap Fund.

19 Mar 2010

Politicians extending their monopoly

Speaking of human rights and water...

We get this
The United Nations High Commissioner for Human Rights is currently working on a proposal to introduce a human right to water, which may be worded so as to restrict private sector participation in the industry. An independent investigator, Catarina de Albuquerque, has been appointed to look into the role of the private sector in the human right to water. The deadline for submissions is 26 March. See this for details...
If you want to comment,* email Ms de Albuquerque to make the case for equal treatment of the public and private sectors.
* I wrote this:
Although I do not agree with the creation of a human right to water (see this paper), I hope that a right -- if it is created -- does not come with a pre-specified PUBLIC supplier of water. We have many examples of public failures and private successes in water provision, and an ideological constraint on ownership of the provider is more likely to help corrupt politicians than poor water users.
Addendum: Note that the Office of the High Commissioner on Human Rights provides a useful FAQ [pdf] on water and human rights that acknowledges that someone will have to pay and that both private and public providers can provide water services. Unfortunately, OHCHR does not comment on how to deliver these rights.

Speed blogging

  • A poll of 600 CA voters [pdf] finds that 55% oppose the $11 billion bond and 34% favor. I know that there will be a big campaign and lots of scare tactics, but $11 billion for no certain gain is much scarier. I am opposed.

  • Norway's sovereign wealth fund ($350 billion) is investing in sustainable water businesses [pdf].

  • In places without water markets, people want to know what water is worth, like this guy in Texas who put his water shares on eBay.

  • Another pricing failure in Marin, where customers are upset that their bills are going up after they used less water. That's NOT how to do it (this is).

  • My friend and lawyer* Darren Azman (a law student graduating in May) has a paper on taxes and shaming that is accepted for publication but not finalized. Tell him what you think about "The Efficacy of State Shaming Campaigns on Taxpayer Compliance..." (I worry about presumed guilt.)

  • The high costs of animal manure on the environment are not being paid by consumers or companies.

  • Water agencies subsidized the production of "Water Supply Reliability Through Innovation." Too bad they are unwilling to increase reliability with higher prices :(
Hattips to MJ, DW and JWT

* See, I do like some lawyers!

18 Mar 2010

Feinstein's special special interests

You can read Stuart Leavenworth's whole piece, but here are the goodies:
Feinstein's main reason for calling was to complain that I hadn't made an attempt to obtain details of her bill language before publishing our editorials.

I acknowledged we hadn't sought that information, assuming she (like other senators) wouldn't provide details of a bill that hadn't yet been filed.

In the spirit of openness, I then asked her to go public with the language of her amendment. She declined.

"What's the point?" she asked.

The conversation went on from there.

I asked her why she was devoting such singular attention to Westlands and not some of the other interests hurt by California's water crisis – such as salmon fishermen.


On the other hand, as I noted to Feinstein, scores of Fresno farm operations spent the last decade planting almond orchards, even though they lacked secure water rights or adequate groundwater. Is it the government's duty to help farmers who have made such risky decisions?

Feinstein's only answer was that the Central Valley is a major exporter of almonds, and the state should do all it can to protect the industry.

From our conversation, it was clear Feinstein has bought into many of the talking points of Westlands – that smelt in the Delta are being wiped out by predators more than water pumps, that the Delta is being poisoned with ammonia from sewage treatment plants in Sacramento and elsewhere.

Several times, Feinstein made the claim that the state is in a "wet water year," and thus should be able to spare some for farms. Water, she said, was spilling from Shasta Lake.

When I challenged her on that point, she responded. "Want to bet?"

I could then hear her rustling through some papers before conceding that Shasta was well below its capacity.

Why is Feinstein going to bat for Westlands is this way?

