31 Mar 2011

Models vs reality

The Design Observer Group has two interesting posts. The first laments missing labels for major bodies of water on google maps.

The second is an essay on the Army Corps of Engineers model of the Mississippi basin that's full of interesting institutional details, e.g.,
The Mississippi Basin Model quickly became the most complicated, expensive and time-consuming research project ever undertaken by the Corps...

When Reybold sourced his original labor force, he handpicked POWs with knowledge of engineering and construction, specifically German engineers, whose home country had already embraced the benefits of hydraulics modeling. Repatriated after the war, the prisoners were surprisingly hard to replace. At the time, all river management works were funded by the districts that profited most directly from their development. Thus all funding (design, construction, future operation) for a model projected to visualize 41 percent of the United Stated as a single landscape had to be equitably divided among 15 districts in proportion to their river frontage. It wasn't until 1957 that direct congressional appropriations for the project were approved.


As water poured through the Missouri River section of the model, the resulting data were relayed directly to aid workers in Omaha and Council Bluffs, who were able to respond with brigades of civilians and sandbags to points where levees needed to be raised only slightly; areas predicted to flood dramatically were evacuated. In total the Mississippi River Basin Model prevented an estimated $65 million in damages.


The 1942 report noted that "provision would be made, however, for adding the remainder of the Mississippi River Basin at any time this might become desirable [the model stopped at Baton Rouge]," but the Army Corps went on to make 25 years of decisions about flood control here, and modeling the outflow of the Mississippi River never "became desirable."
USACE now uses computers for simulations, but those models miss the "presence" of the physical model, flawed though it may be.

Addendum: Aquadoc also blogged on this material.

Politics in DC versus trade in NY

I had a quick working vacation in DC and NYC (many projects), and here are a few random impressions from an ex-pat visiting the home country...
  • Americans are definitely friendlier and more chatty. That can be good (interesting random conversations) or bad (superficial cliches).

  • I found someone's blackberry on a residential street; the screen saver showed some dogs on bricks with ivy behind them. I looked at a few houses nearby, saw similar bricks and ivy and rang the doorbell. Dogs barked, and I was able to give the phone back to its owner. Pretty cool -- and lucky: I would not have been able to call the owner because the phone was locked.

  • World Bank lobby
  • I spent quite a lot of time at the World Bank (I figure the Bank is 25 percent effective). Most of their project financing is useless, but their experts and coordination projects are helpful. The trouble is that many experts cannot access or influence policy makers without some form of project money behind them. That's a strange problem to have when you assume that leaders in developing countries want to help their people (they should be asking for help) but not when they care more about money than good policies.

  • Many people in DC work on dividing the pie, e.g., deciding how to divide the money spent on healthcare among hospitals, doctors, insurance companies, businesses and people. This "work" is not productive in the sense of creating more or better care for more people; it's a fight over fixed spoils that can reduce the size of the pie (benefits) in circumstances where winners create distortions to get a bigger share. Contrast this example with single payer systems (like the UK's national health) where there's less incentive to fight over money. It's possible to argue that these fights improve efficiency via competition, but I think it's more like destructive rent-seeking.

  • Regular folks use natural gas!
  • It's pretty common to see political advertisements in DC. The series by the American Petroleum Institute, in favor of natural gas, is typical. (I've seen ads by unions, defense contractors, et al.) I'm curious to see these ads in the metro, where few Congresscritters but MANY staffers ride. Why does the natural gas industry need to remind staffers that "they are people too"? Because staffers write or modify laws that affect the industry according to what's best "for the people" but without asking actual people. So laws reflect a stereotyped (citizens need to be simplified into stories and demographics) and distorted (stories are told by lobbyists and the media) view of the country. On the one hand, that's necessary in order to get anything done. On the other, it highlights how inadequate laws will be; I'd prefer fewer laws made at a local level (subsidiarity).

  • Zabar's on Broadway and 80th, NYC
  • Speaking of the Bank and lobbying, DC excels at food for rich people and NYC excels at food for poorer people (Amsterdam is better for the middle class). I think these results reflect population demographics: DC has a lot of people eating on someone else's dime (OPM). Zabar's Deli is a lot more plebian than the World Bank.

  • The TSA represents our worst face. The last experience for most visitors leaving the States is an encounter with boring, useless, hostile "security" workers who are more interested in rules and their power than being helpful. Many countries have better and nicer security workers.
Bottom Line: Cities reflect the mix of people and their professions. Go to DC to see the results of competition to divide taxpayer's money. Go to New York to see the results of competition to create value for customers.

30 Mar 2011

Missing management not missing money

From the Economist:
(Cambodia) Tim Chan Tha is sifting and flattening used plastic bags for recycling. A widow with three children, she earns about 6,000 riels ($1.50) a day for this. She lives nearby down muddy dirt roads, in a cluster of ramshackle huts of corrugated iron, salvaged wood and tarpaulins. Ms Tha’s life seems as miserable an example of urban poverty as could be found anywhere.

In one respect, however, she is lucky. Her home has a constant supply of running water, drinkable straight from the standpipe outside. Perhaps just as remarkably, she pays for it. The provider is a government-owned utility, the Phnom Penh Water Supply Authority (PPWSA), which actually makes a profit and pays tax. For its many fans in the world of development experts, its achievement in doing this while serving the very poor makes it a model—proof that all that stands between poor people and a decent water supply is mismanagement.
GWI expands on this theme in an editorial on water provision (or failure thereof) in North Africa:
There seems to be a slack assumption across much of academia that the private sector only comes into contact with government if there is privatisation. Somehow they think government remains more pure and separated from the temptations of private business if everything remains under government control. In fact, the reverse is true. The greater the government control of the economy, the more private businesses come up against government as they go about their daily affairs. That is when the scope for corruption becomes enormous.


If you want to be corrupt in the water sector, the best way of doing it is to work out who is going to pay the best bribes first, then package a project into smaller parts so these favoured companies all have a piece of the action and all pay you for it. Then announce a tender with a deadline no more than two weeks after the publication of the request for proposals. This should ensure that no one apart from your preferred bidders come up with offers. If any outsider is able to whip together a bid in double-quick time, you then use non-specific “quality” criteria to dismiss it. When the project inevitably fails to perform two years down the line, rig another tender to fix it. The money-go-round continues as long as the system remains under corrupt government control.
The editorial goes on to lament subsidies to water service that fail to cover costs and lead to conflict between operators, customers and the government.

Bottom Line: Better to compete based on full cost pricing and service to customers.

Thank you, Professor Wantrup!

I was a Wantrup Fellow at UC Berkeley for two years, and that position gave me the freedom to pursue my research on the political economy of natural resources (and create a public good, this blog) without worrying about how to pay the bills.*

Siegfried von Ciriacy-Wantrup died in 1980, but his bequest** lives on.

If you are interested in the institutions for managing natural resources, then I recommend that you read a few of my posts on Wantrup's work:
I credit Wantrup for explaining how decisions are made on three levels: establishing the constitution, making rules allowed under the constitution, and making decisions under the rules. People tend to spend too little time on deviations from the rules (conflict theory, corruption) and how rules are made (public choice, principal-agent dynamics), let alone constitutional limits. See more in my review of the Calculus of Consent.

Bottom Line: Institutions (rules and norms) matter, and this funding institution allowed me to avoid the fetish for mathematical research to spend more time trying to understand our institutions for managing natural resources and the environment -- and then communicate those ideas/opinions to you :)

* Although I am employed again (for research), I still see little sign of professional support for teaching and outreach to the general public. This is depressing to me, since I see much too much energy going into publication (which counts for professional advancement) and too little into dissemination or implementation (which does not, except maybe via consulting). It's still possible that the "aguanomics" brand will make it possible for me to support myself teaching, blogging, and talking to reporters, citizens and policy makers -- especially since I'm not too worried about material success or comfort. But academics like me are definitely in the minority. The majority worries about paying the bills and/or doesn't care about reaching the world outside their office.

