30 Jul 2010

Speed PR

Public Relations stuff worth a mention...
  • Bad sign (OPM for wasteful project): "Members of the consortium seeking to build the controversial Belo Monte Dam in the Brazilian Amazon reveals a striking lack of private sector participation...there is only a 28 percent chance that the Belo Monte Dam would yield a positive rate of return over the first 50 years of its operation. The report's risk scenario analysis calculates a high likelihood of a loss for investors ranging between US$3 - 8 billion."

  • "The Center for Environmental Innovation and Leadership is an independent organization that facilitates information and education exchange among government and military professionals charged with identifying, specifying, and buying green goods and services and with the vendors, contractors, and consultants that provide green goods and services." They want you to join!

  • "Flowing 330 miles from the Sierras to the delta, the San Joaquin River is California’s second longest river. It once boasted one of the state's great salmon runs. But since the construction of Friant Dam near Fresno in the 1940s, most of the San Joaquin's water has been siphoned off to farmland in the Central Valley. Now, after years of lawsuits, a new effort to restore the river is offering hope that fish and farmers can co-exist." View the video.

  • "Food & Water Watch put together this celebrity-studded video to encourage Californians to ask their legislators to scrap, not delay Prop 18." I don't know these "celebrities," but I agree that the bond should be scrapped.

Bias at California's DWR

The Department of Water Resources distributes five emails per work day to many people interested in California water issues. I have often wanted my stuff to be included in these emails.

I understand that they may not want to publish blog posts, but I was surprised to get this response to my piece in Forbes from Ted Thomas (Chief, Media and Public Information Branch, Public Affairs Office):
Thanks for your interest and congratulations on being published in Forbes. Regarding our clip service, I should explain that its purpose is to keep our managers and employees current with news that relates to their work and responsibilities. While your commentary is interesting, it does not usefully add to our program dialogue.
So it's not possible to redistribute a piece pointing out that shortages result because water prices are too low, but it's ok to distribute a blog post that says "The Colorado River IS Running Dry"? (Panic! Build more storage <-- another article DWR distributed.)

Bottom Line: DWR serves its bias (we want more supply!), not citizens needs (we want no shortage!).

Big Ag sells to Big Urban

I've been participating in an email discussion about Westland's plan to sell 50-100,000 acre feet of water to Metropolitan Water District (Spreck broke the news; this article gives more background).

This ag-to-urban, central-to-southern California sale upsets enviros. Why?
  1. WWD has been making A HUGE FUSS about how it needs MORE water. How is it possible now that they can be selling water? (Short answer is that WWD has to sell it, to avoid losing it from storage; the long answer is that WWD will eventually sell ALL of its water to SoCal urban buyers. No, it's NOT about the workers, food or community. It's about MONEY.)
  2. MWD's water has driven SoCal sprawl, and more water means more lawns at MWD and more sprawl into new housing developments.
  3. Some enviros just dislike WWD (and other irrigators using imported surface water); they want it shut down and its water left in the environment/Delta.
I am not upset about these "business facts" (or even anti-ag emotions), especially when water is going from willing sellers to willing buyers, for beneficial use.

OTOH, I am not happy about this (prospective) sale:
  1. WWD water is subsidized.That means that price may be too low and profits come out of our pockets.
  2. A backroom sale does not allow others to bid. That's not good from a social perspective.
  3. Feinstein and other politicians are writing special rules, changing the definition of water rights to make them worth more cash -- and more water -- when we have already overallocated our water supplies. These special interest giveaways merely rob The Public a second time.
My suggestion? WWD auction its "surplus" water to the highest bidder and use the revenue to repay the money it spent to acquire it.* The remaining money should stay at WWD, as a reward for its special relationship with DiFi and others. (I don't like those special interest/lobbying rents, but I don't think they should be taken away. We need politicians who are brave enough to change the policies that produce these rents. Anyone?)

Bottom Line: Water trading is good, as long as the good for sale is clearly owned and the price reflects its real cost.
* It's interesting that they are talking about a water swap -- 3 af today for 2 af in the future -- instead of a cash sale. The swap makes sense for three reasons: (1) They do not want to haggle over price (except that "net af" of water), (2) they do not want the public to know how valuable the water is if it WAS priced, and (3) they do not want to worry about cash flows. OTOH, the swap creates a long term relationship (good!), but also creates uncertainty. Will MWD be able to return the water in the future? What if it's dry for 5 years and MWD needs the water for toilets, showers and lawns?
Addendum: Tom Birmingham wrote me an email on this post, and I am waiting for him to let me post it as a comment. Until then, the gist of his comment is that this is a swap, not a sale, and that MWD has the storage space to let it happen. I replied that this swap seems a poor substitute for a market (in which WWD and MWD would be able to buy and sell when and if they wanted), but a necessary substitute given the current distribution of water rights -- a distribution that favors WWD and MWD over other water users.

29 Jul 2010

Calculus of Consent -- The Review

Buchanan and Tullock (BT) wrote The Calculus of Consent: Logical Foundations of Constitutional Democracy in 1962, but their analysis is still worth considering.

Although the book is written for academics, it is not hard to read. Reasonable concentration and patience is all that's required to understand BT's exposition.*

Here's their big point: Constitutions should be designed from the perspective of individuals seeking their own interest, not a society seeking the greatest good for the greatest number.** They say this not because they think that people are selfish bastards, but because governments of/by/for the people need to be designed for the choices that individuals make. It's a question of "appropriate technology."

