29 Apr 2011

Friday Party!

Holi in India is pretty wild (lots of great pics)

Solar subsidies to farmers?

Let's connect the dots:
  • "The California Assembly passed a bill that would oblige state utilities to get a third of their energy from renewable sources by 2020." Governor Brown signed this update on earlier, similar laws.
  • Farmers and others are setting up big projects to meet this artificial boost in demand.
The first dot is an artificial increase in demand for renewable power. Note that this requirement of utilities does NOT apply to customer-sourced renewable power.*

The second dot belongs to the beneficiaries of big new projects for renewables. By current statistics, total capacity is about 63,000 MW. Of this, 420 solar projects have a capacity of 20,600 (about 30%) and 300 wind projects have a capacity of 23,700 (about 35%).

So we can see that current and future conditions will favor solar and wind projects that will need LOTS of space from people who own land. These facts lead me to the conclusion that farmers with useless land (due to loss in fertility or water or salting) are going to benefit from this government mandate. Seems like another case of baptists (environmentalists) helping out the bootleggers (unsuccessful farmers) via government subsidies.

Bottom Line: "Do the right thing" regulations that mandate behavior generate money for special interests.

H/Ts to DL and DW

* For a comprehensive overview of solar in the southwest, read this Miller-McCune article, which helpfully points out that rooftop solar can be more efficient than huge arrays in remote places.FYI, I'm NOT a fan of feed-in tariffs to promote solar. They are the reason why Germany (NOT a sunny place) is covered in solar (is Jersey far behind?). Better to price carbon into ALL power sources and then let market forces determine where and how to install solar. But THAT solution will not please lobbyists and special interests :(

28 Apr 2011

Boycott bottled water?

Carlton Krumpfes emails:
This Earth Day we are starting a bottled water boycott! The bottled water boycott is a battle cry for consumers to form a collective conscious in a process to rescue the planet, influence big business, save money, improve health, and quench the globe’s thirst with cleaner, healthier, cheaper water for all.
So the website has a few posts and some ads for home water purification systems, but my main concern is with the ineffective nature of this boycott:
  1. A small reduction in demand (by boycotters) will merely lower the price for others who continue to use bottled water. That's not going to do much for pollution or water sustainability.
  2. Bottled water from municipal supplies is sustainable (assuming that the municipality as a whole is not mismanaging itself into shortage). Water from springs and groundwater CAN be sustainable, if it's a small share of total flows. I can say that because bottled water extractions in the US are way less than 0.1 percent of total water use.
  3. The real problems (to me) are the weight of driving bottled water around and problems in disposing of and recycling plastic bottles. (Ironically, those problems exist with soda drinks and consumer products but few people want to boycott all of them!)
  4. My solution (more detail in my book) is to levy a $0.10 deposit on all bottles. Half that deposit is returned when the bottles are recycled (which will reduce bottle litter); the other half is used to make bottles into other useful plastic products (which takes care of disposal).
Why do I propose a deposit/refund scheme instead of a boycott? Because a small group cannot do much to affect everyone else when they STOP using the product. Rather than push that string, they can work together to get laws/regulations passed that apply to ALL consumers, thereby having a real impact on things that matter (litter and disposal).

The "20/80 rule" says that 20 percent of people "do the right thing" while 80 percent of people don't care but do watch prices. A ten cent deposit would send a useful price signal to the 80 percent: A higher price on bottled water will probably reduce demand and sales volume by more than a boycott would.

Bottom Line: Sometimes people don't care about your passion for the Earth and self-sacrifice. Better to change incentives so that they face the consequences of their actions.

27 Apr 2011

S&P screws things up again

S&P, the people who brought you over-optimistic credit ratings for companies that paid for ratings, is now going to screw up the assessment of risk from climate change:
Standard & Poor's (S&P) is to routinely including an assessment of climate risk into its corporate credit ratings across all industrial sectors...


"This is still cutting edge stuff – there are very few people in the City who understand it."
I'll say, and that suggests that S&P's assessments will be misunderstood and misused, even when they are inaccurate (nobody knows if I am accurately describing things I imagine in my head!)

Bottom Line: S&P is going to increase volatility in the market but focusing people on a single wrong number. They don't know how local climate change is going to affect operations -- let alone how preparation and responses are going to modify those impacts.

Water services in Sao Paulo, Brazil

MS asks:
I was wondering what you think of the sanitation and water policies going on in Sao Paulo, Brazil. The organization handling infrastructure in this area in a private-public company called Sabesp (the government owns a majority stake in the company). Do you think it is doing a good job? Do you think that Sao Paulo needs to make some major investments in the area of sanitation, clean water, and access to potable water? For the record, I own some stock in Sabesp.
I've never been to Sao Paulo and I don't know anything about Sabesp, so what can I say to an investor?
  1. A company's share price reflects expectations of future profits. If that expectation is too high, than the price will go down.
  2. Profits at Sabesp will depend on its ability to meet performance targets, the government line on water prices, current and future service areas, the cost of debt and the balance between required and useful investments.
  3. The items in #2 will fluctuate with market AND political sentiments. It's possible to guess where they will be by looking at other infrastructure developments and political actions in Brazil. 
  4. President Rousseff, like Lula, appears to understand the benefits of political and legal stability.
How well is Sabesp doing?