** "For the purposes of this fellowship, natural resources are defined broadly to include environmental resources. The fellowship encourages, but is not limited to, policy-oriented research. Applications are open to scholars from any social science discipline, and related professional fields such as law and planning, who will make significant contributions to research on natural resource economics broadly defined. Preference will be given to proposals whose orientation is broadly institutional and/or historical, and which are conceptually and theoretically innovative. Proposals with a primarily statistical or econometric purpose are not eligible for consideration." Although I loved that last part, a number of colleagues denounced it as barring "talented" economists mathematicians.

29 Mar 2011

New poll -- a subtitle for The End of Abundance?

I've not been writing a lot about TEoA, but I've been working on it quite a bit.

Here's a brief summary of the situation:
  • I cancelled the contract with UC Press in December when it was clear that we were not reaching agreement on the audience for the text.
  • Island Press gave it a pass. Reviews were decent (two positive and one neutral), but the new editor wasn't willing to take a chance on me as a first-time author.
  • I've decided to self-publish the book (probably through Amazon). That will make it possible for you folks to get hard copies. I plan to put out a PDF (hyperlinks!) and/or Kindle version.
  • I've got a copy editor. I may have a cover designer.
  • If all goes well, it should be done in May (party!)
This book is meant to summarize most of the material on this blog, tie together meta ideas and add some new insights and ideas that seem to fit better in a book.

I've written it for "people like you" -- folks who may not be economists but who are interested in understanding or using economics to improve water management. I am writing for engineers, managers, lawyers, environmentalists, biologists, political staffers and farmers...

So, I've got two questions:
  1. Which subtitle (in the poll on the right sidebar) sounds the most interesting? What makes you want to open the cover?
  2. Do you have any comments/ideas on what I've described? Please comment or email me.
Bottom Line: I am looking to put out the best book possible and will consider all suggestions.

Addendum: The title will still be The End of Abundance. I am talking about the subtitle!

Poll Results -- water policy drivers

Water policies change when...(pick 1+)
New political leaders bring new ideas 13 votes
Old political leaders say things will change 3 votes
Special interests say so 35 votes
The public wants change 23 votes
Activists agitate for change 12 votes
Academics provide new ideas or information 9 votes
Journalists describe how things work (or fail) 10 votes
The weather dictates 34 votes

These results basically match my opinions, but they do not match what we hear, i.e., "we are weighing alternatives and taking appropriate measures" does not sound like "we do what special interests tell us."

So is it that policy-makers are trying to eat their cake and have it? Pretending to represent the public interest but not really doing so?

And what about weather-driven change? Does that mean that the cost of serving special interests is too great?

Love to hear your thoughts.

Anything but water

H/T to JWT

28 Mar 2011

Monday funnies

Grad students pursue old goals with new tools:

The Origins of Virtue -- The Review

Matt Ridley wrote this book (subtitle: "human instincts and the evolution of cooperation") in 1996, but it's certainly not dated (and it's been cited by hundreds of scholars).

Ridley draws very heavily from Adam Smith's Theory of Moral Sentiments (1759) in explaining how we balance between selfishness and cooperation -- and does so in a clear and engaging way. Ridley's discussion of the Prisoner's Dilemma [p. 56] is case-in-point:
All fishermen would be better off if everybody exercised restraint and did not take too many fish, but if everybody is taking as much as he can, the fisherman who shows restraint only forfeits his share to somebody more selfish.
The good part about this book is Ridley's path through history and ideas, to explain how we ended up with more virtue than the scenario above might indicate. He goes on to explain why a firm-but-fair strategy in a repeated Prisoner's Dilemma (I cooperate if you cooperate and defect if you defect, but continue to defect if you continue to cooperate and cooperate again after a mutual defection) is not only more robust but also more realistic. He later shifts to multi-person cooperation games, which are what life is REALLY about.

The book then shifts from logic and calculation to emotion [p. 136]:
Complicated emotions... prevent us deserting wounded mates or forgiving unfamiliar slights. This, in the long run, is to our advantage, for it allows us to keep marriages together in bad times, or warn off potential opportunists.
Goes to war:
A tribe including many members who, from possessing in a high degree the spirit of patriotism, fidelity, obedience, courage, and sympathy, were always ready to aid one another, and to sacrifice themselves for the common good, would be victorious over most other tribes; and this would be natural selection.

Quoting Charles Darwin's Descent of Man (1871)
And discusses in-group versus out-group behavior [p. 193]:
Hitler perfected the double standard of in-group morality and out-group ferocity by calling his movement national socialism. Socialism stood for communitarianism within the tribe, nationalism for its vicious exterior. He needed no religious spur.* But given that humankind has an instinct towards tribalism that millions of years of groupishness have fostered, religions have thrived to the extent that they stressed the community of the converted and the evil of the heathen.
These words alone make the book worth a read (I quoted them for my book :). Ridley is just on point so often, and so clearly, that it's a pleasure to feel the ideas in your head forming into neater relationships. And he goes from that dark side to the light, to trade, which Ridley explains is not just unique to humans but also the source of our great wealth (I am now reading In the Company of Strangers, which also covers this material).

Ridley also undermines the idea that humans are going to discard their selfish ways for Gaia. Lester Brown, for example, announces that "building an environmentally sustainable future depends on restructuring the global economy, major shifts in human reproductive behavior, and dramatic changes in values and lifestyles" [p. 214. Thismay be how Lester Brown sees the world and acts, but can he get nearly seven billion people to agree with him?

Some claim that's easy, since humans were not so greedy and destructive in the past. They were like Chief Seattle, whose 1854 speech to a white man offering to buy his land evoked a gentle wisdom:
How can you buy or sell the sky, the warmth of the land? The idea is strange to us...Every part of this earth is sacred to my people. Every shining pine needle, every sandy shore, every mist in the dark woods, every clearing and humming insect is holy in the memory and experience of my people...Will you teach your children what we have taught our children? That the earth is our mother? Whatever befalls the earth befalls the sons of the earth...This we know: The earth does not belong to man; man belongs to the earth. All things are connected like the blood which unites one family...Man did not weave the web of life: he is merely a strand in it. Whatever he does to the web, he does to himself.
But Chief Seattle did not give this speech; it was written for TV in 1971. The real Chief Seattle was happy to sell his land. And his ancestors were responsible for hunting many species to extinction. Human respect for the environment -- living simply so that others may simply live -- is a modern -- and minority -- belief.

I've written many times in this blog on the need to pay attention to incentives and personal choices for managing water (or the environment), and the "20/80 rule" is a short-hand reference to the 20 percent of people who have an intrinsic desire to do the right thing (take shorter showers, for example) while the other 80 percent (or 93 percent or whatever...) will only take shorter showers if its costs them too much money. That's why I tend to bang on about prices and markets, because self-restraint and virtue are not sufficiently widespread to prevent overexploitation of resources or the environment.

Ridley also does a good job explaining why the Hardin's 1968 vision of a Tragedy of the Commons is just as naive as the prisoner's dilemma. As Lin Ostrom and many others have shown, humans have sustainably managed their common resources (lobster fisheries, timber lands, grazing territories, etc.) for centuries, using various combinations of communal management and private property. The tragedy of the commons, in fact, is much more likely when the government takes away private property, to protect it from "selfish owners," because bureaucratic managers have little incentive to protect it from poachers and illegal harvesters (examples are all over the world, from India to Brazil to Russia to many parts of Africa).