Here are a few notes that I made while reading:
  • Economics "works" because people are different. That means that they can trade -- one man's trash is another man's treasure. The same holds for politics, where people have different needs and interests, and these change over time.
  • Political choice is subject to uncertainty (NOT risk) over time, over multiple decisions. That means that a constitution should be designed to maximize "average" benefits (wins less losses) across many decisions (ex-ante unknown), allowing for trades in votes over many issues (logrolling). Decisions are made on two levels: At the ex-ante constitutional stage, general rules for making decisions are decided. On the current-event legislative stage, particular decisions are made. An individual may approve a constitution that allows him to be overruled, knowing that he will still gain net benefits from constitutional protections over time. On individual issues, the individual will vote for his own interest -- or trade his votes for other issues of greater importance.
  • There are three ways to make policies: Private individual decisions, private group decisions, and public group decisions. Private groups need unanimous agreement; public groups do not. The most-efficient decision mechanism recognizes two costs: The cost to the individual of the mechanism (i.e., where the majority tells the minority what to do) and the cost of making a decision (i.e., the larger the majority required, the larger the cost). There is a sweet spot in the aggregate of these costs, where the cost to the individual and the cost of making a decision are minimized. You want to design a constitution to hit that spot.
  • Note that a rule of unanimity has the lowest cost to the individual, since no individual will allow a policy that hurts himself. Unanimity has a high decision cost, since it requires that everyone agree on a policy.
  • The literature of collective action tends to focus on the cost of not doing something; they miss the cost -- to the individual -- of doing something. This cost is perhaps a "choice externality."
  • The more-disaggregated the decision authority, the lower the cost of a decision (subsidiarity).
  • A single-issue referendum is inefficient because it does not allow logrolling -- vote trading that takes issue intensity into consideration.
  • BT make a major mistake here, I think, in ignoring (or missing) the problem of logrolling a series of bad policies into place.*** Because they assume that voters -- not representatives -- are making decisions, they assume that logrolled-policies are beneficial on net. This assumption falls apart when self-interested representatives trade their votes for policies that benefit special interests. In the resulting circle of value-subtracting, robbing Peter-to-pay-Paul policies, they make everyone worse off, in multiple ways.
  • Public projects need only benefit the proportion of votes necessary to get the project enacted. It's clear that these projects can be less efficient than private collective projects.
  • BT's theories match observed constitutions and legislative processes.
  • Representative voting means that a minority of 1/4 -- 51% of the voters in 51% of the districts -- can make decisions. Beware! 
  • An individual may accept private costs (e.g., from allowing prostitution to continue) if the alternative (collective control of sex) is worse.
  • The best way to allocate a collective good is to give every individual an equal share (adding to 100% of the good) and then allow trading. That's what I have said for all-in-auctions and human rights and water!
  • As government has expanded its range and allowed for narrowly-defined programs (remember that this was written in 1962!), the benefits to special interest groups have increased. From this, we can see that special interests will thrive as government's size and scope increases.
  • Tullock says that game theory accepts the rules as given while economics allows the rules to change (or be ignored). This useful classification was discarded when GT was merged into economics. I make this point when discussing "conflict theory" -- where rules are endogenous -- but I wonder how many economists fail to consider what scenarios when rules can be broken.
Bottom Line: I give this provocative and useful book FIVE STARS. Every political scientist should read it. Anyone running an organization should read it. Citizens should read it. People upset about BP, or Iraq, or the DMV should read it. (Or maybe just read this review a few times and think about the difference between what you want government to do, what it can do, and what it does do.)
* I tried recently to read Keynes's General Theory and got lost in his witty erudition. I left it on the bus.
** Something that Professor Wantrup, my benefactor, also understood.
*** I do not know if they updated their theory in the past 50 years (!) to account for this problem. Help?

And now what?

(via RB) UN declares access to clean water a human right
The non-binding text "declares the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of the right to life."

It expresses deep concern that 884 million people lack access to safe drinking water and that more 2.6 billion do not have access to basic sanitation.
A non-binding deep concern is NOT going to improve people's water supply. It's a fine waste of words by pampered bureaucrats who work for the governments that NOW fail to provide water to their people. (The resolution was sponsored by Bolivia.) Will more money -- motivated by enhanced human right guilt -- deliver the water? No. Competent water companies -- private or public -- will.

Bottom Line: Cheap talk doesn't deliver water. Incentives do. Make water profitable, and the poor will not thirst.

28 Jul 2010

Poll results -- choices

Hey! There's a new poll (are you what you eat?) to the right ---->
A mother should be free to choose...
...when she wants to have an abortion 21%24
...where she sends her kids to school 20%22
both 58%65
neither 1%1

I am (obviously) in the category of "both." I am guessing that the "where to school, but NOT abortion" crowd are right-to-lifers (even if they are intellectually inconsistent*), but I am wondering about the "abortion but NOT where to school" people. Are they teachers defending their sinecures?

Please comment.

Bottom Line: Pro-choice people should not add caveats.
* Yes, I think that a mother has the right to kill her unborn child. First, because it can often be a question of it vs her (involuntary servitude). Second, because unwanted children are not often happy children (utility). Third, because consciousness and pain are functions of social context and expectations, which babies do not have.

27 Jul 2010

I'm in Montana!

I'm here as a Julian Simon Fellow at the Property and Environment Research Center. PERC does a lot of cool research on how markets can improve the environment and how to prevent regulations from destroying it.

I am working on the second draft of my book, The End of Abundance, using the comments that 25-30 reader-reviewers provided me. These folks deserve a LOT of praise for such useful comments!

I'll be catching up on logistics (processing photos from Central America, figuring out what's next in terms of jobs and living location, organizing my academic, consulting and outreach work) while I get caught up on some recent developments in water -- and blogging on them!

If you're going to be near Bozeman in the next month, then say hi.

Speed blogging

  • Food and Water Watch has a guide to understanding your utility's water quality report. It may be useful, but you will have to wade through their human rights and government-knows-best propaganda.

  • Many English speakers cannot understand the passive tense. That may explain why academics and bureaucrats like to use it (to sound smart), but it also explains why people have a hard time understanding them. That's a problem if citizens cannot understand laws or their rights.

  • Some interesting thoughts on subsidies vs user pays.

  • Pro-citizen groups have put together a tool to help people understand how to draw their own borders for congressional districts. This is a great way of seeing how far politically-biased boundaries drift from boundaries that are objective or that serve OTHER partisan interests.

  • The extra stuff in beer that they (Bud, Miller) don't tell you about.

  • Details on why clean coal isn't.
Hattips to RT and JWT

26 Jul 2010

Global Water Magazine

The first issue of this publication from Johns Hopkins is out, and it's full of interesting articles.