Maybe you want to go visit The International Benchmarking Network for Water and Sanitation Utilities (IBNET, a project I have a small affiliation with) and get some data:

Bottom Line: Investing is about being smarter than the average person or willing to take more risks to get more rewards. Everything else is sales propaganda or fraud.

26 Apr 2011

Bleg: Aguanomics in Israel?

I am going to Israel next week, as guest of the Israel Export and International Cooperation Institute, to look at some technology.

As you know, I am ALSO interested in water management and incentives.

So, if you have any ideas of people to meet, places to go, then please write them here or email me.

FYI, I arrive Sunday night in Tel Aviv. I have Monday free and will be "left" in Jerusalem on Thursday afternoon (perhaps to return to Tel Aviv that night). I also have Friday free. I fly Sat VERY early from Tel Aviv.

Speed blogging

TEoA in the western US

via AP (and aquanexus):
A report released Monday by the Interior Department said annual flows in three prominent river basins — the Colorado, Rio Grande and San Joaquin — could decline by as much 8 percent to 14 percent over the next four decades.
Shall we change the way we manage water now, or when the sh*t hits the fan?

Bottom Line: Nobody ever says that the Sahara is in drought.

25 Apr 2011

Poll results -- book buying

There's a new poll (pretty picture?) on the right sidebar ==>
If I bought The End of Abundance (300pp), I'd want (check 1+)
a paperback ($20, free shipping) 50 votes
the Kindle version ($10, no page #s) 25 votes
a PDF version ($10, page #s, iPad) 32 votes
another eBook ($10) 7 votes
to buy bulk for my company/school 2 votes

Thanks for these votes. I will therefore prioritize releasing the book in paperback, PDF and then eBook/Kindle versions.

Monday funnies

from Mr. Grumpy:

Let's put the pensioners in jail and the criminals in a nursing home:
  • This way the pensioners would have access to showers, hobbies and walks.
  • They'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc and they'd receive money instead of paying it out.
  • They would have constant video monitoring, so they could be helped instantly, if they fell, or needed assistance.
  • Bedding would be washed twice a week, and all clothing would be ironed and returned to them.
  • A guard would check on them every 20 minutes and bring their meals and snacks to their cell.
  • They would have family visits in a suite built for that purpose.
  • They would have access to a library, weight room, spiritual counselling, pool and education.
  • Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request.
  • Private, secure rooms for all, with an exercise outdoor yard, with gardens.
  • Each senior could have a PC a TV radio and daily phone calls.
  • There would be a board of directors to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.
  • The criminals would get cold food, be left all alone and unsupervised. Lights off at 8pm, and showers once a week. Live in a tiny room and pay £600.00 per week and have no hope of ever getting out.
Is it just me, or does anyone else find it amazing that during the mad cow epidemic our government could track a single cow, born in Appleby almost three years ago, right to the stall where she slept in the county of Cumbria? And, they even tracked her calves to their stalls. But they are unable to locate 125,000 illegal immigrants wandering around our country. Maybe we should give each of them a cow.

The real reason that we can't have the Ten Commandments posted in a courthouse or Parliament, is this -
You cannot post 'Thou Shalt Not Steal', 'Thou Shalt Not Commit Adultery' and 'Thou Shall Not Lie' in a building full of lawyers, judges and politicians... It creates a hostile work environment.

Restrictions vs prices

The Santa Clara Valley Water District plans to revoke [pdf] its "10 percent voluntary conservation" goal due to the [official] end of shortage and drought.

As the author of The End of Abundance, I need to repeat the book's thesis: The institutions for managing abundant water supplies need to be restructured for scarce water. That means that "temporary voluntary restrictions on demand" are outdated as a response to scarcity, drought and shortage if you think that scarcity will return.

It makes more sense to change to a system where prices go up with scarcity and go down with abundance. Those price signals (like the signals at a gasoline pump) help people permanently change their behavior, unlike temporary/emergency measures for drought that are implemented (or not!) via an unreliable bureaucratic or political process. Even better, prices allow different people to respond in different ways. Some will reduce their use by 2 percent; others by 20 percent.

Bottom Line: "And it never failed that during the dry years the people forgot about the rich years, and during the wet years they lost all memory of the dry years. It was always that way." --John Steinbeck
H/T to BN and RM

22 Apr 2011

Friday Party!

OMG, this is F'in crazy: Downhill urban bike racing in Valparaiso, Chile (via JWT).

VCA 2010 RACE RUN from changoman on Vimeo.

Anything but water

21 Apr 2011

Visualizing water use

(via DB and NP) Here are other methods and the back story:

Addendum: Here's a nice post discussing footprints and visualizations.

The Deep State

In Turkey, the Deep State refers to a cabal of military and authoritarian types who run the country for their own interests, slandering, torturing and assassinating opponents as they hold themselves above the law.

The Deep State exists in many dangerous countries (from Russia to Venezuela to Guatemala), but I worry about its rise in the US.

Some of you already know about previous failures at the FBI, the expansion of the military industrial complex, and the propaganda wars around climate change (spying on climate scientists, denier bots), but the wheels really started to come off when wikileaks started publishing State Department cables.

HBGary (an "expert hacking" organization) attacked wikileaks. In a counter attack by hackers, HBGary's emails were published, and they revealed that the US Chamber of Commerce and BankAmerica were running solicited to run misinformation campaigns in favor of their interests.

