30 September 2010

Mulroy's propaganda

(via TS) The NY Times talks about "Las Vegas's Worried Water Czar[ina]" as if Pat Mulroy is a momma defending her babies from attacking animals.

That's a laugh.

I left this comment [re-edited for here]:
“Nevada’s problem has become everyone’s problem,” she said. “The last thing that everyone needs is for a city that relies 90 percent on that water to not meet its needs.”

No, it's YOUR problem because you sell water too cheaply to residents and real estate developers. $21/month for water service results in 280 gallons/person/day consumption.

Pat can't solve the problem because Pat IS the problem.
Pat doesn't need more water. She needs to raise her prices.

I'm no fan of the Colorado River Compact, but it sets a baseline for water trades. When will we get those?

Speed blogging

Hattip to MC

29 September 2010

Need to catch up with water issues in a hurry?

Then read Emily Green's Week that Was. Good stories clarifying the bizarre sides of the water world. (I could do 2 hrs on the links there...)

It's there every week, and you should be there too!

Can politicians overcome bias?

I don't know, but the ones who have been spouting off outdated numbers on lost agricultural jobs from reduced water deliveries to bolster their political agendas (pro- and anti-exports) are going to have a hard time now.

Richard Howitt and Jeff Michael (and others) have co-authored a report [pdf] on the link between jobs and water. The money shot is below...

Now there's only one authoritative estimate on this hot topic, which means that politicians cannot selectively cite the numbers they prefer.

I am glad to see this, and happy to know I played a part in its creation :)


Addendum: Mike Taugher puts this report in much the same context.

28 September 2010

Free water? WTF?

This is NOT from The Onion:
Senate Bill 1413, which has passed the Assembly and Senate and is awaiting the governor's signature, and calls for fresh water to be available in school eating areas by next July.

[snip]

School officials think offering water is a good idea — but are afraid of the cost.

Most schools in the Los Angeles Unified School District don't have free water in eating areas, said David Binkle, deputy director of food services.

"We happen to think it's a great option," Binkle said. But he's not sure where school would find the money for equipment, filters or water testing. The bill provides no funding.
That's because they are making money from soda machines, as I explained here.

Bottom Line: Students are NOT an income source; they are your customers! School choice would fix this.

Anything but water

Hattip to WEH

27 September 2010

Monday funnies

You MUST watch this:



I saw it on reddit, btw, which is now officially WAY better than digg (RIP).

30 months of aguanomics

When do we stop counting months and go to years? When do parents start talking about a baby's years instead of months? (Updates from six months, one year, 18 months and 2 years)

Well this is the last half-year update. :)
The big picture

Things going pretty damn well at aguanomics! My impressions are that the community here is getting stronger, the discussions are getting more sophisticated, and there's even a small hint of "aguanomic" ideas circulating offline. I am still committed to continuing this blog for quite some time. It's fun. That drawing on the right? I made that when I was a little trouble-maker. (Blogs were on paper then :)

Stats (geek fest!)

We're upto 2,850 posts (about 140 of these are from guests and 60 or so from Damian).

Much to my surprise and pleasure, aguanomics is ranked 3,578 out of over 1.2 million blogs. We've also got an overall Technorati Authority of 514 (HuffPo is 913). Ironically, our "green rank" is lower. Maybe I've been talking too much about macroeconomics? or is it the markets?

About 1,200 people are subscribed to the blog; they usually read it remotely. There are about 300 visitors per day, with the fewest on Saturdays. In the past year, about 56,000 people have made about 100,000 visits to the site [pdf], looking at an average of 1.6 pages (curiosity!). Traffic is up about 4-5 percent based on the prior year [pdf]

Community

I really enjoy the interaction with people on this blog. A lot of smart people with various experiences have made this a deeper community.

Please do invite your friends and colleagues to participate. I know that a water blog is about as geeky as it gets, but I've really learned a lot here. (Damn, the book is looking so much better. I am VERY excited. Bummer that it's going to take AGES to get out in print...) The more people we get, the better the debate and ideas, and the more likely that they will get out in the world.

You can get this blog on RSS/email or good ol' bookmark :)

I was very happy to meet Emily Green in LA. We talked for a few hours, and she's really an exceptional woman. I am hoping to meet other water bloggers in person, but this was a good start. It's just amazing how cool people can be, and I regret that our online tools still lack the depth of face-to-face interactions.

I've added new labels to posts. Fail is for those sad situations when promises are not kept. Win is for results that move us all in the right direction. I noticed that there's a lot more fail than win here. That's mostly because I am interested in highlighting (and fixing!) broken things instead of cheering for great things. I am still quite an optimist as far as people are concerned (not sure about politicians and lobbyists). I want more win posts because people are always asking me "so what works? got an example?"

If you have good fail/win stories, send them! If I mislabeled your favorite fail/win post, please tell me.