Oh, and I wrote one of them :)

Water Rights and Human Rights: The Poor Will Not Need Our Charity if We Need Their Water

Monday funnies

Speaking of Facebook:

Federal flood insurance

...continues to fail. JWT sent this article on the bureaucratic delays that are keeping people in New Orleans from moving into their homes because flood insurance is taking too long to process.

Please tell me why the Feds are in this business? They know nothing that a private company does not; their subsidies lead people to pay too little to live in dangerous places; their paperwork keeps real estate markets from functioning.

Bottom Line: The government should NOT be involved in some markets, because it only screws things up.

23 Jul 2010

Speed blogging

Hattips to to CC, JWT and HZ

22 Jul 2010

Lobster thieves

We stayed in Little Corn Island (LCI) off the Caribbean coast of Nicaragua for a few days. Our guest house was run by a retired fisherman, Carlito, who told us about some recent arrests.

LCI is known for its lobsters (see lobster traps at right), and many of its people -- and people on the neighboring islands -- make their living during the 8 month season, selling lobster tail for $8 per pound to two big companies that ship tails to customers in the US.

The season is necessary to keep the lobster population healthy, to give eggs time to hatch and mature. It starts on July 1.

We were there at the end of June, and the arrested fishermen were Nicaraguans from Puerto Cabezas, about 120km to the north. These guys had depleted their fisheries. When the government tried to shorten their season, they protested and got it re-opened. Then they wiped out the fishery. (Sound family, salmon guys?).

They were fishing without permission off LCI, before the start of the season.

The LCI fishermen asked the government to intervene. Nothing was done. They asked the mayor and port master to do something, they shrugged their shoulders.

So several boats of LCI fishermen boarded PC boats and arrested the PC fishermen. They found lobsters that were undersized and carrying eggs.

When they brought the PC fishermen back on shore, the government came to pick them up.

It's hard enough managing an open access fishery, but it's even worse when force trumps rule of law.

I suggested to Carlito that LCI fishermen organize into a co-op -- to protect their fishery from outsiders -- and issue catch permits (ITQs) to allow locals to fish when they want while keeping the local lobster population healthy.

Bottom Line: It's not hard to make rules. It's hard to make sure they are enforced.

21 Jul 2010

He who lives by the sword

via CM
It was attention-grabbing news last year: A big Kings County landowner sold $73 million in water rights to the Mojave Water Agency in Southern California as local agriculture struggled against drought.

The Kings County grand jury thought it was controversial enough to investigate... The report went on to say that the Kings County Water Commission, which exists to advise supervisors, "failed to submit any written comments or to advise the Board of Supervisors to do so ... However, the grand jury concluded that "no actual breaking of California law was found."


County officials say Vidovich had the right to sell the water, which didn't belong to Kings County anyway, since it was imported from the Sacramento-San Joaquin River Delta under the auspices of the Department of Water Resources.


Dudley Ridge had no water prior to 1969, when it began taking deliveries from the California Aqueduct, Neves said.

The report raised concerns that other landowners could also sell their water, turning Dudley Ridge back to empty land. Neves shot that down, saying that water use has gotten so efficient that farming in Dudley Ridge - despite the high cost of Aqueduct water - will likely continue.
Neves is probably wrong. Dudley Ridge had no water until 1969, and it will have no water in a few years, if outside urban areas are able to buy it. It's purely a matter of willingness to pay versus value in use. Not even almonds produce as much value as showers and flushing toilets...

Bottom Line: When there's profit to be made, water will trade.

20 Jul 2010

Some Answers about Fiji Water

I've been trying to talk to people at Fiji water since the start of March. I even changed my travel plans, to be able to talk to them when I was in Fiji. But that meeting was canceled at the last minute and my subsequent attempts to get written or verbal answers to my questions have been shuffled about and ignored. It's been nearly five months, and I'm tired of waiting. Tired. Tired Tired.

So I decided to post my questions, with answers from "Stuei," my made-up correspondent. Feel free to correct/elaborate on my answers -- especially if you can give URLs for sources. Enjoy!
  1. What's the carbon footprint of Fiji Water delivered to San Francisco (it comes via LA, right?) How does that compare to the footprint of Dasani -- or any other brand that is from municipal water?

    Stuei: We have a triple-negative carbon footprint! We've bought options for future forestation on the land that we are now clearcutting. Given our assumption that carbon sequestration will be 10x more valuable in 20 years, we are going to replant 30 percent of the current area in 10 years, allowing us to make money now and you to drink our water guilt-free. Dasani? Crap from the tap -- don't drink that poison!

  2. How much water does FW extract from the aquifer in Fiji per year? How many bottles is that? How much comes out of the spring (it's artesian, right) in the average year?

    Stuei: We take about 50 percent of that aquifer. 80% of our extractions go for the water slide (employee perks!); the rest goes into bottles that are handblown with the finest plastic, giving our water a fresh, new-car taste. The spring's flows go up and down, but our extractions don't. This is a business, not a nature show!

  3. How much FW is sold/donated in Fiji? What are the top five countries, with share of your total sales?

    Stuei: We donate over 400 bottles of water per year in Fiji. The President Dictator Our Friend love those little bottles. We sell water in Fiji, at the same low price that LA celebs pay. Most of our water sells in the US, where people are too worried about their health to exercise, too paranoid to believe that tap water is drinkable, and too uneducated to see through our clean crisp marketing. My favorite place to sell Fiji is in Aspen -- I love to ski on that snow, but hate to drink it.

  4. How much does FW pay the Govt of Fiji per bottle for water? If not per bottle, is there an annual license fee? Does FW pay taxes (income, property) in addition to this?

    Stuei: Nothing. Duh. We pay bribes, but only to people. Governments are NOT people. Get that straight. Our license fee of $1,000 is quite expensive, but our tax credit of $50,000 more than makes up for it. Since we employ 200 workers, that rebate allows us to pay them $250/year more. (We don't, of course. Have you seen the unemployment stats for Fiji?) We pay property taxes based on our land-footprint. It's about 500 sq feet around our pumping facilities. The rest of our facilities are on stilts, so we only pay taxes on "unimproved land." (I got that idea from the kosher pig folks; their pigs don't touch the ground, so they are "clean." Get it?)