It seems that corporations are not just content to offer bribes as part of their "first amendment right" to influence policies and politicians; they [corporations like HBGary but not necessarily BofA or the USCC] also violate our civil rights by hiring hackers to attack people whose beliefs (or attempts to enforce the law) get in the way of their profits.

Now this reminds me of business in Russia: You uphold the law, we shoot you in the head.

What's sad is that our so-called leaders are much more interested in fear and loathing than upholding openness and freedom. Private Bradley Manning -- accused of leaking the State Department cables but not charged -- has been held in solitary confinement for nine months. That's not justice. That's fascism.*

Bottom Line: Our leaders are losing sight of their job (to serve citizens and uphold the constitution) in favor of self-service, greed, ego, and brutality -- and we are letting them get away with it.

* Naomi Klein (a NY liberal) compares US policies to policies in Nazi Germany and Soviet Russia. Unfortunately, she makes a good point.

20 Apr 2011


April 20th is about putting things in context.*
* If you're looking for a marijuana story, then read a scientist's calculation of the carbon footprint of indoor marijuana cultivation. The drug war doesn't just fund the mafia, increase police corruption and brutality and encourage violence in Mexico, the US and many other countries -- it also destroys the environment. Quad-fail!


I often discuss institutions and transaction costs here, but it was only recently that I read a very useful paper [PDF] by Oliver Williamson, who won the Nobel Prize* for his work on transaction costs.

I was pleased to see -- contrary to what I'd been told -- that Williamson explains institutions quite clearly. The following diagram appears on page 597:

In it, Williamson makes a useful clarification of the different types of institutions. At the top level (L1) are institutions such as culture that last for hundreds to thousands of years. Then there are formal rules (e.g., a constitution) that will be constrained by culture but last for decades or more. Next (L3) comes governance in how the game is run.** These are various laws and administrative rules that are constrained by informal culture and norms and formal constitutional bounds. Finally, we get to L4, the ongoing process of allocating resources (water, labor, capital, time, etc.) in accordance with out individual goals.

This schema helps clarify the ideas that we discuss here (and in my book) for reforming L3 governance or affecting L4 actions, even while taking formal rules and informal norms into account. That's why, e.g., I propose all-in-auctions as a way of reallocating water (given rights in L3) or redistributing rights (given norms in L1 and constitutional definitions in L2) when it comes to a human right to water.

Bottom Line: Institutions matter, and it's useful to know which institutions you want to change/respect. Read this paper.

* Yes, it's not a real Nobel. Whatever.

** Also see this review of The Calculus of Consent (on constitutions).

19 Apr 2011

Australian voices of reason

In a scathing draft report, the Productivity Commission yesterday called for an urgent overhaul of the urban water sector, declaring consumers were paying more than necessary for their water as a result of poor government decision-making.

The 600-page report is highly critical of decisions by state governments across the country to overinvest in expensive and inefficient desalination plants...

The report says governments have been too quick to discount recycled wastewater for political, rather than economic, reasons: "Negative community perceptions have become entrenched in the absence of good evidence about the costs and benefits."


The commission wants to open up the market for urban water trading and remove all remaining bans on trading between urban and rural areas that would allow water to be purchased at its highest value. It also recommends that state and territory governments should move away from setting water prices to monitoring how utilities price water and whether they abuse their market power.

The Productivity Commission found water restrictions imposed by state governments were likely to cost the nation about a $1bn in lost production, and governments would be better off charging consumers extra for different tiers of water packages and allow the market to regulate water use.

Getting water to the poor

This evening in Berlin, I will debate Wenonah Hauter of Food and Water Watch on whether full cost pricing is the best way to ensure good water service to the poor.

I represent the pro-side of the debate. Ms. Hauter represents the con-side that favors (presumably) government subsidies to water-service.

One of my points is that incompetent and corrupt governments cannot get water to poor people. I claimed this in my paper on human rights and water, but I looked for some data and got this:

This figure shows Aggregate governance indicators (from the World Bank) on the x-axis and Access to an improved water source (from the UN) on the y-axis for 170 countries, as of 2008. Here's my XLS.

You can see that the R^2 (goodness of fit) is 0.43. The correlation between the two variables is 0.66.

Note that this is an indirect argument, since it's quite possible for locally-managed, independent water agencies (private, public or in-between) to provide good service without suffering from the generalized corruption of the country. It's the independence that matters, as it frees the agency from distant complications so that it can concentrate on sustainable operations.

Bottom Line: Don't depend on incompetent governments for your water.

18 Apr 2011

The Big Thirst and TEoA

LP and RD sent me this WSJ review of Charles Fishman's new book (I am waiting for my review copy).

I thought that the conclusion was quite good:
He does not offer much of a model for how this pricing system might evolve or how it might win political favor among people whom he has told us time and again resist even small changes in flat-rate water bills. But policy analysis is not really the point of his book, which is at its best when it is being merely descriptive, not prescriptive. Ending it with this simple yet radical pricing idea merely leaves us thirsting for more.
Conveniently, that's exactly the goal and purpose of my book: economic solutions to water scarcity.


By the way, I've set up a simple form for you to fill in if you want to be notified as soon as The End of Abundance is available. It takes about 30 seconds. Go!

Monday funnies

This has happened to me :(

The biggest government failure

Warning: Angry rant ahead. I've gotta get this off my chest.