I am also pleased with the number of posts. Eight to twelve posts week seems to be working for me, in terms of getting enough interesting stuff up but not overwhelming you (or me). I recommend that you take a look at speed blogging posts; their links are higher quality, now that I filter more stuff.

My Plans

I'm flying to Amsterdam today, and I'll be over there until Jan 2011, living with my girlfriend Anne. That's totally exciting, but I am also excited to be able to learn more about water in Europe.

In the meantime, I am looking for a job, probably at a university or think tank where I can continue to do research, teach and do outreach (BLOG!).

I am interested in consulting gigs but not full time. I hate to do neat stuff that I can't share with you.

It looks like I will be giving a few talks over there ("Wazzup Cali!") but also coming back here to give a few talks. These are very good developments.

Some people have asked if I make anything from this blog. Well, not directly. My total ad revenues are about $125 (didja see the ads? no? good.), and my annual expenses are about $30 (turning off ads for polls). I totally appreciate all the free cool blogger tools out there.

On the other hand, I use this blog to get the word out, on aguanomics, my work, and my ideas. My cost is my time, but this is a pretty damn good use of my time. I am also really happy to be useful to people, maybe even worth $100,000!

I've benefited from UCLA (undergraduate), UC David (PhD) and UC Berkeley (postdoc), so I really feel that I have a responsibility (and ability) to the People of California. Other people? They get my stuff for free :)

I am unpaid, over-employed, and totally having a blast!

So, let's carry on, promoting good ideas and burying bad ones. There's still work to do.

25 September 2010

Flashback: 20 -- 26 Sept

These were relevant a year ago -- and still are...

IID's $35 Million "Mistake" -- my favorite example of why markets can make farmers money.

Chino Auctions Water for Real Money -- or not. No conveyance, no market.

Resnick's Machinations -- questioning the science in the Delta. Progress yet? My prediction is that we need to choose between No People or No Fish

Good Water Blogs -- still good!

Markets or Regulations? Markets, of course. They work better (less money, fewer bureaucrats and more freedom).

24 September 2010

Rocking out

I just finished revisions (but not proofing) for Part I of The End of Abundance.

I just wanted to say THANK YOU to everyone who helped with reading and comments, as well as those of you who have helped me understand (as best I can) the multiple dimensions on these topics.

Very Cool.

Now, on to Part II!

Oh, but that's for me.

For you folks who just want to waste some time with Snoop Dog in Candyland, enjoy this :)

Speed blogging

Hattips to DL, CM and RM

23 September 2010

Macroeconomic managers [sic]

Orszag, Romer and now Summers have resigned from Obama's administration.

The Economist says that most of them are burned out (and perhaps frustrated). I agree, and do not think that they are resigning for failure, since we don't know about alternative universes and many others affected economic policy.

I wrote this comment [edited for typos]:
It's a pity that blame and credit will be hard to apportion, but Larry and the others surely deserve some of each. The trouble is that they are getting blamed for many things out of their control (Rush Limbaugh is playing on my father's radio now, and Rush is quick to shift Bush's mistakes to others). On the flip side, they will not get credit/blame for many things that they affected.

People are too quick to impose human control over macroeconomics and attribute changes to individual actions. Each one of us is just about as important as a grain of sand on the beach. A few of us have pebble-sized powers, but those are not so big...

Better to be humble, set simple rules, and leave millions of individuals to sort things out (a la Hayek, Friedman et al.)

How's the real estate market doing?

My paper, The Real Estate Market Index [pdf] was just published in The Real Estate Finance Journal.

Abstract: The Real Estate Market Index (“REMI”) combines sales price, sales volume and days on market into a summary measure of market activity or liquidity. The REMI, which rises with price or volume and falls with days on market, is more sensitive to market sentiment than indices based on price alone, e.g., the Case-Schiller Index. The REMI is useful to people who want a measure of market liquidity. Data from over 19,000 sales that occurred between January 2000 and November 2009 in Mission Viejo, California illustrate the calculation, calibration and application of the REMI.

People can use the REMI to better understand real estate market dynamics.

22 September 2010

iPhone rant

My contract with AT&T is up. Now I have an iPhone (that's fully paid for) that I want to use in Europe.

On the phone, AT&T says that Apple is in charge of unlocking.

Apple says that "some carriers" will unlock the iPhone, but AT&T says that it "cannot" be unlocked but will help you with an overseas contract that costs $200/month for data streaming.

F... that.*

Time for jailbreak. Any suggestions?
* The economics of this are simple. AT&T gets more money if the phone cannot be unlocked. Apple is happy to oblige, for some of that money.

Bleg -- Cover and subtitle for End of Abundance?

Hi Folks,

Happy Equinox (Fall begins!)

I am working like a dog on revisions to the manuscript for The End of Abundance: A Primer on Water Economics. Woof!