  5. How many Fijian citizens work for FW? How many non-Fijians (in Fiji and LA...)

    Stuei: We bought passports for our foreign staff, so we are 100% Fijian on the ground. Even I celebrate on October 10th. 90 percent of our wages go to the 20 people who work in marketing in LA. The other 10 percent of our wages go to the day-laborers we have in Fiji. I understand that some of them work upto 50 days a year, so we even remember their names. (Well, we remember who gets what nametag.) Employees who pass 200 days of employment with us are "retired" -- they get a free bottle of Fiji water and a place on our shoot on sight list.

  6. What's the most-common question from anti-bottled water people? What's your answer?

    Stuei: "Why are you evil?" I kinda like its directness, but I don't tell them that. I just say Fuck You -- and the horse you rode in on. Hahhaaha

  7. What's the hardest question for FW to answer from anti-bottled water people? What's your answer?

    Stuei: "Which do you love more: money or marketing?" I still flip coins on that one, but our marketing is so bad-ass that Eskimos buy our ice! Fiji-ice, of course!

  8. Where are your plastic bottles made? Virgin or recycled plastic? Is there a bottle recycling program on Fiji? What % of bottles does it pickup? Any recycling stats for FW bottles in the US?

    Stuei: We make 'em in China, where it's easy to get 8 year olds on the lines, and we can dump our waste next to the road. Although I hate to say "Virgin" (Fucking Branson), I LOOOVE virgin costs. We take blood oil from Iran and Sudan, refine it in to bottles with slave labor from Burma, and then ship the empties to our plant on North Korean ships that just delivered missiles to Yemeni freedom fighters. How are the bottles so clear and square? We take crutches from all those one-legged Afghanis and use them to pull the bottles through a solution of butterfly wings, shark fins and rhino feet. Gotta love that quality. Recycling? Yeah, we do that. We dump the bottles in the ocean and then wait 400 million years for plate-tectonics to turn those suckers into new oil. Bam!

  9. What's the relationship between FW and the government of Fiji? Does FW have any position on political coups? Does FW have any formal or informal relationships with police, military or other security branches of the Fiji Government?

    Stuei: They're our bitches. All of them. The only crime that we don't control is that $12 mai-tai at the resorts. We tend to do quite well off the pedophiles and guys fencing stolen cameras and laptops, but we need to pull back on supply a bit. Low prices do not help the bottom line at FABS (Fiji's Ass Belongs to Stuei).

  10. What % of FW costs are for production, transportation, head office, marketing/sales, science. Do these sum to 100%?

    Stuei: Science? Damn, this is just water. There's no science! We spend 80% of our money on packaging, marketing and transport. We break-even on wages. Those costs eat into our profits, but we are able to maintain those at 75 percent of revenues. The only boys who make money than us (water! it's just water!) are Bill Gates ($200 cds!) and the US Mint ($100 for $0.01?! Awesome!).

  11. Why should people buy FW? Why FW instead of Aquafina (muni water) or Perrier (spring)

    Stuei: Because they are shallow poseurs afraid of their plumbing. Oh, and our bottles are square!

  12. Thanks Mr. Resnick Stuei!

    Stuei: No worries kid. I love the media. Have a bottle to go, 50 percent off for you, amigo.

Addendum: Truth is stranger than fiction: Bottled holy water from Israel. Also read this on Green FW.

19 Jul 2010

Monday funnies

This is so true!

The Appeal -- The Review

I just read The Appeal by John Grisham. The plot involves a big chemical corporation that pollutes the water in a small town, such that many die of cancer. The story develops as the corporation tries to fix an election of a supreme court judge, so that this same judge can support their appeal against the scruffy lawyers who took on the major corporation and won the original case finding them guilty of willful pollution. I'll leave the details for you to discover, but Grasham puts his finger on the problem of elected judges here [p 296]:
It's unseemly how they [judges] are forced to grovel for votes. You, as a lawyer representing a client in a pending case, should have no contact whatsoever with a supreme court justice. But because of the system, one comes to your office seeking money and support. Why? Because some special interests with plenty of money have decided they would like their own seat in the court. They're spending money to purchase a seat.
Bottom Line: Read it and weep. Justice for sale does not serve the people. Judges should be appointed, not elected. (Same goes for sheriffs!) I give this book FIVE STARS for its excellent blend of fact and fiction, too close for comfort. (Others may not like it for its unhappy ending, but such is life...)

16 Jul 2010

Why do businesses let money run down the drain?

ED sent this article on the money that businesses can save with water conservation. Does this imply that businesses are leaving money on the table? Maybe.

First, we have to remember that most businesses established their budgets and bookkeeping at a time when water was "too cheap to meter." They may not have updated their expense tracking in response to higher prices or metered consumption. So water costs that are under the radar can indeed be reduced with little effort.

But that may not be true. Some businesses could perhaps reduce water consumption (and expense), but at a cost (time, equipment) that exceeds the savings.

Finally, there's the issue with bureaucracy. The problem may be that one division (even one worker) is in charge of paying water bills while another is in charge of water use. If the latter position does not have a financial incentive to reduce use, then "waste" will continue. This is true for many organizations -- governmental, for profit, etc.

Bottom Line: Businesses may be wasting money but maybe not. Tell us what's happening at your work, about the link between water consumption and water bills.

15 Jul 2010

The Bureau -- The Review

The Bureau: The Secret History of the FBI (2002), by Ronald Kessler covers the FBI's history, from its foundation to post-9/11. I learned two big things in this book: J. Edgar Hoover made the FBI powerful, but in the wrong way. Instead of focussing on good law enforcement and preventing/solving crimes, he focussed on gathering information and using it to manipulate people -- criminals and innocents alike. The FBI was more like the KGB or Stasi than the Boys in Blue.