Market failure occurs when firms trading in the market create harmful negative side effects; the conventional response is to regulate or tax those activities, e.g., auto pollution.

Government failure occurs when activities delegated to politicians or bureaucrats are mismanaged to the point when society would be better off without government "help;" the conventional (but rare) response is to end those activities, e.g., government telecoms or wars.*

This post is about government failure with respect to the financial markets.

It's appropriate to post around tax day, as we contemplate what value we received for our tax payments.

Here's the short version: Government regulators and politicians have cooperated with Wall Street to create one-way bets in financial markets in which Wall Street makes the profits and tax payers take the losses.

The long version: Here's some evidence/argument in support:
For a concise summary of the issues discussed above, watch Inside Job (winner of the 2010 Oscar for Best Documentary). Inside Job -- unlike some of Michael Moore's stuff -- is accurate. The most shocking and appalling segment (for me) is when "respected" economists like Martin Feldstein (Harvard), Frederic Mishkin and Glen Hubbard (both Columbia) all look straight in the camera and say that they see no conflict of interest in writing reports praising deregulation in Iceland or financial derivatives that they were paid to write.** Hubbard looks like a total asshole (in my limited experience, he's not a nice guy); Feldstein looks like the cat that ate the caged bird; Mishkin at least looks awkward as he admits he was paid over $100k to write a report on Iceland that was based on his theoretical ideas of how markets are efficient and regulators do their job.

Let me repeat that: You can see that these guys were relying on theory in proclaiming the stability and efficiency of those markets. First, because they use typical jargon connected with those ideas. Second, because those markets had not experienced any macroeconomic shock sufficient to test their stability.

If I was the Dean, I'd revoke the tenure of all three. I'd fire them for disservice to the academic community (fraud) and their employers (theft while on payroll). They can go back to Wall Street, where there are no ethics above making money/

Let me back up and provide more background on my thoughts (just to be thorough):
Oct 2008: Does Wall Street matter? Yes, but they also caused this mess.
Feb 2009: Better to let the business cycle run; don't stimulate or bail out.
Apr 2009: Economists are useless if they mislead us on market policy.
Jul 2009: The Great Recession Conspiracy (Jim Taylor made me co-author; I agree with 80 percent of it.)
Aug 2009: Academic economists don't understand real markets.
Oct 2009: Please save capitalism from the Capitalists.

In recent days, we've got these updates:
Bottom Line: The government of the US (Bush and Obama) is somewhere between incompetent and criminal in its continued efforts to give away $trillions of our money*** to the richest of the rich.

* More on government services at Poll Results -- Tradeoffs and why I support Tea Baggers (only about 10 percent true, alas, they are pretty ridiculous these days)

** I've declared payment on a paper I wrote; it was rejected by an editor because it was "obviously" biased. He had a poor grasp of causality, but at least he knew that someone paid to hear my opinion.

*** As an expat with outside options (another passport), these shenanigans make it much easier to write off the US as a basket case of mismanagement (for my thoughts on pure evil, read an upcoming post on the Deep State). I started thinking about exile while traveling in the 1990s (remember the circus around OJ and Monica that diverted interest from real problems?), but Bush II put every thought into overdrive. These thoughts are very sad for me, since most Americans and most of America's culture and institutions are really great. America is ranked 22nd in the world in corruption -- not as bad as Zimbabwe, but not very good.

**** Here's an interesting Q&A with an average Wall Street banker.

Addendum: I met Michel Camdessus (ex-head IMF) this morning and asked him about bailouts, etc. He deferred comment on the US system, but praised that the French government's actions towards ensuring stability (a real risk) and maybe making money from "liquidity services." But his answer and the discussion was slightly awkward.

15 Apr 2011

Friday Party!

Walking the Dinosaur!

IID continues to innovate fail

The Imperial Irrigation District identified recipients for their fallowing grant program, but applicants not selected can appeal.

Nine applicants who scored 75 percent or higher based on their request for proposal will share $2.2 million.

The RFP, scored by an independent panel of professional grant readers, required applicants to show that fallowing created a hardship, and how they would stimulate the economy and boost employment.
The gist of this story is that anyone who claims harm from fallowing that resulted from IID's water sales to SDCWA is eligible for compensation.

So they make up stories, and professional grant readers decide if the stories are good enough.

This is silly.
  1. IID has not agreed to send more than 10 percent of its water to cities. The scope for harm with 10 percent fallowing is pretty small. 
  2. Economists found a net benefit from IID's fallowing/sales program to SDCWA. IID ignored that report.*
  3. There are better ways to decide who fallows.** I'd do a reverse auction: Set the number of acres to fallow (x) and accept the x lowest bids for fallowing. I bet that the price is less than the $200+/- that IID gets for the water.***
Bottom Line: IID continues to find ways to mismange its water.

* I can't find a link on the web, but it's: Sunding, David and Kubota, Gordon H. and Mitchell, David (2004). "Third-Party Impacts of Land Fallowing Associated with IID-SDCWA Water Transfer: 2003 and 2004." Local Entity and San Diego County Water Authority.

**IID, if I remember right, fixes a price (a fraction of the $200+/af they get for water) and then asks for takers. When there are too few acres, IID fallows its own land, but that system may have changed.