(Here's the website, btw, with a little bit of description...)
  1. I am not too pleased with the subtitle to the book (A Primer on Water Economics). Any better ideas? I think it's good to keep "water" and "economics".

  2. Any good ideas for cover art? A photo perhaps?
Feel free to email me, and thanks for help!

Anything but water

  • In praise of dissent: "enormous benefits await when somebody is brave enough to disrupt this coveted social harmony and challenge prevailing conventions. History is littered with such visionaries who have been vilified by their communities."

  • 10 Tips on How to Write Less Badly

  • The REAL Stuff White People Like (from dating profiles)

  • I also think that this is a problem: "In 1961 full-time students in four-year colleges spent 24 hours a week studying; that has fallen to 14... The most plausible explanation is that professors are not particularly interested in students’ welfare. Promotion and tenure depend on published research, not good teaching. Professors strike an implicit bargain with their students: we will give you light workloads and inflated grades so long as you leave us alone to do our research."

  • Governments can create markets, but such markets can be scammed: "because destroying a tonne of HFC-23 is a lot cheaper than avoiding the emission of more than 10,000 tonnes of carbon dioxide, HFC-23 destruction has become the CDM’s principal source of emissions credits... 59% of the CERs used as offsets in the EU cap-and-trade scheme in 2009 came from HFC-23 projects, representing more than €500m ($695m) in credits." Now people are questioning the accounting behind HFC-23 credits. Read the whole thing.

  • Excellent: "This latitude that we give one another creates a space in which a culture of crime lives and breeds. It is dishonest not to admit that this is true. At the same time, America is an immensely creative country, very inventive, extraordinarily dynamic, meaning that things change in America at a staggering pace."

21 September 2010

Governments fail: delay and fiscal policy

A guest post from WEH:

Before one discusses how delay in government fiscal policy leads to government failure, one should look at nimble.

"Nimble" is basically the ability to innovate and change in short time spans. This phenomena of nimble is absent within a collective. Nimble is related to private property rights and mutual self interest.

Within the realm of political-economy it has been long known that governments fail due to delay in fiscal policy along with the the inability to be nimble regarding implementation. Does a monopoly organization (government) directed by politicians have quick organizational responsiveness and the ability to innovate and change? No. Governments are not nimble.

Nimble in fiscal policy will never exist. Fiscal policy is the reverse of nimble, that is "fumble." Government fiscal policy is an attempt to hit a moving economic target, a highly-dynamic moving economic target.

In the U.S. economy delay in fiscal policy implementation is directly associated with the form of government. Representative republic is a great form of government. However, the representatives of the republic must deliberate about government intervention in the form of fiscal policy.

However, the economy is changing while representatives debate. It's likely that economy has changed by the time that deliberation has settled on a fiscal policy intervention.

Hence, we see a stale intervention into an economy that has changed in composition, players, trends, etc. Further, the intervention is administered by a non-nimble bureaucratic management structure.

Bottom Line: Fiscal policy deployed in response to past economic circumstances may have zero or negative impact on the dynamic forces within the economy.

Poll results -- Photo contest!

Hey! There's a new poll (what's the hurry?) to the right! --->
Which ONE of these photos do you like the best?
From my tap to yours 15%13
Castello Saint George 9%8
Maasai at the well 15%13
Thirsty Bees 17%15
Havasu View 7%6
"Human pipes" of Goma 24%21
Corps of Engineers Forever! 14%12

I congratulate our winner, Alex, for this photo


(6) "Human pipes" of Goma. "I took the attached picture in Goma on the north shore of lake Kivu near the border with Rwanda. The picture is important to me because of the banality of the scene, at least to the kids; they do this every day. But to me it's shocking - young bodies stacked up with so much weight and so far to walk (kilometers probably). It's a cliche that what we take for granted is so hard for others to get, but I would see this scene almost anytime I was on the street. It's more than a cliche to me now. I think without thoughtful management and conservation, those of us lucky enough to have advanced water systems will find life increasingly difficult as water becomes more scarce in the future."

Alex wins his choice of bumper sticker (woo hoo!). Alex -- send me your choice and address!

Thanks to the photographers for their awesome photos and voters for expressing their pleasure :)

20 September 2010

Monday funnies

via my dad...
  1. A day without sunshine is like night.

  2. On the other hand, you have different fingers.

  3. 42.7 percent of all statistics are made up on the spot.

  4. 99 percent of lawyers give the rest a bad name.