Politics is one answer. Farm water is a huge issue for Valley Democrats trying to keep their seats this year. By putting pressure on the Obama administration to favor farmers over fish, Feinstein provides cover for vulnerable Dems, such as U.S. Reps. Jim Costa and Dennis Cardoza and U.S. Sen. Barbara Boxer.
Bottom Line: Feinstein is NOT representing the people of California; she's representing a special interest WITHIN a special interest. Too bad for the other 38 million Californians.
Careful study of the reports suggests that Westland’s Tom Birmingham knew exactly how Feinstein would react to Westland's mating dance with Republicans. In fact, you can bet that the message to Feinstein was intentional: if you do not do our bidding, the Republicans will become our champion and they – not you – will get the big campaign bucks. Subsequent events confirm that it is indeed the dog that wags the tail and not... the tail wagging the dog. In case you were wondering, Feinstein is the tail.

Speed blogging -- drought edition

  • California looks to Australia for lessons on water management... California politicians were "shocked" that the feds may take over "their" water -- as was the case in Australia. Keep mismanaging it, and that will be true.

  • USDA is providing $10 million to farmers affected by California's water shortages... I'd call that subsidizing unsustainable ag. How about fewer farmers for less water?

  • Farmers say that they cannot afford to pay for Temperance Flat... They want urban taxpayers to subsidize them. (and Jim Costa is onboard with that!)
hattip to JF

Water chat with Adam Loch

In this 31 minute water chat with Adam Loch [11MB MP3], we talk about his PhD research on farmer attitudes to water markets, environmental purchases of water and changing the rules on water markets. Adam has years of experience as a member of a farming family, so his insights (personal and from research) are particularly interesting and accurate. Adam is also a tremendously gifted speaker, so listening to him is also fun.

Bottom Line: If you want to know what farmers think about water markets, ask them.

17 Mar 2010


A lady on the airplane* says to me "You're not doing what everyone else is doing!"

What else is new?

Speaking of that, how about this?
Don't work in an office if you value common sense over obedience
* I had my computer open. Perhaps she was worried that we might crash, but we were already on the ground.

Poll Results -- Love your neighbors

Hey! There's a new poll (not invented here) on the right sidebar --->
I know my neighbors like...
...family (we lend each other money) 3%2
...friends (we lend each other stuff) 19%12
...acquanitances (we lend each other a hand) 41%26
...strangers (we wave to each other) 31%20
...enemies (we take stuff from them) 5%3
...good food -- I ate them 2%1

I don't have much to say about these results, except that they will vary by community (large or small) and country (neighbors are more friendly -- across the board -- in some countries).

Bottom Line: It's good to have friends close by; they are handy when you need them.

Water chat with Mike Young

In this one hour, 17 min water chat with Mike Young [27MB MP3], we discuss many important aspects of water policy, from prices to markets.*

Mike co-authored the paper that laid down the foundations of Australia's water rights reform, redefining rights into property that could be traded like land and dividends that would vary with water supplies. It is this paper, with its underlying goal of robustness, that has lead to an explosion in water trading in Australia, with proportionate increases in efficiency in water use and wealth for those who hold water rights. (Those are farmers, btw.)

Besides Mike's research on the creation and evolution of institutions (see also Torrens land titling system, LLCs and the Tinbergen's Law [what?! No wikipedia entry!]), we also discussed his role as a public intellectual -- a role that I am also pursuing. It was very encouraging for me to hear of Mike's successes.

He also recommended the government's National Water Initiative for clear and relevant information on water policy in Australia, and elsewhere.

Bottom Line: You need the right tools for the right job, and those who design those tools need to worry more about communicating to potential users than job security.

* I turned off the tape for us to go to lunch. Instead of continuing to talk water markets, etc., we started to gossip about water, academic careers, etc. -- an untaped but interesting conversation :)

16 Mar 2010

New or used?

More random thoughts...