The second main point is that institutionalized professionalism -- something that developed after Hoover -- was weakened by a few grandstanding directors who failed to put honesty and rule of law above their personal or political agendas. The results were awful -- spies who betrayed the US for many years, the Waco public relations disaster (the FBI's involvement at Waco was ok, the media spin was a disaster), and the fumbling that happened after 9/11. Like many, I thought that failed US-intelligence "let 9/11 happen," but I am convinced that this was not so. (That doesn't mean I support the War on Terror,* failed invasion of Iraq or incompetent Department of Homeland Security!)

Kessler calls for more FBI agents (up from 12,000 or so; compare this number to 1.4 million military) and national ID cards (as a secure replacement for de-facto ID we have with social security numbers). I support both of these ideas.

I also liked the way that the FBI increased diversity: They allowed women, minorities and people with language skills with lower scores than white males to get INTO the FBI academy, but EVERYONE had to pass the same tests to graduate. The same would work at universities, if they were willing to cut off low-performing students.

Bottom Line: I give this book FIVE STARS, and I hope that the FBI continues to strengthen as an agency of professionals supporting good laws; they should learn from the past, to avoid old mistakes.
* I also read Le Carre's Absolute Friends, a fictional tale of how two friends are manipulated by conservatives in the military industrial complex, to drive ahead the War on Terror. Conservatives needed a war, and innocents died to give them a cover story for abusing others.** I see a lot of fact in this fiction, but I wish that more of the facts we see were fiction, instead of manipulative, abusive power-hungry actions by "leaders" whose megalomaniacal actions weaken countries and their institutions.
** The FBI behaved in much the same way during Hoover's time, attacking communist reading groups while protecting mafia hitmen, pretending that they were above the law and hiding their abuse of Americans.

14 Jul 2010

The trouble with truth

In September 1959, Nikita Khrushchev visited the US and saw the difference between America and the USSR and the propaganda-US that Soviets promoted to their people. He already knew that things had to change in the USSR,* but he was not able to overcome resistance from his hard-line colleagues. He was "retired" in 1964, and it took another 30 years before the Soviets tried to tackle change.** By then, Gorbachev was too late.

North Korea competed in the 2010 World Cup. As with most totalitarian countries that feed people with propaganda instead of rice, North Korea ("Korea Democratic People's Republic," in Orewellian-speak) needed success in this event, to show how strong their country was.***

Unfortunately, Korea DPR came in 32nd place, or last. Their team did not win any of their three matches. They only scored one goal, and had 12 scored against them.

I'd love to know how the DPR Ministry of Information Lies spun this story to its long-suffering people. Perhaps 32nd place was better than the other 150 countries that didn't even compete? Perhaps they were a diversion from the real action -- an unannounced attack on a South Korean ship?

We may never know, but it's a sure thing - to me -- that DPR people will note how badly they did. Most of them know how bad their government is, but a few die-hard nationalists may now be forced to admit DPR's failure. Objective, competitive results are hard to ignore; hopefully, they will increase pressure for change.

Bottom Line: Fascists can order people for awhile, but tings start to fall apart as increasingly-shrill commands lead to increasingly-useless results.

* He denounced Stalin in 1956 and struggled to make domestic reforms.
** The 1970s jump in oil prices gave the Soviets an extra decade at the same time as it weakened the US.
*** The same way the Chinese needed it in the 2008 Olympics and the USSR did in many past competitions.

13 Jul 2010

Prior appropriation is kinda broken

CC sent this [pdf]:
In 2003, the New Mexico Legislature further strengthened the acequias´ power to acquire water rights by enacting Sec. 73-2-55.1. This section codifies the acequia´s power to reallocate water temporarily to a water bank to augment the acequia system when that water isn´t being put to beneficial use. Water is not subject to loss for non-use, and the water bank is not subject to recognition or approval by the State Engineer. Hence the water is not subject to appropriation by other parties, as long as no change in the point of diversion or a change of purpose of use has occurred....acequias have long realized that the blunt application of the prior apropriation doctrine does not make for good neighbors.
In other words, the acequias did NOT have to use it or lose it, a policy that seems wise in contrast to our "use it all up!" policy of the past 150 years.

Bottom Line: Institutions are sometimes slow to evolve, but they must when times change. If they do not, they make things worse.

Beyond Chinatown -- A Guest Review

Wayne Lusvardi* sent this excellent review of Steven Erie's 2006 book Beyond Chinatown: The Metropolitan Water District, Growth, and the Environment in Southern California. I read that book and agree with most of this review. Some of it is new; I was VERY interested to see that Erie had consulted for Met, creating a potential conflict of interest in his evaluation of Met's history and behavior and perhaps giving critics an easy explanation for why Erie was so pro-Met in his book. I, btw, think that Met did great things for SD, but I also have issues with how Met has operated; see my dissertation and this article. So here's Wayne...

Not Beyond "Chinatown" Or Bureaucratic Welfare State Myths

"…the Metropolitan Water District of Southern California over its long history has not been a Chinatown-style ‘hidden government’ simply beholden to the interests of Los Angeles and private developers." - Steven Erie

"The concept of the ‘official secret’ is the specific invention of bureaucracy, and nothing is so fanatically defended by the bureaucracy as this attitude…" - Max Weber, Economy and Society

Rather than giving us a divining rod, political scientist Steven Erie has thrown hot water into acid in his new book Beyond Chinatown: The Metropolitan Water District, Growth, and the Environment in Southern California. Erie has written a panegyric recent history of The Metropolitan Water District of Southern California ("MWD") and its sister agency the Los Angeles Department of Water and Power ("DWP") and a polemic against San Diego County water agencies in the recent "water wars" of Southern California. The Metropolitan Water District (MWD) is the regional water wholesaler to 27 other water districts in urban Southern California, importing water through the Colorado River Aqueduct and the California Aqueduct (or State Water Project – "SWP") to a population base of 18 million people.