*** My impression is also that IID likes to spend that money on itself, not transfer it to the farmers it supposedly represents.

14 Apr 2011

Anything but water

  • The Economist has some pretty good suggestions for cutting back the State.

  • Gyms are not interested in getting you in shape. Here's how to do it [get in shape].

  • Is nuclear power safe? Yes. Can Nuclear Power Be Part of the Solution? Maybe.

  • The lottery in Holland is a very big deal -- mostly in the money that they spend marketing. The BankGiroLoterij sends everyone fake cash cards. Some people go to the website to register the card, where they are then asked to play the lottery. All of this is possible because they are making such profits from the lottery that they can spend 0.99€ on marketing to make 1€. The lottery in NL is worse than Publishers Clearing House in the US, but they have such style!

  • Inevitable: "They're perfect. In fact, they're someone you could see yourself spending the rest of your life with. A decent person with a good job or business in search of a good, honest partner to settle down with... Welcome to Romance Scam!"

  • Africa's mobile phone development success continues to produce (good) surprises.
H/T to AZ

More supply doesn't mean no shortage

Emily Green blogs on the lifting of use restrictions in Southern California in response to the heavy rain and snowfall this season [NYT too!]:
"We anticipate residential consumers and businesses throughout the Southland will continue to use water efficiently," said Jeffrey Kightlinger, General Manager of the Metropolitan Water District of Southern California
My observation is that greater supply does little to prevent shortage, which results from demand exceeding supply.

Will people "do the right thing" as Kightlinger hopes? Maybe. Or maybe they will demand "too much."

It would make more sense to raise prices when water is scarce (recently and in the future) and lower them when water is abundant (now and in the future). Supply and demand will balance, and there will be no shortage.

Bottom Line: "One hand clapping" water management does not produce applause.

Water charity WTF

I got this email on April Fools,* but it's serious:

"We would like to introduce a new and innovative London-based charity called 2 Water Charity. 2 Water aims to provide water to those most in need of it via wine-tasting events, therefore turning wine into water. We have used the unprecedented idea of turning wine into water, appealing to wine lovers worldwide, giving them the opportunity to turn their passion into a charitable action.

What do we do?
We are developing water and sanitation projects in Malawi, Central African Republic and India, and are currently in the process of elaborating a water purification strategy in Eastern Europe."

Elaborating? WTF? I could spend a few days making fun of this organization ("Our passion for the art of wine and expertise in the development sector motivated us to use wine as a vehicle to diminish this gap in living standards"), but I am going to leave it to you to find the best-worst statements from their website.

Bottom Line: 2 Water is a neat way to get people to pay for organizers' lifestyles.**

* April Fools posts from UC Davis Delta guys and Aquadoc, who goes downhill from "Lynn Don LaDouche" :)

** "Our trip to Miami signifies more than one cause for celebration. It is a delight to be launching 2 Water in America from one of the most beautiful cities in the world, surrounded by white sandy beaches and immersed in a lively, vibrant atmosphere"

13 Apr 2011

End of Abundance -- progress report

The book is on track for a 1 June release in paperback, PDF, kindle and eBook formats.*

I am NOW looking for:
  • blurbs from people who are famous within their community (engineering, law) or just plain famous (Matt Damon? Jack Nicholson?).
  • people who need months of lead time to order books for classes, companies or organizations.
If you or someone you know is in either or both of these categories, then please email me. I will send you a PDF of the current (draft) version of the book.

If you want a review copy of the final version, please email me (including the outlet for your review), and I will send you a paperback or electronic copy after 1 June.**

The book's website is filling in. It will eventually include sample chapters, blurbs/reviews, a discussion forum, multiple ways to purchase the book, etc.

At the moment it only has a link to 13 YouTube videos (total length under an hour) in which I describe the book (13 min) and each of its 12 chapters (2-4 min/each).

Go, watch and leave comments! :)

* The subtitle is "economic solutions to water scarcity"
** I'll contact those of you who helped with earlier drafts, to send you your copy.

The right to water in a restaurant?

AT asked an interesting question:
I was under the impression that institutions that sell food and/or alcohol are required to provide free tap water. They can charge a fee for the cup or the ice, but not the water. However, I'm finding conflicting information about this online. Is there a US or CA law that requires the food industry to provide free tap water, to your knowledge?
I know that many restaurants in Europe will refuse to bring you a glass of tap water. They sometimes make excuses ("very bad water"), but usually they tell you you have to pay for bottled water.

I also recall a Continental (or was it US Airways?) flight where they would not bring me a glass of water. They wanted to sell me a bottle of water. I insisted on water, so they gave me a cup of HOT water. That wasn't working too well, but then I got a cup of ice... and "made" my own room-temperature water. I was pretty mad.

Does anyone have an idea of laws or regulations (or a better horror story)?

12 Apr 2011

Big action in China?

RD sent this very important news:
the Chinese government announced that it will invest four trillion renminbi (US$600 billion) over the next ten years to protect and improve access to water. The policy was spelt out in this year's No 1 Document — the central government's first policy document of the year, setting the top priorities
The commentary at the link identifies a number of problems with this plan (everything from bureaucratic secrecy and coordination to vague funding sources), but this announcement is a step in the right direction. It's hard to ignore a No. 1 document.

Am I allowed to call them liars?

...or are they just incompetent?