Don't make a new community when you can borrow an established one. If you want to spread a message, you can use the phone or internet. You don't have to set up a new communications network. If you want to change peoples' water or carbon behavior, you can use prices to send signals. There's no need to create new currencies, footprints, or certification systems. Further, you can tap the mommy network if you want to discuss the next generation's future -- there's no need to create a new networking hub for "Generation XY"

Water chat with Tom Rooney

Tom Rooney has been trading water in markets for over 20 years. In that time, many things have changed, and brokerage has become faster and more automated as products have become simpler and more-homogenous (see tomorrow's water chat with Mike Young for more on how he affected the process). Tom's company -- Waterfind -- has put tremendous effort into codifying the 40,000 rules that affect water trades (at the irrigation district-, state- and country-level) and writing software that makes markets work.

(Just for definitions, note that two types of water are traded in Australia. Permanent rights for an allocation of water that can be separated from land, and temporary rights for deliveries of water ("wet water") that are allocated as a percentage of the permanent right. The ratios of these two types, their prices and volumes vary with markets, regulations and water supplies. Most trades are for megaliters. One ML is 1,000,000 liters, or about 0.8 acre-feet.)

I talked to Tom Rooney on two occasions -- when he was on the road, talking to farmers and others in the business (see photo) and at Waterfind's Adelaide office.

In our first chat [18 min, 6 MB MP3], we had very little time to get into details, and Tom just makes some introductory remarks. In his presentation, I learned about the gaming that occurs around export caps (restrictions that limit exports to 4, 7 or 10 percent of available water or rights), the roles of government as buyer (for environmental water) and regulator, and how prices have changed with seasonal conditions and the change in rules to allow carry-over. One very interesting aspect was the way that government demand (and changes in those demands) has lead to wild swings in "free market" water prices. (Also note the interesting problem of crowding out -- no environmental organizations will buy water if the government will do it with tax money.)

In our second chat [49 min, 17 MB MP3], I played the roles of farmer (seller), regulator and environmentalist. (Then Tom turned the tables and interviewed me :)

For more background, watch/read this piece and check out their 2008/2009 water year annual report [link coming]. In this last piece, you can see trading prices and volumes, the inverse relationship between the price of permanent water rights and temporary water deliveries,* and much more detail.

Bottom Line: Tom Rooney has been in this game from the start. He's not just a broker -- he's helping the market evolve and work better. His clients pay five percent fees, but they get 95 percent of value that was not there a few years ago.

* As delivery allocations on rights (as a percentage) fall, the value of the rights falls, but the value of delivered ("wet") water rises.

15 Mar 2010

Does a latte cost a few trees?

Just a reminder: We cannot make good decisions without prices on things we like (or don't). That's why there should be a price for carbon (or a tax), a price for pollution, a price for water shortages, etc. With all of these prices, we can do the calculation, comparing the cost and benefit of our different choices.

Monday Funnies

11th Commandment: Thou shalt not be a hypocrite. (And yes, I prefer the tolerant Christians, Muslims, Hindus, etc...)

Water chat with Jon Plummer

The deluge begins: I am posting four Aussie water chats this week. Enjoy!

Jon Plummer is studying water markets for his PhD research (under Sergei Schreider). In this 40 minute water chat [14 MB MP3], we discuss how markets work in Australia. Since this was my first detailed discussion on that topic, I recommend that you listen to it as a backgrounder for later water chats (to be posted in the next few days).

You will also want to take a look at these two figures. The first shows price and volume information on trades (from here) -- something that we see all the time with stocks but very rarely with water markets. The second shows some of the physical geography determining the extent of the markets we are talking about.



Bottom Line: It takes some time to get used the a new set of institutions, and market institutions vary from place to place.

12 Mar 2010

Carbon additionality is stupid

Much ink has been spilt on the need to encourage projects that reduce net carbon emissions (with money) without paying people to do what they were already going to do.

The trouble with the requirement that people be paid for "additionality" is that it's too hard to separate real from imagined moves that improve the carbon balance.

This accounting and fraud problem is slowing or blocking a lot of projects, because buyers of carbon credits do not want to pay for projects that may not be certified as "additional."

This is stupid.

First, projects are not getting done (or, even worse, are getting credits for NOT happening), which means that the desired impact -- less carbon -- is even farther away.