After giving an example of a tribe's sustainable and egalitarian method for managing its resources in Papua New Guinea, Ridley quotes an ecologist who worries about "unusual property rights... that restrict the ability of the government to implement conservation measures..." Do we need to remember that tribal people are the first to oppose massive environmental destruction of rainforests in Malaysia and Indonesia? Do we need more examples of forests being sold for a song (or a bribe) in exchange for promises of jobs and palm oil exports? Indeed, NGOs are enabling the rape of the Gaia through their inability to accept the fact that selfish government workers care more about themselves than their countries' natural resources. In other words [p. 246], "government is the cause of most [environmental] problems, not the solution to them, precisely because it creates tragedies of the commons where none existed before."

Bottom Line: I give this short but wise book FIVE STARS. It should be required reading for every high school student, politician, activist and economist.

* Just above, Ridley describes "a continuing tendency for Christians to love only those neighbors who share their beliefs."

25 Mar 2011

Three years of aguanomics

Wow. Three years, 3,200 blog posts and 280,000 visits by 160,000 unique visitors.
The Zetland Arms, London (photo by Suncica)
It's no exaggeration to say that this blog simultaneously dominates my life and gives me great rewards and satisfaction. As an economist interested in debating, understanding and promoting good policies, I cannot imagine a better vehicle than a blog and a better community than the one at aguanomics.

Seriously, this is no echo-chamber of ditto-heads. I've really benefited from your participation, comments, questions and patience.

Whenever I do one of these updates (the last one was at 30 months), I provide quantitative and qualitative information on the blog.


In a comparison [PDF] of March 2010 to March 2011 to the year-earlier period, a few things stand out. First, the number of visits and page views are down (!) by 15--18%. These numbers do not reflect RSS readers, but that count has been over 1,100 for quite some time. 94,000 visits and 145,000 page views (250 and 400 per day, respectively) is certainly not bad, but who wants less? (Interestingly, the number of views to the home page are down by 25%, which implies that more people are reading posts in the archive.)

On the upside, visits from the Netherlands are up by 295%! (Oh wait, that's me.)

On a slightly geeky note, the share of visitors using Chrome is up from 5 to 13 percent.

Turning to Technorati, aguanomics has an "authority" of 482, putting it at 3,135th place in the world (Stats for "green" are 510 authority and 110th place, respectively). Given that last place is 105,767th, that's not bad :)


The blog is a lot of work, and it's rewarding. I've used it to think about and find new ideas for research. Most of the material in my book (update on THAT project coming soon) first appeared here. I've gotten some consulting, many talks, and endless questions from people who know more about the blog than any other aspect of my work.

At the moment, the blog has "nothing" to do with my day job, but I often post things here that I discover while doing my research. It's also nice as a means of "just do it" analysis and publication. I've ranted about useless academics and publications many times in the past, and this blog has kept me from exclusively occupying that category.

I plan to continue blogging. My inbox and notes are full of new topics and thoughts, so there's no immediate risk of a posting drought (joke!). On the other hand, I continue to monitor Plan B (quit everything, bake bread, travel). It's nice to have an alternative to desperation, but the increase in my influence, effectiveness and interest appears to be outpacing my ennui and disillusion with the same crap in newspapers or political pronouncements. Life is process, and this one ain't half-bad.

Bottom Line: Aguanomics is healthy, interesting to me, and (hopefully) useful to you. If you want to make someone's day (and mine), then recommend aguanomics to your friends, family, colleagues and hangers on. That's right -- click here.

24 Mar 2011

The marketing department's better world

I was paid to post this video and press release from ABB's Better World campaign. I did so because it's on topic (free money!) but also because of the spin put on survey results. See my comment below.

[video removed at ABB's request]

Press release: "ABB is striving for a better, cleaner future by developing innovative technologies that increase energy usage efficiency. ABB have sponsored a survey, which was conducted by Bloomberg Businessweek. The survey illustrates the expressed concern that the majority of energy experts have about renewable energy. Energy officials believe that immediate changes must take place. The video [link removed at ABB's request] shows the survey results which could lead to effective solutions for energy usage efficiency. ABB believes that by creating a smarter energy system we can protect the environment and aim for a brighter future."

Comment: The video claims that:
  • "76% of energy professionals believe government regulations should require utility companies to produce more energy from renewable sources," but the white paper [PDF] supporting the claim ranks seven alternative actions (e.g., "Incentivize the development of the grid," at 89%) as more important.

  • "89% of energy professionals believe government incentives trump markets in driving energy efficiency uptake by consumers," but the white paper [PDF] that claims government incentives are important also says that "the barrier to energy efficiency... is cheap energy (31%) more than incentives (22%)." Not exactly a clear result.

  • "63% of energy professionals believe the greatest opportunities for improving efficiency in the energy value chain can be found among industrial end users," but the white paper [PDF] says it different: "63% say that reducing consumption of electricity among end-users is the most effective means of using electricity more efficiently...the best opportunities for efficiency improvements along the energy supply chain are with energy consumers (Consumers 38%, Industry 16%)." This one I'll call a complete fail.

  • "81% of energy experts think smart grid technology is important for creating a cleaner, stronger system of the future," which sounds good, until you read [PDF] that "major barriers impeding the adoption of smart grid technology [include] regulations that don’t reward operational efficiencies (63%) and a lack of incentives for utilities to transform operations (58%)." Let's not put the cart grid before the horse incentives!
Bottom Line: The marketing department appears to be more interested in government regulations requiring industrial users to spend money on renewable technology and smart grids, not in the results of their own survey.* Fail.

* Veolia's recent white paper concludes "unless more sustainable water resource management practices are adopted by companies and individuals, almost half of the global economy -- and more than half of the world's population -- will be exposed to severe water scarcity by 2050." Their white paper (prepared by IFPRI) is far more balanced in discussing the incentives and mechanisms of sustainability. Sure, Veolia wants to sell water efficiency technology and services, but at least they say that "companies, cities and the public will need to move toward water conservation and efficiency improvements, coupled with aggressive but feasible investments and policy reform focused on increased water productivity."

23 Mar 2011

Pursuit of Water on tour

About a year ago, I talked to Tim SolWoong Kim about "Pursuit of Water, a global project focusing on world-wide social issues concerning water, gathering together the globe and bringing change through creative and various means of media."

Since then, Tim and his team have gone to Haiti and produced "Afterma+h, a social cross-media project to impact Haiti, especially social justice issues concerning water." Interesting.

Tim will also be on a "water talk tour," meeting with people and giving talks in Los Angeles, Portland, Seattle, Vancouver, Toronto and New York between 27 March and 11 May. If you want to get involved, go here.

A thought on happiness

NB: This post describes how economists think about (and fail to see) the real world; I am still learning.

Economists say that people choose actions to "maximize their utility," which raises two questions. What's utility and what's included in its definition?

"Utility" can mean many things, but it basically means happiness, and it includes everything that makes people happy. That can mean making and spending money, but it can also mean watching the sunset.

This inclusiveness helps us understand the problem with programs or policies that contribute to GDP (monetary activities), to the detriment of non-GDP activities. Thus, we may see policies to help moms work (and hire nannies) as "good" for the economy, when they may not be good for utility. (Note that I am talking about changing incentives to participate in these activities, not voluntary participation.)

I was thinking a little more about utility and came up with the following definition:

Utility = peopleαproductionβconsumption1−α−β

This is the first time I've used math on this blog in nearly three years, but this notation uses the classic Cobb-Douglas function, which has two useful characteristics (given that α and β are positive and sum to less than 1). First, we can see that a value of zero for any of people, production or consumption means that utility is zero. Second, more of any of these increases utility according to the values of α and β.