As Lloyd Carter predicted, politicians spoke falsehood in public (via RM):
  • "Man made drought" -- there's no such thing.
  • "Caused 40 percent unemployment" -- not true.
  • "Farmers not receiving all the water they deserve" -- there is no Santa Claus.
  • "Breadbasket of America" -- uhh, nope.
These politicians (McClintock, Denham, Hastings, Nunes) are deluded.

Reminds me of Bill O'Reilly, who equates his inability to understand tides with proof that God exists.

Bottom Line: The lack of critical reasoning among politicians leads to stupid rhetoric, policies and actions. And we ALL pay (even the farmers).

Non-profit profits at water utilties

Some people forget that cash is not the only way to "take profits" from a business. That leads them to the false conclusion that the people who own/run non-profits cannot find a way to help themselves while claiming to help others.

NB: By "help themselves," I mean taking more than their wages might indicate.

How do they help themselves? There are the obvious ways:
  • Getting reimbursed on a per diem- instead of cost basis for travel;
  • Hiring extra workers to reduce their own workload;
  • Getting paid more than market wage, with the approval of a friendly board of directors;
  • Consuming more perks (nice office, car, extra vacation, etc.);
  • and so on...
I'm not going to begrudge them these forms of income, but I'd prefer that everyone look at the whole picture.

(I first started thinking about these issues after reading a history of the National Geographic Society, one of the wealthiest non-profits in the world. My recent visit to the "non-profit" World Bank did nothing to dispel my thought that these social servants can have a pretty good life. Churches? Let's not go there.)

Right, so that's just a starting point to set up this more interesting angle:

I can't remember who gave me this idea, and I may have it wrong, but here's how it works:
  1. A utility (private or public) claims it needs $200 million to improve infrastructure.
  2. A bond issue is approved, backed by future revenue (rate increases) or property taxes.
  3. The bond brings $200 million to the utility, which then raises rates to cover repayment.
  4. The work is done for $150 million.
  5. The extra $50 million goes to perks, bonuses (under budget!), etc.
Does this make sense? I'm not sure that financial or operating audits would catch this process, since it takes several years and involves moving money back and forth between accounts, budgets and divisions.

You're comments (and examples!) welcome!

11 Apr 2011

Monday funnies

The Duck and the Lawyer (via JWT) 

A big city lawyer went duck hunting in rural Lincolnshire. He shot and dropped a bird, but it fell into a farmer's field on the other side of a fence.

As the lawyer climbed over the fence, an elderly farmer drove up on his tractor and asked him what he was doing. The litigator responded, "I shot a duck and it fell in this field, and now I'm going to retrieve it."

The old farmer Peter replied, "This is my property, and you are not coming over here."

The indignant lawyer said, "I am one of the best barristers in England and, if you don't let me get that duck, I'll sue you and take everything you own."

The old farmer smiled and said, "Apparently, you don't know how we settle disputes in Lincolnshire. We settle small disagreements like this with the 'Three Kick Rule'."

The lawyer asked, "What is the 'Three Kick Rule'?"

The Farmer replied, "Well, because the dispute occurs on my land, I get to go first.. I kick you three times and then you kick me three times and so on back and forth until someone gives up."

The lawyer quickly thought about the proposed contest and decided that he could easily take the old codger. He agreed to abide by the local custom.

The old farmer slowly climbed down from the tractor and walked up to the attorney. His first kick planted the toe of his heavy steel-toed work boot into the lawyer's groin and dropped him to his knees!

His second kick to the midriff sent the lawyer's last meal gushing from his mouth. The lawyer was on all fours when the farmer's third kick to his rear end, sent him face-first into a fresh cow pad.

Summoning every bit of his will and remaining strength the lawyer very slowly managed to get to his feet. Wiping his face with the arm of his jacket, he said, "Okay, you old fart. Now it's my turn."

The old farmer smiled and said, "Nah, I give up. You can have the duck."

Speed blogging

  • Lloyd Carter predicts a torrent of propaganda from politicians meeting in Fresno to discuss irrigation water today (11 Apr). His dissection of their talking points is brutal, but that won't keep them from pretending they speak truth. Any feedback on what they actually say is welcomed.

  • The EU motivates member countries bureaucrats and politicians to clean up their water with smiley faces (there were fewer before the reporting deadline). Pretty cool.

  • Global Water Intelligence: Politicians force Israel's water authority to sell more water at the cheap price ($2.40/m^3 = $6.80/ccf). More desalination ahead. In Saudi, water prices are up, but customers are happier -- because now they have reliable water. Meanwhile, the folks who took over water service from Veolia are reducing rates in Paris. They claim they are cheaper/more efficient; Veolia claims they are taking advantage of Veolia's earlier capital spending. This story matches my theory of the private-public ownership cycle.

  • Along the same lines as Limits to Growth, consider this publication by the National Intelligence Council: "Global Trends 2025: A Transformed World... offers a fresh look at how key global trends might develop over the next 15 years to influence world events. Our report is not meant to be an exercise in prediction or crystal ball-gazing. Mindful that there are many possible "futures," we offer a range of possibilities and potential discontinuities, as a way of opening our minds to developments we might otherwise miss."