Second, it's not morally defensible to exclude projects "that would have happened anyway" from receiving payment. If someone has a forest, why not pay them for not cutting it? Even if they were not going to cut it anyway, it seems nice to pay them for having such a useful asset.

The only reason that I can see for keeping additionality is that some bureaucrats or enviros want to maximize bang for their buck, to take the "free" stuff for granted and pay for additional stuff. This tightwad perspective sounds good on paper, but I don't think it's good, for the reasons I mentioned above. Further, I can tell you that the price of keeping something that you want to keep anyway is pretty low. With competitive markets and bidding for carbon sinks, it's a sure thing that the cost of carbon deterrence will be low.

Bottom Line: Pay people for doing things we like, even if they already want to do those things.
On a related note, read this excellent article on the value of ecosystem services, why we need to account for them and how much we should pay for them.

Speed blogging

  • "The New Left [Hippies] then, like the Tea Partiers now, had a legitimate point about the failure of the ruling class. But they ruined it through their own imprudence, self-righteousness and naïve radicalism." Yep.
  • Three myths about water [pdf] -- it's NOT static or renewable and desal is not the answer.
  • Janice Beecher (Institute of Public Utilities - Michigan State University) has an excellent presentation [pdf] on urban water and pricing. I recommend it to anyone interested in urban water. Slide 17 has a great description of the results of over/underpricing water or over/underinvestment in infrastructure. I could teach a 10-week course with this!
  • FAO publication [pdf]: "Farmers living in harsh environments in the regions of Africa, Asia and Latin America, in continuous coping with extreme weather events and climatic variability, have developed and/or inherited complex farming systems that have the potential to bring solutions to many uncertainties facing humanity in an era of climate change."
  • The nuts and bolts of irrigation delivery.
  • Point-use meters in apartment buildings may not be economical, but they "can reduce use between 15 and 39 percent."
  • NorCal water users unite to fight against SoCal. Markets are better at resolving these conflicts.
Hattips to EF, KF and DW

11 Mar 2010

The fascist two-step

Some bureaucrats may have good intentions but underestimate the complexity of the problem they are tackling.

If they fail to get results, they may tighten controls, in an attempt to "help" that ends up harming people.

This two-step explains how good intentions (Soviet collectivization, Cuban battles to best the Yanquis, Venezuela's creeping nationalization of the entire economy, and so on) turn into bad results, making do-gooder patriots into fascists.

Bottom Line: Be humble as a regulator and regulate simply -- or don't bother.

Rediscovering the Mississippi

My friend Derek Wallace is making a three month trip down the Mississippi, following the path of a drop of water from the headwaters to the Dead Zone in the Delta.

He's looking for financial, logistical and moral support for his Race2theGreen project.

Watch this video to hear his 4 minute pitch:

Bottom Line: Everyone talks about doing the right thing; perhaps we should support people who DO it.

10 Mar 2010

Humans have things to learn

Just saw Apocalypto, where one set of murderers (the Mayans) gets replaced by another (the Spanish). Better to be ruled by dogs.

Speed blogging

  • Mencken: "The kind of man who demands that government enforce his ideas is always the kind whose ideas are idiotic." Hear hear (...that, command and control folks?)

  • The federal deficit grows at the same rate as hard disk capacity (see figure). Coincidence? I think not!

  • "Open Source House is a non-profit organization that aims to provide better, more sustainable housing in low-income countries"

  • Yikebikes are made in Christchurch, NZ. They are personal electric bikes that fold down to the size of a briefcase. Neat!

  • Ocean acidification update: from bad to ugly.

  • Fleck has an excellent post on academics' inability to convey useful information to policy makers. (Trouble is that most academics won't read it, since they don't read blogs!)

Hattip to HZ

9 Mar 2010

Speaking of Other People's Money

This exchange among Central Valley farmers got my attention:
But the idea of outside regulation doesn't sit well with growers. Farmers see groundwater as their last resort in a drought, and they are reluctant to relinquish any right to pump it.

"Overdraft is here. So who are you going to try and regulate?" asked Westside farmer and commissioner John Howe.