In non-mathematical terms, the main idea is that balance is good, but more is better :)

Now the definitions of people, production and consumption are also interesting.

People includes friends, family, lovers and strangers. Different people attach different weights to each of these subgroups. Both a family man and a swinger can put high values on α, even as they assign different priorities to different subgroups.

Production is easier to understand, as our output of paid and unpaid goods and services. Likewise, consumption involves a combination of goods and services -- everything from a cup of coffee to bungee jumping at Victoria Falls to the 22nd Rolls Royce. People obviously put different weights on different types of consumption and production.

It's important to note here that many economists consider time spent in production as "lost" to leisure (a type of consumption), making production a bad. This simple idea can be resolved by dividing production into fun (additional consumption) and work (lost consumption), but that often-overlooked nuance means that many economic models are not very accurate.

Production as a positive source of utility, OTOH, clarifies the reason that many of us work and choose jobs; less-attractive jobs have lower β value.

Bottom Line: We are the same in our pursuit of happiness but different in the way we find it.

22 Mar 2011

Leadership and the Middle East

So far, the news is good for Egypt (and perhaps Tunisia), but looking bad in Libya, Bahrain and Yemen. So sad to see "leaders" killing their own people to hold power (as opposed to making them suffer while doing so).

This speech by Charlie Chaplin* clarifies matters (and tells us why people in poor countries do not get basic water service):

* Originally from the Great Dictator (1940).

World Water WTF

Today is the annual circus of "look at me" articles, press releases, conferences and speeches by people and for people with attention-spans of a goldfish.

Not my scene, so I am I'm giving you a break from the fracas, with BONUS funnies that put things in context...

and help with priorities...

21 Mar 2011

Monday funnies

Anything but water

18 Mar 2011

Lives of the Laureates -- Highlights

In this book, 18 winners of the "Nobel prize" in Economics* talk about their evolution as economists to lay audiences. I liked the talks because they were long enough to tell stories yet not as technical as Nobel acceptance speeches where the laureate needs to justify their award.

This post is not so much a review as a collection of highlights I marked while reading.

Milton Friedman (Nobel 1976; speech 1985):
I have spoken and written about issues of policy. in doing so, however, I have not been acting in my scientific capacity but in my capacity as a citizen, an informed one, I hope. I believe that what I know as an economist helps me form better judgmental about some issues than I could have without that knowledge.
Franco Modigliani (Nobel 1987; speech 1987):
An engineer, surgeon and economist each claim that their profession is the oldest. The surgeon says ``Remember at the beginning when God took a rib out of Adam and made Eve? Who do you think did that? Obviously a surgeon." The engineer says "Just a moment. You remember that God made the world before that. He separated the land from the sea. Who do you think did that except an engineer?" "Just a moment," protested the economist, "Before God made the world, what was there? Chaos. Who do you think was responsible for that?"
James Buchanan (Nobel 1986; speech 1987):
To the allocationist the market is efficient if it works... To the catallactist the market coordinates the separate activities of self-seeking persons without the necessity of detailed political direction. The test of the market is the comparison with its institutional alternative, politicized decision making.
Robert Solow (Nobel 1987; speech 1988):
Theoretical physicists nowadays think they are on the verge of what they call, only partially self-mockingly, "The Theory of Everything." There is no economic Theory of Everything, and attempts to construct one seem to merge toward a Theory of Nothing. If you think I am making a sly comment about some tendencies in contemporary macroeconomics, you are right... economics should try very hard to be scientific with a small s. By that I mean only that we should think logically and respect fact.
Ronald Coase (Nobel 1994; speech 1994):
My aim has always been to understand the working of the economic system, to get to the truth, rather than to support some position. And in criticizing others, I have always tried to understand what their position was and not to misrepresent it. I have never been interested in cheap victories.
Douglass North (Nobel 1993; speech 1994):
Learning is not just a product of the experiences of the individual in his or her lifetime, it also includes the cumulative experiences of past generations embodied in culture... there is no guarantee that the cumulative past experiences of a society will... necessarily solve new problems.
John Harsanyi (Nobel 1994; speech 1997):
You are "impartial" if you do not know in advance whether you will be in a more favorable position under capitalism or in a more favorable position under socialism... a utilitarian theory of ethics... means that you develop an ethical theory based on moral rules that best serve the interest of all individual members of society** and do it in an impartial way...
Bottom Line: I am lucky to be in the same profession as these folks.

* There's an ongoing debate about this award. Alfred Nobel did not create it; it was created by the Bank of Sweden "in memory of Alfred Nobel." There's also a HUGE debate over associating economics with "science." I tend to see more "social" than "science" in economics. See this post for more thoughts on research and this one on the Nobel Prize.

** I've associated these thoughts with Rawls and Harsanyi seemed to have written them later in the 1970s. No matter their provinance (probably Adam Smith!), I agree.

17 Mar 2011

Measuring subsidies to kill them?

Coincident to the post earlier this morning, I got this email:

The Global Subsidies Initiative (GSI) announces the release of a new study: Measuring Irrigation Subsidies in Andhra Pradesh and Southern India: An application of the GSI Method for quantifying subsidies [PDF]

The second report in GSI's series measuring irrigation subsidies provides the starting point for a debate on the use of irrigation subsidies in India. Subsidies to irrigated agriculture in major irrigation projects in just the four south Indian states (Tamil Nadu, Andhra Pradesh, Karnataka and Kerala) were conservatively estimated at US$575 million per year from 2004 to 2008. The full subsidy is certainly substantially more, as significant numbers of small- to medium-size schemes were not included in the study, nor were substantial electricity subsidies to private groundwater irrigators.

The majority of the subsidies were for interest on capital, and operation and maintenance (O&M) costs, over and above the revenue generated from providing irrigation services, hydro power generation and pollution abatement fees. Irrigation projects that were not completed to schedule were found to have significant cost overruns leading to government funding tied up in projects not delivering any benefits or revenue. When governments were unable to collect revenue from farmers, re-investment back into completed systems stopped and system maintenance declined.

Collecting basic data for the study was a challenge. Government-funded supply costs were not recorded and compiled with the notion of generating accurate cost estimates for irrigation activities. What data are available are often spread over a variety of government departments. The study recommended that the government encourage water authorities to maintain better records and publicly provide information on water costs, revenues and subsidies, in a more organized and accessible manner.

There may be clear public policy reasons for providing subsidies. However, without accurate information on subsidy volumes, public policy debate is hampered and the relative costs and benefits of alternative paths to policy goals impossible to assess.

This study was prepared on behalf of the GSI by International Water Management Institute.
I asked Tim Shah to comment on the report, and he said:

Irrigation subsidies in India are indeed a huge problem. Based on the literature though, and the stuff I read for my project, Andhra Pradesh has been a unique case which I summarized in my blog post to you. I don't know as much about the other southern states (e.g. Tamil Nadu and Kerala), but farmers in AP have generally become more effective in managing their crops in spite of the generous subsidies thrown at them. As AP is highly reliant on monsoonal rains to replenish its groundwater aquifers, the need to conserve, manage crops more efficiently and sell such crops to markets is even more critical than other places in the country (such as Punjab) which have more friendly hydrogeological conditions and higher storing capacity which has mistakenly given farmers this idea that water is abundant and limitless.