Chinatown and Hidden Government

The first two chapters of Erie’s book are dedicated to debunking the conspiracy theory put forth in the movie Chinatown that Los Angeles water agencies are "hidden government" reflecting the pro-private development interests of urban Los Angeles at the expense of rural areas a la the infamous Mono Lake-Owens Valley "water grab." To the contrary, Erie states that Los Angeles subsidizes the price of water for all of Southern California. Erie contends that the Owens Valley "water swindle" conspiracy theory evokes powerful symbolism that negatively affects today’s water wars and lawsuits, including the MWD water wheeling rate case which he describes later in the book.

Erie writes that MWD inherited the imagery of the "original sins" of the Los Angeles DWP.

Erie unconvincingly explains away everything Los Angeles-based water agencies did historically as reflecting "the public interest" and one-sidedly views nearly everything water agencies in politically conservative suburban districts did as secretive, irrational, and self-interested. For example, Erie states that Los Angeles conceived, parented and subsidized the regional Metropolitan Water District, which mainly serves the suburbs, so that it could also have backup water supplies available in a drought. Erie conveniently fails to mention that historically the urban-economic planning model was to develop bedroom communities feeding the job center of Los Angeles in rent seeking (self-serving) fashion.

12 Jul 2010

Statewide Groundwater Regulation?

Given the sorry state of surface water regulation, I [Damian] am not sure statewide groundwater regulation will produce many benefits. I really am not sure. Peter Gleick is probably right that there will always be areas of overdraft as long as pumping levels are not capped.

The massive overdraft in the southern San Joaquin Valley stirs up the most interest in statewide regulation. However, the local districts are not sitting idly by while their users mine the water underneath. They have no authority to cap their farmers' wells, but they do affect the water table with conjunctive use programs, etc. Furthermore, in talking with West Kern Water District (south-western corner of the valley) for example, although the groundwater is not regulated, they have MOUs with neighboring districts which prohibit taking "too much."

Valley of the Moon Water District, an urban supplier in Sonoma County, said something similar. The Sonoma basin is not adjudicated, and the users prefer it that way. I asked, naively, why not adjudicate to perfect the rights to the source, and Krishna Kumar's (the GM) response was quite insightful - the legal hassle and cost of moving to an adjudicated aquifer is large, and their current goodwill towards each other is enough to prevent pernicious pumping.

So, despite a lack of statewide regulation, many local agencies do manage their groundwater. Clearly, they understand that it is better to pump from 300 feet than 400 feet as they bear the costs of falling water tables. If they prefer to live in a world where pumping is costly and mostly unrestricted, why should we say otherwise? Put differently, given that many sets of users in the state have developed ways of managing groundwater without state intrusion, why should we think that the San Joaquin Valley is any different? Could it be that overdraft is slightly beneficial for the Valley? It most certainly leads to grant money and gives credibility to the call for more surface supplies...

Another cost associated with statewide regulation - In passing a cap, the legislature may give landowners gifts. In years past, falling groundwater tables led sympathetic politicians to build massive surface projects to ameliorate the farmers' "woes". I cannot imagine the legislature imposing a cap without some giveaways to landowners, and if they include new surface storage, that would most certainly be a waste.

The benefits I see from a cap on groundwater use would be more efficient use of water. Suppose the state did impose a cap on each basin that is not currently capped. (The costs of establishing the cap would be very high and there would be many winners and losers - let's ignore this massive issue for now). If some farmers can no longer pump as much as they want, it would push up prices of surface water and / or lead to land fallowing. Put simply - reduce groundwater availability, increase the price of water. Higher prices usually eventually lead to more efficient use. Water markets may also get a kick in the pants. The interplay with water markets I think has the most potential for good,

Bottom Line: I am less convinced today that state-imposed groundwater caps are the right way to go than I was a couple years back...

Two posts you need to read

Peter Gleick nails the political failures in water management.

CO2 Greenwashing par excellance -- unfortunately, it's not The Onion...

Monday funnies

I took this in Nicaragua....

...and no, they are not kidding about sex in adverts!

Yes, split IID in two

This article details problems at Imperial Irrigation District, where the energy division is subsidizing the water division. (IID irrigation water costs about $20/af.)

The subsidy arrives via the fixed charge that water charges power for the "falling water" that generates energy on its way to irrigation canals. Why the fixed charge?
IID Director Jim Hanks said the fixed falling water charge was adopted to allow the finance department to better plan its funds for the year, since the adjustable charge varied.
In other words, IID accountants are lazy.

I'd LOVE to have a fixed gas price, so I could "plan my funds" for the year, but that's not going to happen. It can at IID, because it runs its co-mingled businesses like a bureaucracy, not two businesses that have real costs that vary.

This seems a good time to recall that I've suggested that IID energy and water be split into two separate businesses, and they should be.

Bottom Line: Split IID in two, and watch energy and water management efficiency rise.

9 Jul 2010

Speed blogging

  • Emily Green's notes on hydraulic fracking (using high-pressure water to break rocks and free natural gas for extraction) are well well worth reading. (How can you miss with Cheney, Halliburton AND Inhofe?!) Inhofe, btw, introduced amendments to exempt polluted discharge from EPA Clean Water regulations. This guy is a one-man planet killer.

  • The OECD says "Government support to Israeli farmers has fallen over recent years but a number of market distorting policies are still in place."

  • A 250pp history [PDF] of New Mexico acequias, an institution for managing communal irrigation water.

  • Malthus 2010: "for mitigating agriculture's future contributions to climate change, continuing improvement of crop yields is paramount."

  • Palm oil, corruption, sustainability and consumer boycotts. Can Indonesia and Malaysia deliver reform? Speaking of trees, "A small reduction in tropical rainforest cover can increase malaria incidence by nearly 50 per cent."

  • Great article on the business of marijuana in Colorado -- regulations, marketing, you-name-it.

  • Persuading people to use less (energy but also water), without prices, education or guilt.
Hattips to CC and JWT

8 Jul 2010

Poll results -- public policy for who?