Howe was responding to a statement by Kings County Counsel Peter Moock that the overdraft situation is probably "going to get worse."

"An end has to come to that [overdraft] at some point," Moock said.
Remember that these guys claim that more surface water will reduce overdraft. I doubt that will happen, as long as they are unwilling to put any restrictions on overdraft (robbing from their future).
On a related note, I see that Westlands has quit ACWA. It seems that Westlands has decided that its interests are not the same as a majority -- there's no "I" in team. That's quite a signal. Are politicians listening?

Water is money is politics

Someone forwarded this to me; it's quoted verbatim below, with some formatting. It's a good example of how water and money are related. Note that the water may not be used to generate additional jobs.

From: Mark M. Borba
Sent: Friday, March 05, 2010 10:32 AM
To: 'Thomas W. Birmingham, Esq.';'zzCardoza, Dennis'; Jim Costa'
Cc: 'Sarah Woolf'; 'Jean Sagouspe (E-mail)'; 'John Harris'; 'david e wood; 'don devine'; 'DonP'; 'j flores'; 'John Diener'; 'Stuart Woolf'; 'Jason Peltier'
Subject: THANK YOU! WWD allocation announcement impacts

Jim, Dennis & Tom:

Thought I'd share my rough calculation of the impact of the (30% + 8-10%) = 38-40% allocation announcement now anticipated (thanks to all of your tireless efforts) from the Bureau on March 15th:

It was a $140,000,000 phone call!.....adding an average of $312/ac to the "margins" of every grower's budget in the District:
  1. (Increase by 35%) = 420,000 AF X $300/af (ie. $465-vs-$165; Supplemental -vs- O&M)
  2. (Total 40%) = 480,000 AF X $30/af (ie. Est.reduced O&M/af)
  3. $140,000,000 over 450,000 acres = $311/acre
How growers elect to "spend" that is anybody's guess:
  1. Plant more acres (Cotton?)
  2. Substitute for Supplemental water (no acreage change; lower input costs; shift to capital spending?)
  3. Substitute for Well Water (no acreage change; lower input costs; add margin to financing package?)
  4. "blend" all water costs; farm more acres (NOTE: +35% = 0.8925 AF/acre)
Any grower talking to a lender about 2010 financing not only shows this increase in margin, but can now "show me the water", which has become the bankers lament...and a prerequisite to getting crop financing.

Thanks to Cong. Costa and Cardoza for not only pushing for this accelerated announcement in the increased water supply, but for insisting that the allocations (both the 30% and the addn'l 8-10%) be delivered at "Contract Rates".

This is HUGE...combined = $140,000,000!

8 Mar 2010

Please tell us about new water research

Gary Libecap, a well-known water economist at UC Santa Barbara writes with this:
I have been asked to write up a summary/short survey of recent water research for the NBER Reporter. I want to use this opportunity to advertise what is being done in the area to the broader NBER community that generally will not be up on this. Since you are active in the field, I want to be sure to include as much of what is out there as possible. Can you send me cites as well as any downloads of working papers that might be more difficult to access?
If you have papers on water (economics, politics and other social science angles), then please email the link or paper to Gary.

Monday Funnies

via JWT:

Farm Water Success Stories

Peter Gleick announced a new Pacific Institute book with that title. I left this comment:
Why not publish a book called "Farm animal success stories"?

Perhaps because farm animals are grown and sold in markets, with prices and incentives.

Water will be used efficiently when and where there are financial incentives. These guys are surely successful and efficient, but I'd bet they only went there because of money, subsidy or propaganda.
Bottom Line: We don't need stories and case studies, we need incentives.

ps/For those who think I only bash Peter, check this post on landscaping, which I like. I left this comment: "Good post. Here's a simple rule: Don't add water to your garden. What lives is what you should have there."

pps/His post advocating prosecution of businesses that dodge water efficiency regulations does nothing to serve consumers and a lot to serve overweening regulations. Right, that's enough of Peter Gleick for now...