While I have not read much about this GSI method of quantifying subsidies, I do not think it is the "be all end all" solution by any means. This could be carried out in any state in India and would simply tell institutions that they have been idiots for years through providing OVERLY generous subsidies. Obviously there have been cost overruns which have led to government funding tied up in projects not delivering any benefits or revenue. But by using a more grounded and participatory approach, like the one we researched, it can act as a better model to manage and maintain records of state subsidies to farmers. This way, farmers are utilizing all of the hydrological data possible for groundwater conservation, they are engaged in their practices and learn about how to efficiently and strategically manage crops based on limited water resources. From here, the state government could provide subsidies accordingly based on how much water and electricity they need. If the subsidy providers become more strict about this, then the farmers will already have their hydrological data which the state can use to assess funding allocation. The GSI approach seems inaccessible, disconnected from rural reality and not participatory!

Better public policy in these Indian states is not going to only come from the quantification of subsidies. It will require a much more participatory and "two-way" approach where farmers and subsidy providers are actually communicating with one another. This leads to better policy because it is transparent and can ultimately lead to the increase in the welfare of rural farmers through the efficient allocation of resources.

DZ's Bottom Line: Subsidies can be troublesome because they distort behavior. Although it's possible to coordinate action to overcome this behavior, success is neither easy nor guaranteed. So GSI's initiative to highlight the explicit cost of subsidies is welcome, as is Tim's observation that farmers are capable of responsibly managing their water in a sustainable way.

I'd reconcile these views with the political desire to throw money at farmers by suggesting that governments just send money to farmers. Such a "solution" delivers politicians' gifts of taxpayer money to farmers while minimizing the distortionary effects of a subsidy on behavior.

Unfortunately, it also highlights the bribery, so perhaps it's not something we're likely to see :)

The Andhra Pradesh approach to groundwater

A guest post Erik Blair and Tim Shah

Over the past two months, we have had the fortune of researching an innovative and highly participatory project in one of our graduate courses at the School of Community and Regional Planning. Both of us had an interest in exploring groundwater in the developing world and were fortunate to stumble across an article in the Economist magazine entitled “Making Farmers Matter” with a focus on India. Why India you may ask? India is the world’s largest user of groundwater with an estimated 22 million wells. As Steven Solomon writes in his newest book, “in India's breadbaskets of Punjab and Haryana, the water tables are falling over three feet per year; monitored wells in the western state of Gujarat show a fall in the water table from 50 feet to over 1,300 feet in thirty years”. India accounts for 25% of the world’s total groundwater draw. Interested in more statistics? See here.

The northern desert state of Rajasthan is not doing any better and the challenges it faces are severe. A major reason for this is the fact that farmers pay virtually nothing for water or electricity. Such wasteful subsidies from state governments have led not only to the perpetuation of destructive farming practices, but worse yet, a culture of over-drafting and a complete neglect for conservation.

Shedding light on a positive and more promising story takes us to a South-Eastern state of Andhra Pradesh where a project named the “Andhra Pradesh Farmer Managed Groundwater System Project” has been gaining traction in its unique approach to demand-side management and through engaging farmers “in the field” to demystify the science of hydrological monitoring. This project was jointly implemented in July 2003 by the Royal Netherlands Embassy in New Delhi along with the UN FAO and 9 NGOs under the leadership of the Bharati Integrated Rural Development Society (BIRDS). More details about the project implementation can be found here.

Zetland has written about the tragedy of the commons countless times and how it is a problem we deal with in the developed and developing world alike. The essence of this project has been to avoid it by teaching farmers to think about water as a common pool resource. This helps farmers overcome their selfish desires and to think about groundwater as shared and collective resource.

The local governance institutions on the ground, which were set up by the 9 NGOs, are paramount to this program. Their objective is to disseminate training and transfer knowledge across districts for the farmers’ collective understanding of groundwater use. The “farmer water school” - an informal training program that improves the skills and knowledge of farmers to carry out their practices in a more efficient and sustainable manner – is one such method.

The program trains farmers to collect hydrological data, understand discharge and recharge, take rainfall measurements and daily groundwater levels. Such “groundwater dynamics” have been poorly understood by these farmers because the science is complex and ostensibly better understood by PhD hydrogeologists at the state level. As evidenced in the eight-year life of APFAMGS, farmers can understand the groundwater system in greater complexity if provided the skills to understand the resource’s limitations, and the capacity to make collaborative decisions about how best to manage it.

A huge success of APFAMGS has been the improvement of gender equity. By learning how to monitor local groundwater levels and measure rates of rainfall and discharge, women have elevated their position in society tremendously. Innovative ideas about water and sanitation access have shortened “water-trips” and improved health, and technical skills have enabled women to make management decisions that directly affect their livelihood.

This collective wisdom and collaborative approach has also translated into the formation of “crop water budget” plans. These plans are premised on “reducing risk of crop failure & identifying opportunities for sustainable production”. A variety of methods go into this process, see here: but the key message is that these plans are devised and shared to allow farmers to strategize about which crops will be grown in which water basin in the state. The crop water budget plans reinforce which crops are more water intensive (rice paddies) and which ones are less (Bengal Gram). Further, this culture of conservation has led to the adoption of drip irrigation for selected crops. This unprecedented communication has forged consensus on reducing the amount of water allocated to the highly water intensive rice paddies, a crop that has driven Punjab’s farmers into serious despair (see this video).

This idea of cooperation, fostered through the vision of groundwater as “common pool resource” has improved crop diversity. This demand-side management approach has led not only to a reduction in groundwater pumping, but selecting crops more strategically based on water intensity – and has become a model of participatory groundwater management for the entire state. This is not a question of regulation of groundwater (both California and British Columbia do not regulate), this is more about how farmers can be empowered, and teach each other, to make critical behavioural changes in their everyday lives.

The farmers have taught us a lot about the power of knowledge sharing. It is in their best interest to share hydrological data with one another to help prioritize which crops they will grow. Prior to the project, the farmers did have each other to discuss best practices on reducing groundwater pumping. Alas, with such desperation to pump water to improve yields and thus quality of life, there was a culture of selfishness which made it hard to see the benefits of cooperation. Without the financial resources from the Dutch Embassy, the technical expertise from the UN FAO, and the understanding of groundwater science at the farmer water schools, it seems to us, that this transformative process would have been a lot more difficult to achieve. Now that the training is well established, we hope that the farmers will take the methods learned and teach other for generations to come. Hopefully, this intergenerational learning does not require the intervention of foreign institutions or groups and that the solutions from here on in are cultivated in a local manner.

To conclude, as graduate students studying community and regional planning, we sometimes get caught up in the process of projects and forget about the importance of outcomes. While the journey in this particular project is arguably more important than the destination; the learning, capacity-building and collaboration exemplified by the farmers has led to significant reductions in groundwater pumping. Such outcomes have been an inspiring story of how to tackle the complex problem of falling water tables.

Bottom Line: More work/investigation needs to be done on this project to see whether it is transferable to other places.
Erik Blair & Tim Shah are graduate students in the School of Community and Regional Planning at the University of British Columbia in Vancouver, Canada. This post is a summary of a two-month research project that they presented on in their class “Planning for Water Resource Management”.

16 Mar 2011

Water on Mars!

Click here for details on this amazing discovery! (via AZ)

Speed blogging

  • A very interesting World Bank paper from 1996 describes water trading, and the many ways that it can help the poor. (This paper is pre-Cochabamba, so it may seem a little optimistic, but the continued failure of government water provision means that it's still relevant.) Lots of useful and important observations in here.

  • One of which led me to the privatization of water rights in Chile (1981) as well as the water supplier to Santiago (the capital). Chile now has nearly 100% water coverage, 24/7, for its citizens. Nearly 100% of water is metered; the poor are given direct income assistance to make sure that they can afford to pay their bills. Here's another interesting paper [pdf] on public-private performance of Santiago's utility (it was good before it was privatized).