Hey! There's a new poll (mothers' choices) to the right --->
Government policy is driven by (choose 1+)
careful analysis 8 votes
current events 24 votes
inertia 23 votes
long term goals 5 votes
partisan bickering 28 votes
special interests 55 votes

I agree with these results, and I am also depressed by them. I am now reading The Calculus of Consent: Logical Foundations of Constitutional Democracy, in which Buchanan and Tullock lay out the best case for voting, logrolling, etc., and I am having a hard time reconciling their optimistic view with daily reality.

That leads me to wonder if:
  • Things are better than we see, or
  • They are as bad as what we see, but don't really matter, or
  • We are going to hell in a handbasket...
My answer changes from day to day, but I can surely say that results from Washington (or Sacramento) are better what comes from most places on this planet. Is that because we have a lead (that we are squandering), or because our "better" is only relative to their "worse," or because we are really just doing fine?

So it seems we face two questions:
  1. How well are we doing relative to how we could do?*
  2. How do we improve what we are doing, to approach a realistic higher level?
I am all for partisan fights that result in good policies that endure for an election cycle, but I do not favor continuous tinkering under the influence of lobbyists looking for a quick handout.

Please tell me your number one reform, to improve this process.

I have many, but I put neutral representative districts (no gerrymandering) at the top. My goal is that representatives appeal to the needs of the average, not the extreme, voter.

Bottom Line: We get the government we deserve. Change requires that we (1) know what's wrong and (2) address those failures.

* Churchill: "It has been said that democracy is the worst form of government except all the others that have been tried."

7 Jul 2010

I'm still available!

(via RM) "One of Gov. Arnold Schwarzenegger’s picks to oversee the troubled Sacramento-San Joaquin Delta is pulling out of the confirmation process after environmental groups raised concerns over a possible conflict of interest."

Dear Arnie,

I am willing to serve, and I do not have conflicts of interest.

Can we take a meeting?


David Zetland

Water managers and gold-plated fantasies

Irvine Ranch water managers plan to spend about $20 million on a water bank. That may be chump change when you have a $billion in cash lying around, but it hardly seems a good use of money. IRWD has won lots of industry awards for its use of very complicated water budgets (a high form of engineering-porn), but they have not done a lot to limit demand by heavy users with big lots. Now, it seems that IRWD prefers to go get more water, to increase imports from elsewhere, instead of reducing demand. That may make sense in the short run, when people prefer to keep using more, but it will not in the long run, when everyone tries to do the same thing. IRWD may be safe in the long run, since the water bank will secure more supplies ahead of everyone else, but will they be able to justify 2-3x the consumption of their neighbors? Doesn't sound like IRWD cares about being a good neighbor or investing time (not even money!) into regional water sustainability.

Speaking of regional games, I read that SDCWA may be taking over the contracts -- or even the whole operation -- at Poseidon's desalination plant. This may happen because SDCWA is suing MWD and MWD may turn around and refuse to subsidize the desalination. Without subsidies, the desal plant make no sense. Or does it? Apparently SDCWA is interested in taking it over, perhaps to get a source of "new water" that is NOT from MWD. SDCWA is obsessed by "water security" issues the same way that Singapore is, and they are willing to pay 2-3x the price of MWD water to get their own water. (I've lost count of how much money SDCWA has thrown at IID for its purchase of IID ag water...)

So Poseidon may be able to make some money after all, not because desalination is environmentally friendly, cheap (see this and this), or needed, but because SDCWA is paranoid and willing to spend ratepayers money on new supply instead of fixing its relationship with MWD.* The desal plant will provide about 8 percent of SDCWA's water needs, btw.

Oh, and don't forget how these managers are going to bury the costs of their boondoggle projects. They will use the old average cost trick. Here's how it works:
  1. Say that your current water supply costs $3/unit and the new supply costs $5/unit.
  2. The new supply will provide 5 percent of your total.
  3. Instead of charging the most water-greedy customers (the last 5 percent) $5/unit, you charge ALL customers (0.95*$3.00 + 0.05 * $5.00) $3.10/unit.
  4. Heavy (often wealthy) water customers are happy to pay a little more, everyone else doesn't notice (and what would they do if they did? We have a SHORTAGE you know!). Manager keep their jobs -- without asking people to use less. Demand continues to grow -- making the NEXT supply crisis even worse.
Bottom Line: Water managers find solutions to water problems, but their solutions sometimes serve the managers instead of their customers.

* Not that I put much hope in MWD wanting to fix that relationship

6 Jul 2010

Water Bond DOA

I was glad to see that the water bond has been "delayed" (perhaps forever) by politicians growing realization of its unpopularity.

It was unpopular because it was expensive, badly designed and did little to fix California's water problems.

As if we need further confirmation, JC sent this interesting bit of wisdom:
Inland Empire residents may face rate hikes if an $11 billion water bond is kept off of the November ballot.


A delay would not stall local projects, but change who pays for them.

"Our projects will move forward," said Ken Manning, Chino Watermaster board's chief executive officer. "They're not contingent on the bond money. Rate payers will just end up paying more."
Oh, I see. So ratepayers will end up paying for THEIR OWN projects, instead of having other people pay for them? Wow. What a revolutionary idea!

(Oh, and what does this mean for the other water bills? Are they going to remain shallow promises, unfunded and unloved?)

Bottom Line: The easiest way to get something done is to use other people's money. Unfortunately, OPM also means that the worst projects get done -- and we pay for them. I'm glad the bond is in a coma, and I hope it never comes back.

Speed Blogging

  • Nature can clean up some oil, but we can help.

  • Eating spicy food? Don't cool it with water. Try these.

  • Background on Concord's ban on bottled water. (Bad idea, but activists love it.)

  • UAE citizens use 550 lcd, 3x the world average, and their water is subsidized. Dubai's mirage is running into the wall of reality.

  • Iraqi tribes are using force to take water (Tragedy of the Commons), sometimes killing irrigation inspectors. Water wars? Nope. More like broken government and insufficient time to create new institutions.

  • The Economist on California water:
    Silly prices like that send the wrong signal to the market. With people having little incentive to conserve, the authorities then have to resort to rationing when droughts occur. That is neither efficient nor fair: it penalises those who use water sparingly as much as those who waste it. In an ideal world, water would be priced so as to reflect its scarcity. In periods of drought, its price would increase and people would therefore demand less.