  • "Up to now, there is no central database of universities that are engaged in drinking water, sanitation, and hygiene projects in developing countries, the nature of their activities, or where they are located. A consortium of universities is trying to fill this information gap. If you are affiliated with a US university that is involved with drinking water, sanitation, and hygiene activities in developing countries, please fill out this brief survey to contribute this information to the consortium’s upcoming database."
H/Ts to EB, KB and RD

8 Apr 2011

Friday Party!

This was posted on the homepage of Wageningen University, and now I (proud employee) post it here.

FYI, it was shot in The Forum (an amazing building) and ends in the campus library. Awesome.

Little did I know that there are dozens thousands of these "lipdub" videos shot at schools around the world.

Bottom Line: I learn something every day...

April Fools!

The folks in Washington DC are off by a week, but fools they are to be fighting like children over budget spending ideology to the point of shutting the government down.

The Euro now buys $1.44. That's a 15-month high (also due to interest differentials) and indicator of how the business world judges American mismanagement.

Bottom Line: I am SO glad that the government doesn't run Google or my local coffee shop.

The microeconomics of selling your stuff

In January, I sold a lot of my stuff in California because I was moving to Amsterdam.

I was reminded of a few truths:
  • The appropriate price is somewhere between what you're willing to accept and the buyer is willing to pay. It's not based on what you paid or what someone who's not there might pay.
  • More importantly, you have to consider a sale now versus a higher price later -- or keeping it.
  • I didn't sell my 1998 BMW because the Blue Book price was about $4,000. I'm willing to buy my car for $4,000, have storage at my dad's place (!), and don't have to pay much to keep it registered, so I kept it.
  • I sold some of my "art" collection. Better that it's on someone's wall than under my bed.
  • It's nice to have your stuff in one place. Reduces transaction costs (where did I leave that?), duplication (one bed is better than two) and footprint (my storage rent was $70/month!)
  • Just because it's in the "free" box doesn't mean people will take it!
Bottom Line: We have possessions for the services they provide. Try to minimize possession as a habit.

7 Apr 2011

Anything but water

  • 15 Fascinating TED Talks for Econ Geeks

  • Cell phones tracking your every move (worse than Facebook?)

  • Until recently, you could download my PhD dissertation for free or buy a nicely bound copy for $91. Now you can get the download bound for $9.99 plus postage (click here, then on Purchase Bound Hard Copy). Awesome.

  • "The world learned of oil transport giant Enbridge’s strategy for handling inevitable oil spills along its proposed pipeline through pristine British Columbian wilderness: mop it up with human hair." A YesMen hoax exposing Enbridge's indifference to the environment.

  • "Disaster Relief as Bad Public Policy: Only 25 percent of the respondents to a survey conducted in Mississippi after Hurricane Katrina identified government as their most important source of aid. Government relief to disaster victims is often less effective than aid provided by volunteers, non-profit organizations, and commercial enterprises, and it often facilitates corruption, encourages growth in disaster-prone areas, and crowds out self-help."

Water Chats --- Wim Bastiaanssen

I had an exciting chat with Wim. He's a professor at TU Delft and founder of Water Watch, a company that combines satellite technology with analytical algorithms to measure water consumption (ET less precipitation), cropping efficiency and a number of other important indicators of human and environmental activities.WW is heavily involved in the "more crop per drop" movement that focuses on reducing over- and under-irrigation (whatever the technology) while maximizing yield.

Water Watch started in the Netherlands, but they do a lot of survey work around the world (China, Saudi Arabia, Brazil, etc.) -- click here for a clickable map linked to their projects.

I was pleased to hear that WW is in discussions for a big expansion of its services. We need LOTS of data on water use. Listen to our 45 minute talk [18MB MP3]

Bottom Line: What gets measured gets managed.

6 Apr 2011

Poll results -- subtitle!

There's a new poll (paperback vs eBook) on the right sidebar ===>
The subtitle for The End of Abundance should be...
the political-economy of water scarcity 21%15
a guide to the economics of water scarcity 26%19
economic solutions to water scarcity 18%13
an economic analysis of water scarcity 10%7
challenges and solutions to water scarcity 18%13
other (comment here) 7%5
72 votes total

Thanks for voting on this poll!

These results provide useful input but they are not the last word. First, I know what's in the book and most of you do not. The subtitle has to match the content, in terms of a promise that I deliver. Second, there's the audience. I can't really see a good way to choose a subtitle that pleases everyone. For example, people have told me that "economics" turns off engineers, but I've written the book for non-economists. I can't exactly omit the word from the title, since it appears, oh, about 200 times. I want to make it as approachable as possible. Some have suggested aguanomics, but that name raises more questions than it settles.

Let's look at the top four results:

the political economy of water scarcity -- accurate but too academic for most; I do not offer grand theories of political economy, either. I discuss the importance of political controls and decisions, but defer suggested actions to "get involved with the people making decisions in your area." Pragmatic, but not really definitive (academic target) or inspiring (activist target).

a guide to the economics of water scarcity -- I dropped "new" from the working title (... the new economics...) because there's not much new in this book. Most of the ideas have existed in the academic world for ever; I am applying them to a new area. If I wrote "new," economists would kill me in reviews, etc. For the same reason, I am leaning away from "guide" b/c the book is not a cookbook or encyclopedia. As one reviewer said "seems like an essay of Zetland's opinions." I hope that it's better than that, but it's not encyclopedic, either.

economic solutions to water scarcity -- I am leaning towards this one because it's descriptive of the book's content, as an answer to "what's your book about?" Also doesn't promise to be the be-all-end-all.

challenges and solutions to water scarcity -- again, this one turns off some people who are tired of hearing about challenges (me too). I basically take them for granted, and spend most of the text describing how to address them.