  • Desalination lobbyists and water managers on junkets in California. On the same topic, salaries of California's public workers (including many water managers) can get pretty high ($574,000?) and Australians in Melbourne will pay $ billions for their desalination plant -- whether or not they use it.

  • A nice post on the chemicals in fracking fluids and some analysis on how big the business of cleaning frack-water is going to be (<$1 billion/year).

  • WaterAid is having a hard time providing water services in Mali (a case study of institutions).

  • Jay Lund (UC Davis Professor of Civil Engineering) on why many Delta levees are uneconomical.
H/Ts to RM and JWT

15 Mar 2011


Amazing footage (via JWT) but definitely not representative of traffic jams, cubicles and the grind. Good excuse to buy a ticket...

Notes from the ASSA

Every year, 10,000 economists get together in January to talk, drink and look for jobs. I went to Denver this year, and here are a few notes of interest:
  • The great irony is that there are so many sessions running at the same time (38-44 in parallel, each with 3-5 papers) that attendees have no hope of seeing everything of interest. I figure that it's possible to see 12 of 400 sessions. Authors/presenters cannot listen to similar topics when they are presenting. This S>>D imbalance results from "publish new stuff and move on" incentives that give academics no reason to spend promote published work or listening to others.* All that matters is more More MORE!

  • The discussion in the panel on "Afghanistan – Costs and Exit Strategies" [mp3 recording] centered on a few points of agreement:
    • Corruption is worse because power is centralized in Kabul. Roger Myerson (Nobel laureate) suggested that decentralization would mean that locals customize corruption more to their needs.
    • Drug cultivation, trade and trafficking (aided by the US drug war) was an elephant in the room that funded the Taliban, alienated farmers from soldiers, and corrupted institutions. (NOT from The Onion: Mexican Drug Lord Officially Thanks American Lawmakers for Keeping Drugs Illegal)
    • Everyone agreed that Afghanistan was bad for the US, which was wasting money, lives and diplomatic will on a hopeless case. Why is the US still there? Machismo ("We don't cut and run") and rents to the military industrial complex. About 30 cadets from the Air Force Academy attended. Their economics professor, an officer and veteran of Afghanistan, was adamant that they could deliver aid and security ("people have thanked us") but blind to larger circumstances that made his efforts unsustainable.

  • Sexton and Sexton** on Saving the planet Being cool: "Using market-level data on vehicle ownership in Colorado, we have empirically identified a significant conspicuous conservation effect related to Toyota Prius demand... consumers are willing to pay up to several thousand dollars to signal their environmental bona fides through their car choice."

  • Robert Schiller: Economists as Worldly Philosophers (or not): "If specialization is too extreme, it has a tendency to lead to carrying original ideas too far, beyond their useful purpose. Specialization coupled with strong competitive pressures within academia leads to a situation in which academics often feel that they just do not have time to ponder broad issues and learn even basic simple facts outside their specialty. Their general knowledge may be embarrassingly limited, and so they may retreat into their own specialty and produce research which contributes in small ways to the development of the field, but fails to pay attention to the larger picture." Anthony Atkinson, meanwhile, argues that economists need to spend more time on welfare economics, i.e., the distribution of wealth and happiness in society.

  • Lord Stern came from London to give a talk about climate change. He said that the move to a post-carbon economy was not going to be painless, but it would be relatively easy to use some sort of tax. One member of the audience pointed out a big flaw in this claim: $trillions in taxes might be used to move to post-carbon life that's no better than today. People would rather spend the money on adding fun and excitement to their carbonized life.

    He likened action on climate change to another industrial revolution but his analogy is imperfect. The industrial revolution was led by profit seekers in markets. Climate change actions are led by bureaucrats and politicians using command and control processes. Even worse, politicians from the US and China agreed to do nothing and block others from advancing mitigation.***

* The Economist writes: "It is harder than ever to keep abreast of progress. After running four issues a year for the past 100 years, the AER will this year publish six. The journal has already produced four specialised offshoots. Economics is producing a torrent of research, coursing in all directions." Although this is spun as a positive development, I think that we need to cut back on the "torrent" (spending more time on refining and promoting ideas in each paper) while maintaining "all directions."

** Son and daughter of my PhD adviser, Rich Sexton, who worries that his kids may be working too hard. :)

*** Several people have told me that "China is very serious about climate change and going green." China has 1.3 billion people with lots of different goals. Going green does not appear to dominate those goals.

14 Mar 2011

Monday funnies

Who cares about SmartWater? Aniston is cute and this commercial is funny.

Westlands -- Worse than I thought

I had two impressions about Westlands Water District (the largest irrigation district in the US):
  1. WWD farmers have done a fine job in stretching their limited water supplies (via high efficiency irrigation, etc.) to grow profitable crops.
  2. WWD only exists by the grace of subsidies that brought infrastructure and water to a place that would have neither without political prioritization that's given WWD farmers implicit (water) and explicit (cheap funding) subsidies.
I've covered WWD on a number of issues over the years, but my recent reading of King of California reminded me that WWD was perhaps an even more egregious abuser of public policies meant to serve small, sustainable farms. (At least the farmers in the Tulare region had water for irrigation!)

Boswell owned the 26,000 acre Boston Ranch in WWD, which was irrigated with Bureau of Reclamation water in total violation of the stipulation that subsidized water only go to farms of less than 960 acres.

I asked Lloyd Carter for some materials on these issue; he kindly helped me and referred me to others who gave me some useful background.

Let's start with Mary Louise Frampton's 1980 law review article [PDF]. Frampton worked for plaintiffs seeking small (<960 acre) parcels of land for farming in WWD, so she had a particular view. She argues:
  • Enforcement of reclamation law would result in 87,000 farm residents on roughly 6,000 small farms; actual numbers [then] were 2,348 residents on 216 large farms. Southern Pacific Railroad was the largest landowner in 1980, at 106,000 acres.
  • Federal subsidies (in 1980) to WWD amount to $1,500+ per acre because farmers are paying 3.3% of CVP costs -- the rest is covered by electricity sales and general tax revenues.
  • The Congress has consistently tried to limit subsidies to small farms, and consistently been outwitted by large farm operators, with the repeated assistance of the Bureau of Reclamation and Secretary of Interior. Other members of Congress have proposed reforms that do nothing to limit large landholdings.
  • The shell games that WWD farmers played to get around limitations are astounding. Here's one chart of changes in ownership structure:
  • According to the USDA, 320-acre farms would be more profitable per acre (i.e., limited returns to scale). This result matches the Arvin-Dinuba study of 1946 but used a larger study area of 130 communities in the San Joaquin Valley. The problem with such results (greater profits for more farmers) is that they would spread profits that are high, for a limited number of WWD farmers, to among many more farmers. They have fought to protect their profits, and succeeded.
  • Frampton provides other details of the numerous ways in which Reclamation law on subsidized water was ignored, circumvented or violated.
Hamilton Candee's 1989 law review article [pdf] addresses the "broken promise of reclamation reform." Candee worked for NRDC and was suing Reclamation for failing to correctly implement laws that limited subsidies to small farms (less than 960 acres) while requiring larger farms to pay the full cost (capital and operations) for their water:
  • He goes through the many ways that Reclamation failed to uphold restrictions on subsidies.
  • The Bureau treated farmers -- and big farmers especially -- as clients, not the taxpayers who paid for their schemes or were supposedly represented by their political representatives.
  • Subsidies to water users often exceeded 75% of costs. Projects often delivered water at prices below the cost of delivery, let alone the cost of repaying debt on infrastructure.
  • On one Westlands farm of 6,279 acres, only 63 acres paid the full cost for for water.
  • Page 680 recounts Southern Pacific's shenanigans to sell land at price that reflected the value of subsidized water. Reclamation laws prohibits these gains to large landholders. What's interesting is not just that SP and others got around these regulations (frequently with the help of BurRec), but that the resulting higher prices have been used as an excuse to maintain subsidies. In other words, those who paid higher land prices that represented the value of the subsidy would claim that they will lose money if subsidies are removed. The language of the law states that large farmers should be offered no such compensation, which means that the large farmers in Westlands would not be able to claim a "taking" if their water and/or subsidies ended. It seems that's still true today.
  • The USDA allows access to subsidies only to small farms. BurRec has not -- due to a lack of will, not a lack of tools or information.
  • BurRec's "Acreage Limitation Branch" was dissolved in 1988, because it was getting too picky about the size of property eligible for subsidies (one party's "budget efficiency" is another party's "hatchet job" to proper oversight and regulation). Sounds familiar today.
  • The Bureau's decision to support large farmers (totally contradicting their founding documents) was mainly for the benefit of 456 operations in 2 of the 17 Reclamation states.* Half full? (only 2 states are badly run) or half empty? (BurRec threw taxpayers and small farmers under the bus).
  • Targeted subsidies are silly (who's to say if a farm should be large or small). Even worse, they often go  off-target.
But these articles are over 20 years old. Those huge farmers in Westlands can't still be getting all these subsidies and handouts, can they?