    It is not a perfect world, least of all in California. But nor is it beyond the wit of those in charge to consider water like oil or any other commodity, and to use market mechanisms to match supply and demand.
Hattips to EF, DL and SS

5 Jul 2010

Monday Funnies

Why I quit Facebook

I deleted my FB account on July 1st, and here's why:*
  • I understand two types of social interaction: one-on-one and many-to-many (a community of about 100). FB is neither, since my "friends" are broadcasting to me and many other people I don't know. FB updates, photos, etc. are put up, but there's no clear way of knowing who sees what and what they think about it. Broadcasting is not social. (Blogging is different, because the relationship -- writer to reader or among commentators -- is clear.)

  • FB is often Fakebook, a place where people create their perfect version of themselves. That's not an issue per se (we all like to see our best sides), but this exercise can get out of control, so that people spend more time living in an imaginary world and less time face-to-face with people who see them in all their dimensions, good and bad.

  • People who say they are "Facebook friends" (with air quotes) are often really acquaintances. Friendship takes time, but FB makes it easy for people to deceive themselves, to think that they have a friend when they really have a connection to a profile with photos, jokes, and so on.
  • FB's business model is broken and ethics are shallow.

  • I barely have time for face-to-face, email and blog communications. If I can only go to FB once a week, then why bother?

  • This is the third time I have quit. Although some may say I'll be back, like I was before, I say that there's a reason for my rejection of FB, and third time's the charm.
I will miss two things: FB profiles tend to have updated contact information, and I sometimes like the serendipitous way that I learn what's going on in people's lives. I've weighted those benefits against the costs and found them insufficient.

Bottom Line: FB does not serve my social needs, so I go back to what works. Drinks anyone?
* This long explanation is not meant to be egotistical. It contains my thoughts on this social phenomenon, one in which I was a participant for 3 years...

4 Jul 2010

Independence Day

After September 17th, today is my favorite of the year. It's a good time to reread this (more at Wikipedia) and remember why we allow governments to exist:

The unanimous Declaration of the thirteen united States of America
When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their Public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected, whereby the Legislative Powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice by refusing his Assent to Laws for establishing Judiciary Powers.

He has made Judges dependent on his Will alone for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

He has affected to render the Military independent of and superior to the Civil Power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For quartering large bodies of armed troops among us:

For protecting them, by a mock Trial from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefit of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences:

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies

For taking away our Charters, abolishing our most valuable Laws and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation, and tyranny, already begun with circumstances of Cruelty & Perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these united Colonies are, and of Right ought to be Free and Independent States, that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. — And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.

John Hancock

New Hampshire: Josiah Bartlett, William Whipple, Matthew Thornton

Massachusetts: John Hancock, Samuel Adams, John Adams, Robert Treat Paine, Elbridge Gerry

Rhode Island: Stephen Hopkins, William Ellery

Connecticut: Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott

New York: William Floyd, Philip Livingston, Francis Lewis, Lewis Morris

New Jersey: Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark

Pennsylvania: Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross

Delaware: Caesar Rodney, George Read, Thomas McKean

Maryland: Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton

Virginia: George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton

North Carolina: William Hooper, Joseph Hewes, John Penn

South Carolina: Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton

Georgia: Button Gwinnett, Lyman Hall, George Walton

2 Jul 2010

Is New York rent control irrelevant?

Economists love to use rent control in New York as an example of a price ceiling that results in shortages, since demand exceeds supply at the controlled price.

NYC rent control has two components: rental prices are not allowed to rise by more than 5 (?) percent per year, except when an apartment is vacated, when it can jump without limit. Thus, you might find a grandma paying $400 per month for the same apartment that a new arrival pays $1,200 per month to rent.

Taking shortage as given, economists have recommended lifting all rent controls and directly subsidizing "the poor" as a more efficient means of matching supply and demand, without turning out grandma onto the street.

But those stylized facts may fail to take reality into consideration. I was talking to a girl the other day who lived in east midtown (Manhattan). She said that her lease was up for renewal, and that she was negotiating the 5 percent price increase with the landlord. What was interesting is that her lease had two prices -- the allowed rent and her actual rent. The allowed rent was much higher, and the landlord wanted the increase to be based on that; she wanted it to be based on her actual rent. What was interesting is that the rent controlled price was not binding. In other words, the market was not affected by the rent control ceiling.

Assuming that I've got my facts straight [anyone? Buhler?], this means that there is no "bureaucratic" reason for of rent control. So, is there nothing to be done? To the contrary, now would be a perfect time to end rent control in New York. Most people would not see their rents change; those who did would either move to another place (since there's no shortage) or have their income topped up (if they were poor; perhaps subsidized by a tax on all NYC housing).

Bottom Line: The market is more flexible -- and easier to work with and understand -- than a bureaucracy. Time to free NYC's housing market.

1 Jul 2010

The deadweight loss of gifts

Economists are famous for their bah humbug analysis of Christmas gifts. In one famous paper, "The deadweight loss of Christmas," Waldfogel pointed out [PDF] that the difference between the cost of gifts to givers and their value to receivers was significant. In other words, there was a "deadweight loss" (DWL) that could be eliminated by gifts of cash.

Most people reject this conclusions ("gifts are inefficient") because it fails to include the emotional dimension of gift giving. I agree that this component is far more important than the DWL.

Unfortunately, I was forced to invoke efficiency when I went to my good friend's wedding in Toronto. Without time or baggage space, I gave a card with a cash gift. Since the groom -- Henry, my ex-roommate -- was an economist, I made a joke about DWL.

Imagine my surprise, then, when it turned out that everyone else also gave cards with cash. It seemed that I ran into a different wedding gift culture. Nobody at the wedding was sure if that norm came from the Canadian or Asian aspect of the wedding, but it was pretty funny to me.

Bottom Line: Sometimes economists are wrong in their analysis, sometimes they are right, but the difference may be more a function of luck than analytical skill.