  5. Remember, half the people you know are below average.

  6. He who laughs last, thinks slowest.

  7. Depression is merely anger without enthusiasm.

  8. The early bird may get the worm, but the second mouse gets the cheese in the trap.

  9. Support bacteria. They're the only culture most people have.

  10. A clear conscience is usually the sign of a bad memory.

  11. Change is inevitable, except from vending machines.

  12. If you think nobody cares, try missing a couple of payments.

  13. How many of you believe in psychokinesis? Raise my hand.

  14. When everything is coming your way, you're in the wrong lane.

  15. Hard work pays off in the future. Laziness pays off now.

  16. How much deeper would the ocean be without sponges?

  17. Eagles may soar, but weasels don't get sucked into jet engines.

  18. What happens if you get scared half to death, twice?

  19. Why do psychics have to ask you your name?

  20. Inside every older person is a younger person wondering, 'What the heck happened?'

  21. Just remember -- if the world didn't suck, we would all fall off.

  22. Life isn't like a box of chocolates. It's more like a jar of jalapenos. What you do today, might burn your butt ass tomorrow.

Breaking News: The recession is over!

(via BB) Feel better now?

If you're not feeling anything different, then you are normal.

Statistics mean nothing compared to the weather, hunger in your belly, or a friendly smile.

(Oh, but maybe that's why I feel good today? Keynes was right about Animal Spirits.)

Intrinsic motivation

My paper, Save the poor, shoot some bankers was just published in Public Choice.

Abstract: Bilateral or multilateral organizations control about 90% of official overseas development assistance (ODA), much of which is wasted. This note traces aid failure to the daisy chain of principal-agent-beneficiary relationships linking rich donors to aid bureaucrats to poor recipients. Waste results when aid middlemen (un)intentionally misdirect ODA. Waste can be reduced by clarifying domestic goals for ODA, using fewer middlemen with greater intrinsic motivation, empowering recipients, and/or replacing bureaucracy with markets.

The key concept in this paper is "intrinsic motivation," the idea that people do the right thing because they want to, not because they are told to do so or are paid to do so. (For more, listen to this podcast with Daniel Pink.)

Intrinsic motivation is important in water, because managers rarely face oversight while acting or punishment for failure.

Sometimes, managers fail us.

In Pasadena,
The board voted to award itself more perks by approving - on a 3-2 vote - giving each member a credit card.

This kind of move not only is a slap in the face to a public clamoring for cities and water districts to stop wasting taxpayer and ratepayer dollars, but it proves the point. These agencies exist above the fray, often independent of public input, making decisions for their own benefit.
In Israel (via TS),
WILL CHARGING more for water now make us consume less? Only up to a point. Israelis are used to overpaying.

[snip]

The availability and affordability of a commodity so indispensable mustn’t become an unsanctioned revenue-generating tool for any government agency, and certainly not a means to cover up officialdom’s egregious failures.

Facile price hikes don’t encourage the public sector to clean up its act. Local authorities in particular are hardly innocent. Their negligence accounts for a whopping 165 million cubic meters lost annually because of substandard municipal equipment or leakages from corroded pipelines.
Bottom Line: Good people can make our lives better, but people who care more about themselves than us can make us all worse off, whether we are in Pasadena, Tel Aviv, Las Vegas, New York, Moscow, Johannesburg, or... The solution is not warnings, education or dialogue. The solution is to shoot fire them.

18 September 2010

Flashback: 13 -- 19 Sept

These were relevant a year ago -- and still are...

BEST: Fear and Water Managers -- a long post lamenting the conservatism that hurts us all.

Senatorial Stumbles -- more subsidies will NOT help farmers.

Krugman on Economics -- he attacks a strawman.

How to save the earth: Fewer People and Less Stuff

BEST: Lessons Not Learned -- How to prevent the utility death spiral (use down, revenue down, prices up, use down...)

17 September 2010

How about those rights?

It's been 223 years since the US Constitution was written (it was ratified about a year later), and we've done pretty well with it.*

There are two things I especially like about the constitution:
  • First Amendment: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
We are not a christian nation. We are a nation of individuals free to practice any religion we want, or none at all. Religious practices can occur on private property, even if it's near ground zero. Further, we can say what we want (hate speech is ok, burning flags, bibles and korans is ok).**
  • Tenth Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The Congress and executive have abused this one, overreaching their authority in the name of "interstate commerce." That annoys me, because it prevents states from trying different ideas as well as blanketing the country with one-size-fits-all laws (abortion, drugs, traffic, etc.) that don't fit at all.

Happy Birthday!

* Perhaps because of its simple, flexible framework. This can be good (political parties and presidential cabinets are not mentioned) or bad (gerrymandered representative districts and corrupt campaign finance were not foreseen).

** Unlike this:

Anything but water

hattip to JWT

16 September 2010

Out of Water -- (not) The Review

Colin Chartres' new book is called Out of Water: From Abundance to Scarcity and How to Solve the World's Water Problems. Besides the awesome title, he also appears to have a good grip on the scale of the issues.* In this interview (via EM), he lays out a... "six-step solution to avoiding the [water] crisis:
  1. gather high-quality data about water resources;
  2. take better care of the environment;
  3. reform how water resources are governed;
  4. revitalize how water is used for farming;
  5. better manage urban and municipal demands for water;
  6. involve marginalized people in water management."
I agree with these steps, but I wonder how much time he takes to discuss the barriers to their implementation? Maybe someone who reads the book can tell us.