6 Mar 2010

TNC wants answers!

The Nature Conservancy is spending $140,000 [pdf] to find good ideas on how to manage water (including markets and prices) in Arizona's Verde Valley. Deadlines at 5 and 17 March. Great!

5 Mar 2010

Free water and Father Christmas

Loved this post. Here's an excerpt:
This sense of a “water crisis” is really about the political realisation in many parts of the world that we cannot continue to live as if water availability were not a restraint on our activities. It is a bit like coming to terms with the fact that Santa Claus does not exist. For years, politicians and engineers have worked to create the illusion that abundant water is part of nature’s bounty, wherever in the world it is required. It was easier to maintain the pretence of plentiful water in the past. In the US, for example, large dams and water transfer projects could be financed through federal government borrowing, paid off through taxation over the decades, and hardly noticed by the general populace. In the Middle East, governments turned to thermal desalination plants, but generally avoided passing on the cost to the customer. In India, the illusion of cheap and plentiful water was created by the provision of free electricity to pump groundwater.

Water innovation event -- March 11

Imagine H2O is invites you [$$] to "Meet the Winners of Imagine H2O's Prize for Best Water Startup, and World Leaders in Water Innovation"... next week in SF. Here are the ten finalists.

Speed blogging

Hattips to DL, TS and DW

4 Mar 2010

Rational religion?

Jaakko Ojala asks:
Could You explain the following claims made traditionally by Christians... using economic analysis:
  1. Heaven is a free gift.
  2. Heaven is not earned or deserved.
  3. Man is a sinner.
  4. Man cannot save himself.
  5. God is merciful - therefore doesn't want to punish man.
  6. God is just - therefore must punish sin.
  7. Christ is both God and man.
  8. Christ died on the cross and rose from the dead to pay the penalty for the sin of man and to purchase a place in heaven for man which He offers as a free gift.
  9. The free gift is received by faith.
  10. Faith is trusting in Jesus Christ alone for eternal life.
Jaakko is doing this for doctoral research. I already said this:
Christianity is just another religion, and religions are good for social order and personal happiness.
Heaven is a free gift, but you have to die to get it. Seems that it's not free. (Economists say there's no free lunch.)
Feel free to leave your own comments here.

Who is responsible? A moral question

I met a nice family of church-going Christians in the campgrounds the other day. The father, mother and four kids were on vacation from his work at Boeing.

He works on aircraft maintenance for the C-17, a cargo plane that the Australian (and US) airforces use in Afghanistan.

I've long thought about the role of the individual in supporting causes that may conflict with that individual's moral stance. In this case, I was interested to know if the guy felt a conflict between his Christian beliefs (thou shalt not kill) and his job (supporting an army in war).

Unfortunately, I did not discuss this topic with him, but perhaps we can here.

So, does an individual have a responsibility for the actions of his employer (as a cog in the machine) or is s/he excused ("I just work here")?

I have a lot to say on this topic, but I want to hear what you all have to say.

(As most of you may know, I have issues with working for the government or as a professor where my time may be wasted on regulations and "useless" research, respectively. That said, I am a postdoc at UC Berkeley who's considering running for Congress, so I am tipping back and forth.)

Right -- so what's your opinion? Your personal experience?

3 Mar 2010

Poll Results -- Whose Government?

Hey! There's a new poll (know your neighbor) to the right --->
My national government serves (choose 1+)...
the People 12 votes
special interests/businesses 58 votes
its own people (bureaucrats and politicians) 28 votes
the ruling party 5 votes
the majority race/religion 4 votes

These results indicate that government (in many places?) has lost the confidence of citizens. That's not a good thing, as it leads to a deterioration in the provision of social goods; see this morning's post.

Bottom Line: We are willing to give up things for the common good as long as we feel that our sacrifices are evenly shared and benefit the majority.

More time to tell the Feds what to do!

JD found that the comment period on federal guidelines is extended to April 5, 2010.

Go for it!