I've got bad news.

Environmental Working Group's 2010 report updates us on the surreal saga of WWD, quoting a 2007 report by BurRec [pdf] that concludes that 250,000 acres of Westlands contaminated by salts should be bought and retired, but BurRec decided -- against its own recommendation -- to spend more money on draining those lands, forgive WWD nearly $500 million of debt (remember that WWD has not paid back the CVP costs incurred in the 1960s and 70s), and so on.** What a crock.

Westlands should be bought out, if only to reduce the material for economists, lawyers and bloggers to argue about. Given sales of $1 billion and a price/sales ratio of 1.5 (WalMart's is 0.44 IBM's is 1.98), the US government should buy ALL of Westlands for $1.5 billion, end all subsidies and services, and sell the dry land at auction. Why would WWD accept? Because the other option is to end irrigation services altogether (per violation of the Reclamation Act), leaving WWD farmers with ranches and no compensation.

Bottom Line: Large farms are just as good as small farms, but no farms should receive subsidies or a free pass on natural resources or environmental goods. Businesses should be run for profit, not for extracting welfare from citizens and taxpayers.

* I'd love to find out which two. I suspect it's California and Arizona, but I can't find an online copy of: Bureau of Reclamation, U.S. Department of the Interior, Acreage Limitation Environmental Assessment, 17-26 (Apr. 8, 1987). Anyone?

** EWG claims that crop subsidies are also a "net loser" at WWD, but they are merely a transfer between taxpayers and WWD, so not strictly a loser in a cost-benefit analysis. OTOH, they ARE a gift to special interests that distort behavior.

H/Ts to LC, RC and TS

11 Mar 2011

Water quality trading

via the sustainable water resources network:

G. Tracy Mehan (Cadmus Group) on "Moving Beyond Water Quality Trading Towards a Complete Portfolio of Ecoservices" [15 Min Video] at University of Chicago on May 29, 2009.

Progress in water quality management has slowed because the Clean Water Act does not adequately address non-point sources... Water quality trading shows promise as one newer approach. An important problem is how to carry out water quality trading between point and non-point sources.

Simple metering

Amsterdam does not have a water shortage problem, so people read their meter once per year, send in the card, and then pay their bill. (Lying about your use -- understating the value -- doesn't work: The meter is confirmed when a house or apartment is sold.) Cheap and effective, the way the Dutch like it :)

Bottom Line: Water billing should reflect priorities -- e.g., saving water or saving effort -- for customers.

H/T to Anne, my lovely housemate girlfriend :)

10 Mar 2011

Just a thought...

I started reading The Company of Strangers this morning as I took a train through the Dutch countryside, eating a pain au chocolat with my latte.

I realized not only that I have a pretty good life and work, but also that this result comes from the work, innovation, enjoyment and trade among thousands millions billions of people. That's what brings me a latte made from distant ingredients; that's what brings me this (looks to be) fascinating book.

I realized this after trying to read Veblen's 1899 Theory of the Leisure Class. That book is hard to read, and it reminded me that life in 1899 -- like that book -- was not as good as what we've got today.*

Bottom Line: Thanks everyone!
* Yes, there are exceptions to this observation. Yes, a book is no dataset. But still.

Reporting FAIL

TS sent me this story about the use of water for extracting oil in Kern County, California:
GELLERMAN: So they're using clean drinking water to extract oil from tar sands?

MILLER: They are, yeah. One of the hiccups of steam flooding, if you will, is that they can't just use any water to do it. It's sort of like your coffee maker. If you use dirty water in your coffee maker, you're going to get stuff precipitating out onto the heating elements of your coffee makers. So the oil companies need a clean, fresh source of water.

One shocking thing that I found in my research is that back in 1985 when oil was at its peak in California, in Kern County it took about four and a half barrels of water to generate one barrel of oil. Okay, four and a half barrels of fresh water to generate one barrel of oil. Well, that oil field is in decline now. Today it takes close to eight barrels of water to generate one barrel of heavy oil.[1] It's enough water to supply 200,000 households, or about 500,000 people, for a year.[2]

GELLERMAN: From reading your article, this is an area where the aqueduct carrying clean drinking water goes right past towns that don't have clean drinking water.

MILLER: Exactly. There are dozens of small towns within sight of the aqueduct, as you say, that don't have access to clean drinking water.[3] So that water flows right past to the oil fields and these towns are forced to deal with well water that they have, which in a lot of cases is contaminated with agricultural pollutants and other natural pollutants.

Yeah, it's a landscape that's defined by drought. It's a semi-arid desert. I mean, this is an area, where, like you say, every drop of water counts.

GELLERMAN: You know, it's really disturbing to read and think that our addiction to oil, or our need for oil, is so great that we would use water - water that's scarce - to extract oil from the ground.
Let's look at some of these statements:
  1. A barrel of oil is 42 gal. Eight barrels have 336 gallons. Given that oil costs about $100/barrel and an acre-foot of SWP water costs about $200, that's spending about 20 cents of water for $100 of oil.
  2. Earlier, Miller says that "about 31,000 acre-feet" are used for extraction. That's about 16 people per acre foot per year, or 55 gcd, which is kinda low.
  3. Property rights are a bitch, but we don't hear people saying "wow, that nice car just drove by and all I have is a bike. Give ME that car." The water in those pipes is owned. Perhaps the government distributed those rights in corrupt ways, but the way forward is to either use a political process to reallocate it or sell it in a market. We cannot fix the present allocation by being "disturbed."
Bottom Line: Water allocations are sometimes surreal, but the solutions to those allocations have to fit reality.

9 Mar 2011

Some thoughts on women

Yeah, I'm late for International Women's Day, but EVERY day is women's day at aguanomics!