* He should, as director of the International Water Management Institute. :)

Auctions for ecosystem services

Sandor Toth sent me his article [pdf] on auctioning a single choice from a range of management alternatives. For example, the decision to clear-cut or maintain or selectively harvest a forest. This ECOSEL auction mechanism improves on regulations, i.e.,
We also like to emphasize that ECOSEL is a voluntary mechanism that provides a platform for both potential sellers and potential buyers of ecosystem services to freely express their intrinsic motivation. It givesmore freedom to individuals to influence forest management decisions on public or private lands via monetary contributions. More control is also given to the sellers (the forest landowners) because with ECOSEL, they have the option to try to raise dollars for management plans that they cannot afford otherwise. They are in full control because it is up to them to decide which management plans, if any, should be put up for auction. In contrast to regulations that can reward provisions or penalize non-provisions of ecosystem services, it can be argued that ECOSEL is an intervention that crowds in intrinsic motivation.
This method should be studied by people interested in low-cost, socially-efficient mechanisms for making policies that affect public or common pool goods. (Also see the last sections of this article [pdf] on options for the Sac-SJ Delta for my version of a solution.)

15 September 2010

Environmental goods vs natural resources

I've often defined environmental goods (clean air, water in a wetlands) as things we like that cannot be priced (or cannot be objectively priced), while natural resources (oil, water in a well) can be priced.

Now I am wondering if this dichotomy fits within the traditional 4-way division of all goods, i.e., via wikipedia:
Excludable Non-excludable
Rivalrous
(natural resources?)
Private goods
food, clothing
Common-pool goods
fish stocks, timber, coal
Non-rivalrous
(environmental goods?)
Club goods
private park, irrigation infrastructure
Public goods
air, rainbows

Does this make sense? Is it merely an artifact of my definition? I KNOW that water can move from one to another (club good aquifer can turn into common pool good among those who share it or a [public good] wetlands that turns into a [club or common pool] reservoir), but I am trying to understand these definitions for water IN USE.

Your thoughts?

Addendum: I can see how water can move from non-rival (price = 0) to rival (price > 0) as an increasing rate of consumption turns water from a renewable to a non-renewable resource (within a relevant timeframe).

Last day to vote in the photo contest

Go here to look at the photos, then choose the ONE you like from the poll on the right side-bar.

Voting ends sometime tonight.

Speed blogging

Hattips to JWT and DL

14 September 2010

Mutual self interest

Some more useful thoughts from WEH:

I heard a discussion the other day that "self interest" in capitalism is really "mutual self interest."

The discussion should be framed as "mutual self interest" because exchange does not occur due to self interest as that is individualistic. Exchange occurs when two or more parties have "mutual self interest". Self interest has been framed as "greed" and used politically when the the case is really mutual self interest. It is much more difficult to frame mutual self interest as "greed" since you are then arguing that all parties are greedy.

For example, you buy a gallon of gasoline. It's mutual self interest that drives this transaction between you and the gas station owner (refiner, oil company, oil driller, etc.). Are all parties "greedy," including YOU? The political argument that oil companies are greedy is more difficult to make when it includes all the mutual players in the exchange, including YOU.

13 September 2010

Monday funnies

(via JWT) This is Neat!



How bad projects get built

RM sent me the "Review budget for Bay Delta Conservation Plan and Delta Habitat Conservation and Conveyance Program" [pdf] that the Metropolitan Water District of Southern California (Met) has prepared.

I was interested to see that Met assumes it will pay less than 25 percent of short- and long-term project costs.

So who's going to pay the other 75 percent? Farmers who participate in the CVP and SWP and take 75 percent (let's assume) of the water from those two projects.*

Now, I don't know about you, but I don't have many examples of farmers paying the full cost of water infrastructure.

What if they don't pay? Well, then Met will pay the difference. Does that make sense? Yes, it does to Met, since their 25 percent share of the water is worth far more than 25 percent of the value of that water in use. In other words, Met will probably end up paying a larger share of the total cost because Met gets more value from the water.**

So here's my thought: If Met's directors believe these estimates and fund this project, and the project gets going, then they will have a hard time NOT spending more money when it comes time to pay a larger-than-25 percent share. That's because it's hard to shut projects down once they get started.

If Met's Directors knew this today, they may not agree to initial funding, since the cost-benefit of a project with higher costs would be less favorable.

What would they do instead? Conserve water (via better prices and markets) and get more supplies from desalination and reclamation.

Would Met's pursuit of efficiency and self-interest be welcomed? Not by farmers counting on cross-subsidies from Met, and not by rural politicians who want urban water users to subsidize their constituents.