Water Calendar

Kaveh Madani, a post-doc at UC Riverside's Water Science and Policy Center and the founder of Water SISWEB, created this neat calendar of water-related web sites [PDF] that's based on the water year.
Aguanomics is in November 2009, when it started to rain. You can thank me later :)

Take down that Pirelli crap and put this in its place, with pride!

Thanks Kaveh!

Self-interest and community

Economists spend a lot of time discussing the conflict between actions that serve an individual and actions that serve the community. (The Invisible Hand refers to actions that directly serve the individual and indirectly serve society.)

Take water use, for example. People who use more than their "fair share" serve themselves while leaving less for everyone else. If others respond by increasing their use, then shortages grow worse. If they respond by attacking the "wasteful" individual, then conflict can erupt that's even more costly.

One solution -- my preferred solution -- is to allow people to use as much as they want but charge them for the privilege. As prices rise, everyone will use less, and shortage will not result. That's what happened when gas prices rose -- everyone faced the choice of using less or paying more, and everyone was happy with their action. Some people may have been upset at others who continued to drive SUVs around, but they know that those drivers were paying a lot to be wasteful, which was (often) an acceptable punishment for such "anti-social" behavior.

That case with water could be the same, if we raised prices, but there are many barriers -- cultural and political -- to doing so. Without prices, there are fewer options on the table. Most places ask people to use less; some of them regulate use. Both of these schemes will fail if people set themselves above the community. (For example, regulating lawn sprinklers is useless if people water at night, take long showers, or water their back yards.) That's been the case in most parts of the US, where individual rights are often stronger than the sense of community. (There are some exceptions, and they often surface when a critical mass of citizens, media and leaders come together, agreeing to do something.)

In other places (Australia, as I am learning), people are willing to use less, because they have a stronger sense of community, and doing the right thing. That force appears to have been the primary driver behind Brisbane's drop in per capita use to 140 lcd, and Melbourne's current use of 174 lcd (46 gcd).

I am sure that readers can give their own examples of conservation successes and failures that can be attributed to a strong or weak sense of community, respectively.

Ironically, it is hard to built "community" in an area (gated communities, anyone?), but a community, once built, lowers the cost of almost every activity in life -- education, safety, traffic, resource use, and so on.

Bottom Line: There are many ways to motivate people; choose the right one for the job.

2 Mar 2010

Speed blogging -- Corruption Edition

The US government subsidizes nuclear power. Get ready for stupid results.

The US government is increasingly incompetent because bureaucrats are tangled in their own org chart, get appointed for political reasons, hired and promoted for the wrong reasons, and/or lack accountability

Westlands is "a coyote with its leg in a steel-jawed trap," says Jason Peltier (of Westlands), and this desperate, non-fuzzy beast is attacking on all fronts, using Diane Feinstein, its political tool.

"The Delta Vision Blue Ribbon Task Force... was planted with key individuals likely to support building a peripheral canal and that their input as stakeholders in the process has been ignored."

Meanwhile, the Marines covered up the cancer-causing chemicals that were in the water of soldiers and their families, with help from some crooked contractors.

Hattips to DL, DW and JWT.

Bill to Stop Farmers from Selling Water

This article discusses the issue. My favorite line is:
"Very few of these sales are voluntary," said Don Mills, chairman of the Kings County Water Commission. "The economics are forcing the farmers to sell the water."
I'm at a loss for words with that statement.

The bill text is here. Essentially, it would prevent DWR from approving agricultural to municipal transfers of State Water Project Water for periods lasting more than 10 years. Perhaps Mr. Arambula is unfamiliar with the Monterey Agreement, which specifically allowed these types of transfers? Lots of work went into that agreement, so to propose eliminating one of the Agreement's provisions shows a lack of historical understanding.