I have a few opinions:
  • Women are awesome. I love them for saving me from myself, for being so lovely.
  • Most "gender" aspects of international aid (and water) are too PC to be locally useful.
  • Men are more extreme than women on both tails (see this and this). That means that men do more brilliant things and more stupid things. That's why men tend to be leaders and serial killers, inventors and couch potatoes. (This is what Larry Summers was getting at when he got in trouble at Harvard, so fire me.) A world without men would have fewer wars but fewer innovations. A world without women probably wouldn't exist, because men would forget to take care of the kids, meals and living out of tiger range. There are trade-offs in this world of no free lunch.
  • The gender-gap in wages is probably due to women's propensity to quit work (for kids or other "non-GDP" activities).
  • In Theory of the Leisure Class (1899), Thorstein Veblen writes: "The earliest form of ownership is an ownership of the women by the able-bodied men of the community." I prefer this interpretation to Rousseau's. In 1755, he said "The first man who, having fenced in a piece of land, said "This is mine," and found people naïve enough to believe him, that man was the true founder of civil society." Possession of women surely predated possession of land, and many societies still practice forms of possession. It's quite an accomplishment, in terms of social evolution, for women to have equal legal, social and financial rights.
  • I support a gender quota for the legislature (NOT the executive). More below...

King of California -- The Review

In this book, Mark Arax and Rick Wartzman illustrate the fascinating details behind a family that combined hard work, farming wisdom and political maneuvering to turn "lake-bottom land" into a farming empire, with help from government workers who may have ignored the Public interest and badly-written and ill-enforced government laws.

The book (subtitle: "JG Boswell and the Making of a Secret American Empire") traces the story of the Boswell family, which left Georgia's cotton lands for California. The Boswell began marketing cotton in Los Angeles and then moved into production, turning land, abundant water, and very sharp management into one of the largest farming operations in the US and world. I won't summarize the fascinating, well-written story, but here are some notes I took on the way:

8 Mar 2011

Poll Results -- Paying for water

Hey! There's a new poll (forces for change) on the right sidebar ===>
I am willing to see the price of water rise by 50% to get:*
Reliable 29 votes
Sustainable 74 votes
Safe 40 votes
Available to everyone 38 votes

These results are interesting to me, since voters appear to put more weight on environmental uses ("sustainable," as in not robbing the environment?) than on uses that directly affect people, i.e., the taps will flow, to everyone, with drinkable water.

Note that reliable and sustainable can conflict if, for example, a dam improves reliability but destroys an ecosystem. The same may be said for "available to everyone" in the sense that people tend to use more water when they have better access, i.e., from pipes instead of a well, standpipe or truck.

I also think that these results reflect the demographics of readers; most of us take reliable and safe for granted, and we live in countries where 100% coverage is the norm. So perhaps these results reflect secondary priorities for a use (sustainability) that's was neglected in the past.

Bottom Line: The problem at hand depends on where you stand, and water management needs to reflect local priorities.

* The impact of this increase on prices of food, energy, etc. will ALWAYS be less than 50%. That's because the water content of these products is quite low by value, relative to other inputs. The idea was that higher water prices would reduce demand, making it easier to meet other priorities (reliable, sustainable, safe and omnipresent).

Which peers can review?

I emailed Mark Atlas a few questions to get more background on his 715pp report on the flaws in 550 environmental economics publications (the original post with a link to his report, is here). I asked questions across a few emails, so the verbatim responses may not read as a single discussion.

I also emailed "triple-professor" Lyon for his response to Atlas's critique. It's at the end of this post.

By coincidence, I read this passage around the same time I found the report:
If rigorous empirical testing were required of economic models, many fewer papers would be written, the subject would become boring to many current practitioners, and the scientific reputation of the field would rise. There would be fewer fads and more lasting contributions. The criterion of success would be to understand phenomena rather than to maximize citations indices. -- James J. Heckman, writing in March 2003 for Lives of the Laureates (Fourth ed. 2004)
Looking over these articles and emails, I am starting to think that the material in these two posts needs a broad circulation among legal and economic all scholars. We can never be too rigorous in evaluating the quality of our work. I recommend that grad students read this discussion (and the papers behind it) to learn more about the rigorous application of scientific method (I took a few classes on that subject in grad school).
  1. Why did you write it?

7 Mar 2011

Monday funnies

Canned Water for Kids. Really.
They claim that aluminum cans are recycled, etc., but not in places where kids do not have clean water. Oh, and what about those adults? Do they get cans of beer? Marketing yes. Solution, no. 

Sponsored by (among others) Can Manufacturers Institute, Can Tech International, International Metal Decorators Association, Metal Container Corp, Packaging World Magazine, South Chicago Iron and Metal, The CanMaker Magazine.

Another kind of OPM

Usually OPM refers to using Other People's Money for infrastructure that benefits you, but I recently received a variation of OPM in my email:
Nika Water Affiliate Invitation

After reviewing your site, I wanted to reach out to you regarding becoming an affiliate for my client, Nika Water.

NIKA Water is a unique and eco-friendly premium bottled water* company dedicated to fulfilling it’s mission which donates 100% of their profits to bringing clean water and safe sanitation to impoverished areas. Check out their site to learn more about this altruistic company! Their affiliate program is run through Impact Radius and offers a 5% commission! With high average order values and seeing the program’s success thus far, you could potentially make a good amount of money supporting this charitable brand.

With your content-related site and web traffic, we think you would make an excellent affiliate for our program - so apply today and we will approve you!

If you have any questions, please feel free to reach out to me and I can help out with the process! Also- as an OPM (outsourced program manager) we work with numerous clients across a wide variety of verticals, so let me know if you’re interested in learning more about our other clients!

Thank you for your support of NIKA. Helping the world never tasted so good!
So, besides the charming mistakes with grammar ("it's mission...their profits"?) and use of jargon (Impact Radius? verticals?) that makes no sense to me, I wondered about an altruistic company that makes profits. How does that work? Well, I saw got this from their site:
At NIKA we are all about helping to end poverty through bringing clean water to those who don't have access to it. One way we do that is through the donation of wells with our profits. Suppose, instead of selling bottled water, we were focused on having people write checks that we would then donate to water projects...that would be a logical approach. If year after year our NGO's depended on us to give them our donations to build their wells they would be very happy with us. If, however, the economy went into a recession as we're currently in or if another world catastrophe occurred, such as Haiti, then our donors could logically tell us that while they believe very much in our cause they feel the need to make sure that their personal finances are shored up or that they need to take a break this year from supporting us to support the efforts in Haiti, for example. We would certainly understand, however, our local NGO partners who have people in country depending on them to build wells and to bring clean water, could be hurt very badly. Although this is simple example, the records of donations over the past thirty years bear this out. When tough economic times occur, donations tend to drop by about 5%. This means layoffs and program cuts.

NIKA's model is one that doesn't need to rely on economic cycles or donor priorities but rather it uses the market place to create the profits which are then contributed back into the causes.
I'll summarize this business model:
  1. We sell bottled water, pay ourselves and send the leftover money (profits) to build wells.
  2. We also have lots of cute people on staff, wearing cool shirts, cause we're saving the world ya know.
  3. That's more sustainable financially because charities see drops in donations and we don't expect to see a drop in profits, because we're immune to business cycles.
  4. Why? We sell water to people who shop at Whole Foods. Apparently, they love to do the right thing and always buy bottled water.
Nice try.

Bottom Line: I'm neither a fan of NGOs that build wells for people or for profit companies that promise to give a portion of their money to charity (remember Starbucks's Ethos Water?). I'd prefer that people who need water build and manage their own wells, the way Charles Banda does it in Malawi or WaterAid has done it since 1981.

* Their water is almost comically-clean [click "our process"]. They are in La Jolla (near San Diego), but claim their water comes from the Sierra Nevada (most water near SD comes from the Colorado River). Anyway, it looks like they take tap water, "multimedia" carbon filter it, evaporate it, "micron" filter it, then "ozonate" it, and then put it in a nice clean plastic bottle.