Bottom Line: Make sure you know all the costs before you spend the first dollar. If those costs are too high, look for alternatives. (Bumper-sticker version: Don't spend $5 for something worth $2.)
* Why are contractors paying for the Delta restoration? Because a restoration that excludes water exports would hurt them. For more on conflicting restoration choices, read my paper on the Delta [pdf].
** Water markets would make this guesswork unnecessary, but politicians and bureaucrats prefer to control water allocation.

11 September 2010

Flashback: 6 -- 12 Sept

These were relevant a year ago -- and still are...

BEST: Read Marketing Your Ideas on effective communication and Dilbert Teaches Empirical Skepticism

Surreal Sachs -- just for the hell of it, and Better PhDs because we need them.

Glennon Speaks Truth! as in... price water like gasoline.

BEST: Nothing to Fear but... a few thoughts on policy and manipulation. On a related note, check out Intrinsic Motivation on why bureaucrats might do a "good" job.

10 September 2010

The origins of conflict

...can often be traced to a struggle over resources.

This report (via CM) claims that many water conflicts will happen in the Western US, due to increasing demand and falling supply. They use this graphic to illustrate the point.


Unfortunately, the report does not examine some obvious tools for alleviating conflict.

The only mentions of "price" or "market" in the report are related to insurance markets (for climate change risk). Unfortunately, the report is silent on the use of markets for water, or energy, or carbon. That's a pity, since the report reflects the collected wisdom [sic] of the Federal government, and prices and markets are notoriously useful in reducing the cost and conflict over resource allocation.

Bottom Line: Use the right tools to solve problems; the wrong tools don't fix anything and leave you frustrated.

09 September 2010

One million acre feet

The Pacific Institute has a new report [pdf] on how to save a million acre feet of water in California. From what I see, it's like the previous two versions in its reliance on command and control, regulation and subsidies (paid by whom?).

Although you should read this, you can't now. Instead, read how to fix urban water prices and promote wholesale water markets, but don't forget to read good analysis of bureaucratic barriers to improvement.

How does a REAL water market work?

Anything but water

  • Elasticity anyone? "Better technology has stimulated demand, resulting in more energy being purchased for conversion into light...The amount of electricity needed to generate that light would more than double. Only if the price of electricity were to triple [correction] would the amount of electricity used to generate light start to fall by 2030." More on this interesting behavioral issue affecting demand for electricity (or gasoline, or water).

  • Stimulus money by congressional district, a map of incompetence ($300k/job!?!)

  • Biodiversity: business might be better positioned to improve the natural world than NGOs are. Also read this article on using prices and markets to save Africa's wildlife.

  • Sound familiar? "But then Europe needs immigrants to counteract the impact on economic growth of its low birth rate and to do the dirty work its own citizens disdain. This summer, Catalonia’s employment agency offered jobs picking fruit to 7,800 unemployed people. Less than 1,700 accepted. Many of those were thought to be of non-Spanish origin."

  • In an update on this story, PG&E's Smart Meters are found to be accurate and not harmful. It's their customer service -- and the regulator's -- that sucks.

08 September 2010

My politics, redux

In the post earlier today, WEH called attention to a number of government programs that are either broke or failures. I "allowed" that post to go up because I agreed with it, although perhaps not its phrasing. In short:
  • The USPS loses money every year, but it was very successful until the 1970s or so, when competition started to erode its customer base -- by delivering better, faster, cheaper. Its status is protected by unionized workers.
  • SocSec is broken because of its PayGo structure. We need individual accounts, private or not. This status is "protected" by a desire to avoid the reality of lower retirement payouts AND politicians desire to keep spending SS money on current expenses.
  • Fannie Mae and Freddie Mac have been failures since they started playing the market, socializing losses and privatizing gains. Their status is protected by political contributions.
  • The War on Poverty (...and Drugs and Terror) has failed b/c it ignores incentives. It's protected by a bureaucracy that loves to "do" something.
  • Medicare and Medicaid are broken b/c they give away too much without revenues to match. It's protected as "better than nothing" as well as doctors who know how to milk the system. (I favor a single payer, multiple provider system, btw)
  • DoE, like the USDA and DoEd, is a waste of money. All three could be shrunk by 90% and maintain core operations...
So, that's why I put up WEH's post...

Now, LL and DW both implied that I am supporting a "republican" agenda of some sort. Let me be clear:
  • I'm a libertarian -- see this post from two years ago.
  • Obama inherited a totally broken government, one that GW Bush damaged from a fiscal, legal, regulatory and political perspective. GW Bush was, IMO, the worst president in US history. Worse than Nixon (who was pretty corrupt) and certainly worse than Clinton (who was impeached for lying about a blowjob!)
  • Reagan said "The seven scariest words in the English language are 'I'm from the government, and I'm here to help.'" That was ironic, since he then expanded the government by a huge degree, invaded small countries, and did a lot to make the government ineffective. 
  • I have a lot of sympathy for the Tea Party's fiscal agenda, but I loathe the widespread failure to understand just how to deliver efficient government.
  • Democrats are no saints, of course.
This blog is about effective government and policies, especially wrt the provision of water. I think that bureaucrats and politicians can do a good job, but I know that's no sure thing. What matters, often, is whether or not they care, and whether or not they can be monitored and measured for performance and/or forced to compete, so that they serve citizens.