As for the 10 year transfer limit - When I lived briefly in Washington DC, I rode the Metro to work. Metro sold two unlimited weekly passes and I bought the Short-trip pass which covered all rides in off peak hours and up to $2.65 of a ride for peak hour rides. My peak hour ride to work cost more than $2.65, however, so to avoid paying more, I would take the yellow line north to the city (I lived in Alexandria) and get off a couple stops later, sprint to the fare gate, exit (that trip cost less than $2.65), re-enter to start a "new" $2.65 trip and sprint back to the subway before the doors closed, if I were lucky, to continue into DC. So much for their policy that the pass was only good for $2.65...

If the government says no to transfers longer than 10 years, we will see transfer proposals for 10 years with an expectation to renew. And users will get around it in other ways too.

Bottom Line: California's water market does not need pointless hurdles like this.

Trade is good for us! All of us?

Russ Roberts explains, and I agree, with two caveats:
  1. For more on the pain involved in creative destruction, consider the case in Malaysia, where capital did well but labor did not. This pain is important in societies dominated by agriculture, where free trade may hurt the majority.
  2. Russ missed a VERY important point -- much of our current prosperity and lifestyle is based on MINING natural resources (I use that word in its dynamic sense, which includes over-exploitation of "renewable" resources.) I know that we would be doing pretty well without mining, but our pace and level of consumption is NOT sustainable.
Bottom Line: Accurate accounting means that you count everyone and everything that's relevant. Miss something and you may think that a loss is a profit.

1 Mar 2010

Last days to comment on federal water guidelines

Go here and click on the "submit comment" on the left sidebar.

Deadline is March 5.

Here's my comment.

Here's an interesting commentary from a former Corps engineer:

Revising the Principles and Guidelines: What all Water Organizations Should Know

Mr. Fred Caver, former Deputy Director of Civil Works for the Army Corps of Engineers prior to his retirement in 2005, explained the significance of the proposed Principles and Guidelines revisions and why water related organizations should be informed. Mr. Caver now runs a small water resources consulting firm, Caver and Associates, Inc., and serves as the Chairman of the National Waterways Conference, an organization dedicated to creating a greater understanding of the widespread public benefits of our nation’s water resources infrastructure and to effecting common sense policies and programs which recognize the public value of water resources and their contribution to public safety, a competitive economy, national security, environmental quality and energy conservation. A transcript of the February 24, 2010, interview conducted by Kris Polly of Water Strategies, LLC, is below.

Monday Funnies

Minimizing individual water consumption

As many of you know, I am not keen on command and control regulations of water use. I advocate higher prices to give people an incentive to use less. (I will cover the role of customs, norms and self-control in the next few days.)

A central problem with my proposal -- some water for free, pay for more -- is that it's based on a per capita allocation of water. Since most water utilities do not know how many people live at a given meter, it's hard to establish per capita allocations and pricing.

I was talking to some Australians who mentioned that their water bills show their use and gave a calculation of per capita consumption as if they had 2, 3 or 4 people in the household.

This calculation helps people understand how well they are doing at pursuing a target of 155 liters/capita/day (41 gallons/c/d). They are currently at 174 lcd.

Now it's clear that any water district can use this method to help their customers help themselves,* but it can be leveraged for use in a per capita allocation/billing system, if you add a little twist.

So here's how it works:
  1. Ask people to declare the number of people at their address (meter).

  2. Allocate some cheap water for each individual, and then charge more for use above that use; see this post for more.

  3. Give them a bill that shows their use per individual, given the number of people they have declared.

  4. (The twist) Also give them the use, number of people, and use per capita for 10-20 neighbors around them. This latter bit of information will create a common knowledge of how many are using how much, which will put pressure (social pressure) to both reduce overall consumption as well as honestly declare the number of household members. Although some people may complain that it's invasive, I do not agree. Most water conservation campaigns focus on "doing your part for the community," and most people do not mind their neighbors knowing how many people live in the house.
Bottom Line: Water conservation takes effort, and we need to be given reasons to exert it -- financial and social incentives provide good reasons.

* As opposed to telling people that they should use 10 or 20 gallons less, which is not only meaningless to the average person, but also wrong in terms of asking water wasters and water misers to use the same amount LESS, from a much-greater number.