That perspective is behind the "government failure" tag attached to many blog posts. The government can fail, just as markets can fail. The real problem is that government failure is a lot harder to correct.

So let's get back to that, shall we?

Just one week left to vote in the photo contest!

Go here to look at the photos, then choose the ONE you like from the poll on the right side-bar.

Government failure in perspective

WEH strikes again!
  • The U.S. Postal Service was established in 1775. You have had 234 years to get it right and it is broke.

  • Social Security was established in 1935. You have had 74 years to get it right and it is broke.

  • Fannie Mae was established in 1938. You have had 71 years to get it right and it is broke

  • War on Poverty started in 1964. You have had 45 years to get it right; $1 trillion of our money is confiscated each year and transferred to "the poor" and somehow the poor are still poor.

  • Medicare and Medicaid were established in 1965. You have had 44 years to get it right and they are broke.

  • Freddie Mac was established in 1970. You have had 39 years to get it right and it is broke.

  • The Department of Energy was created in 1977 to lessen our dependence on foreign oil. It has ballooned to 16,000 employees with a budget of $24 billion a year and we import more oil than ever before. You had 32 years to get it right and it is an abysmal failure.

07 September 2010

I'm back on Facebook

This bit of news is not narcissistic. It just shows that my reasons for quitting Facebook do not stand up to the benefits of staying in the network.

Learn more about network effects here.

On the other hand, I've redefined "a facebook friend" to a definition that makes sense and does not mess up my concept of a real friend (someone you can trust with complicated personal business). Namely:
FB "friends" are people with whom I've shared or would like to share a drink or a smoke. Failure to progress in this regard puts your FB friend status at risk. Plan accordingly. ;)

Unionized government workers

JW wrote an interesting comment on a draft of The End of Abundance, and I wanted to get your reactions:
I have been especially skeptical of the justification of union organization of government workers. If the justification of unionization is to protect workers from rapacious, profit maximizing, immoral businesses, what is the justification for unionizing non-profit, egalitarian governmental agencies?
Please comment.

06 September 2010

Monday funnies

Regulatory capture (via TB)

Dilbert.com

Speed blogging

  • Nano 'tea bag' purifies water (but does it cost less than a cuppa?)

  • "The home's value is $69,900. Yet the total [flood] insurance payments are nearly 10 times that: $663,000. It's no surprise that the insurer faces huge financial problems. The insurer? The federal government." (and it gets worse...)

  • For example, the case of California's DWR, which has decided to charge Butte Country for water, whether it takes it or not. Can Butte sell excess water? Only to DWR, at DWR's price. Sweet deal for DWR.

  • Speaking of a feckless DWR: "Little Hoover Commission calls for new water department with focus on supply management and planning; separate entity for State Water Project, more bond oversight" Read the 2 page PDF and read this article. Great suggestions!

  • Looks like regulators may try to limit exempt wells in Montana. Good idea. Good luck!
Hattip to RM

04 September 2010

Flashback: 30 Aug -- 5 Sept

These were relevant a year ago -- and still are...

Marginal Cost Pricing -- an early contribution to efficient prices from a guy who won the Nobel prize.

BEST: Exporting Water from the Dust Bowl to the Desert -- that $77 million ag-urban sale. Speaking of "highest and best use," Spreck Rosekrans and I chat about how much water a fish "needs" versus how much it has to pay.

Politics as Usual with Cap and Trade -- and all that hot air (debate) is now in the toilet, thanks to "leadership."

BEST: Daniel Goleman at the Berkman Center -- and some delusions of how "do the right thing" will save us.

03 September 2010

Californians need to see the real water problems

A guest post from David Schurr:

Many Californians believe there is a water shortage, actually there is a water management shortage fueled by economics.* Studies conclude that water exports are the major stressor to the Delta Ecosystem, which is the most productive estuary on the west coast. Essentially water exports have exceeded what the Delta ecosystem can handle. The result is an interruption in the food chain beginning with losses in zooplankton populations that sent fish populations crashing.

Even though The State Water Board declares that 75% of the state’s water is needed to protect the environment, the Department of Water Resources (DWR) has allowed water contractors to deliver more water. This year environmental protections were overturned by Federal Court Judges to help farmers. Districts that received their water too late in the season simply used the surplus water to flush toxic salt and selenium from their fields, (no kidding) selenium that eventually ends up back in the Delta.

One user pays more while conserving and another user makes a profit. Through conservation and local water recycling programs; the Metropolitan Water District of Southern California is using about the same amount of water as it used fifteen years ago despite an almost 30% growth in its population.

The truth is that the majority of the state’s water is going to agriculture while urban users are repeatedly asked to conserve and conserve again. An average family uses 2 acre feet per year and is charged $250 while Central Valley farmers pay $55.00 per acre foot. Some districts pay only the pumping cost which is even less. Where is the equity?

Statewide agriculture exceeds $36.2 billion and exports account for $10.3 billion. For example, almond production has doubled in this decade sending bulk prices crashing. Today California is the world leader in almond production of which 80% accounts for exports. In fact 50% of the top seven farm products in California are exported to China, Asia, Canada and Europe.

Anything but water

Hattip to DR

02 September 2010

Is "Sustainable Growth" an oxymoron?

WEH sent this opinion:

In economics you can certainly put “growth” and “development” in the same sentence. However, growth and development have recently acquired a partner term: sustainability.

"Sustainability" is about as fuzzy defined as the term “fair” (more on "fair"). Sustainable and sustainability sure seem like political words and not so much economics. Even BP was called sustainable.

A couple items come to mind:
  1. growth first and development coming second seems to be the regular route,

  2. occasionally you see growth and development together,

  3. rare is development put first and growth comes second.
Growth can run a muck and development gets side tracked and sometimes growth can occur and no development occurs. However, it really boils down to having the money first (growth) so you can finance the development.

Enter sustainable and sustainability. Its not long term growth or long term development, rather its “sustainable” or “sustainability”. Sustainable and sustainability being based on the notion of some centrally planned management makes the subject at hand sustainable.

The terms sustainable and sustainability seem to morph (political) into the base subjects of growth and development. That is, sustainable and sustainability suddenly trump growth and development. Or, alternatively, sustainable and sustainability becomes the study and growth and development become the sub-topics.

The use of the terms sustainable and sustainability, as overarching terms to explain the organization of a current economic system’s growth and development characteristics, although “fuzzy” in its meaning and deployment, appears to come with the implicit assumption of nonviable and/or sectors within an economic system are not viable. The implicit assumption is that viability/sustainability is only possible with central planned management.

However, is viability/sustainability better explained by Schumpeter's "creative destruction"? That it's not so much viability or sustainability as it is: what comes next. That what is viable/sustainable today gets replaced by a more viable item/idea/model/firm, etc. Were oil lamps viable? Was Woolworth viable? Were stagecoaches viable?

Where does this implicit assumption, of nonviable or unsustainable without centrally planned management, come from? What makes those using the term “sustainable” also rely on central planning to make the item/subject “sustainable”? Likely it comes from the failure to see free people making free decisions in a free market place. Free people making free decisions, generally based on self interest, looks like chaos to the casual outside observer. However, the chaos is really efficiency when organized around an economy based on price. Price allows the self interested decisions to exchange at price when all parties believe that exchange should occur as all parties see a benefit. The seeming chaos of the free market makes the casual outside observer nervous. Chaos needs managed. That chaos needs organized and planned. However, the chaos is really self interested decisions that become highly organized around “price”.

Hence the main features of “sustainable” is the replacement of the free market phenomena of growth and development with the centrally planned management of growth and development. That, for instance, a resource can not be sustainable without central planning or else the resource becomes unsustainable very quickly. That the price of the resource will sky rocket and the supply will run out quickly with out central planning. Of course the question then arises that exactly who has the “special knowledge” to centrally plan? That some special knowledge exists that can replace the zillions of self interest-self directed mundane knowledge decisions occurring in the market each day?

Moreover, the idea that special knowledge exists, that can create central planning, that reduces price and extends supply makes no sense given the following:
  1. sustainable gets used in a way that means the low hanging fruit of a particular resource has been plucked and hence the remaining resource gets more difficult to find and more expensive to produce.

  2. however, for example, oil that was easily accessible in the 1930's-1950's,

  3. extraction costs of the low hanging fruit was actually more expensive, in real terms, then the current extraction costs today when deposits are no longer considered low hanging fruit (cost per unit has fallen even though deposit are more difficult to extract than 1930-1950). Meanwhile supply has expanded at lower real costs,

  4. the same is true with natural gas, coal, and many other resources. Technology, driving Schumpeter's "creative destruction", has outpaced more difficult extractions situations and real costs of extraction have fallen. Viability and sustainability increased at a lower real cost yet no centrally planned management system was deployed.
If people demand and value an item it will be supplied. That the current particular supply may well end up experiencing Schumpeter's creative destruction. That costs will be driven down. That supply will cost less and less until the supply is replaced by a more viable supply through market forces. That is, peat bogs, wood burning, oil lamps, and candles were all viable but where eventually replaced or reduced as other items became viable and available at which time the replacement supply became demanded for its value.

01 September 2010

Speed blogging

Hattips to JH and PR

* WTF? I cannot find residential gcd for San Francisco! Just lots of pages on toilet rebates. Any help?