So, feel free to comment on my thoughts, offer alternative wording, etc.

I've sent the materials to the printer to look at the layout, cover, etc. If all goes well (including choosing a subtitle!), then the book should be out in May :)

Water chat -- Mission Markets

While I was in New York, I sat down with Michael van Pattern (CEO) and Dave Meyers (CFO) of Mission Markets, a start-up that wants to be the NYSE of securities (equity and debt) in green companies and eco-products. During our chat, we covered double and triple-bottom lines, standards, price vs value, trading the environment, and how to buy an endangered species (or not! :)

Dilbert knows about these complex topics...

Listen to our 54 minute conversation [20MB MP3] to hear the details.

Bottom Line: For some, the environment is priceless; for others, there is Mission Markets

Do Water Managers Cooperate?

This paper was extracted from my dissertation and prepared for publication as a chapter in a book in 2008. The book is STILL not out, so maybe you're tired of waiting? I sure am.

Do Water Managers Cooperate in Public Goods Games? 

Update! Here it is Water managers are selfish like us [pdf]

Abstract: Managers of public water companies present themselves and are seen as public servants maximizing public welfare. Because water is rarely allocated through market mechanisms, this maximization requires that managers cooperate in a bureaucratic version of a social dilemma. Members of the Metropolitan Water District of Southern California (MET, a consumer cooperative) face just such a dilemma: MET's member agencies make policies as members (setting prices, for example) that they obey as consumers.

This chapter reports the results of experiments that quantified cooperation among MET's member agency managers (MAMs) using public goods games. The results indicate that MAMs are neither relatively nor absolutely cooperative in comparison to, respectively, groups of students and a threshold efficiency consistent with maximizing social welfare. Additional results on type indicate that MAMs have a larger share of cooperators and free-riders than students, but MAMs are twice as likely to be free-riders as cooperators. MAM also appear to engage in cheap talk: Their responses to trust questions (stated preference) have no correlation with their experimental behavior (revealed preference); student preferences are correlated.

5 Apr 2011

Speed blogging

H/T to SS

A thought on micro- and macro-errors

Microeconomics refers to individual behavior; macroeconomics refers to guesswork, deception and alchemy (just kidding!) the aggregate behavior of individuals.

From this, we can create a parallel typology of errors, i.e., micro errors come from misunderstanding how an individual behaves; macro errors comes from a misunderstanding of how individuals interact to produce an aggregate outcome.

Do you have any examples of where analysts/economists/pundits made micro/macro errors?

4 Apr 2011

A note to California

I'm seeing a lot of stories and op/eds about how CA needs more storage, or more water, or less demand, or fewer farmers or dead fish.


What CA needs is a system for balancing supply (drought to flood) and demand (people to farms to fish).

That system is known as a market.

If you want to know how it works, check out the gas station on the corner, then imagine the supply chain and complicated set of demands that interact at that point.

A water market would be easier to run, but it would requires that a whole bunch of special interests (from politicians to DWR to enviros to subsidized farmers) face the real supply and demand of water.

Scary, sure, but a fact's a fact.

Monday funnies

How many historians does it take to change a light bulb?

Answer: There is a great deal of debate on this issue. Up until the mid-20th century, the accepted answer was ‘one’: and this Whiggish narrative underpinned a number of works that celebrated electrification and the march of progress in light-bulb changing. Beginning in the 1960s, however, social historians increasingly rejected the ‘Great Man’ school and produced revisionist narratives that stressed the contributions of research assistants and custodial staff. This new consensus was challenged, in turn, by women’s historians, who criticized the social interpretation for marginalizing women, and who argued that light bulbs are actually changed by department secretaries. Since the 1980s, however, postmodernist scholars have deconstructed what they characterize as a repressive hegemonic discourse of light-bulb changing, with its implicit binary opposition between ‘light’ and ‘darkness,’ and its phallogocentric privileging of the bulb over the socket, which they see as colonialist, sexist, and racist. Finally, a new generation of neo-conservative historians have concluded that the light never needed changing in the first place, and have praised political leaders like Ronald Reagan and Margaret Thatcher for bringing back the old bulb. Clearly, much additional research remains to be done.

The editor comments on the submitted answer:

We regret that we cannot accept your historian joke in its present form.... However, a panel of anonymous reviewers (well, anonymous to YOU, anyway) have reviewed it and made dozens of mutually contradictory suggestions for its... improvement. Please consider them carefully, except for the ones made by a man we all consider to be a dangerous crackpot but who is the only one who actually returns comments in a timely fashion.
  1. This joke is unnecessarily narrow. Why not consider other sources of light? The sun lights department offices; so too do lights that aren't bulbs (e.g. fluorescents). These are rarely "changed" and never by historians. Consider moving beyond your internalist approach.

  2. The joke is funny, but fails to demonstrate familiarity with the most important works on the topic. I would go so far as to say that Leeson's omission is either an unprofessional snub, or reveals troubling lacunae in his basic knowledge of the field. The works in question are Brown (1988), Brown (1992), Brown (1994a), Brown (1994b), Brown and Smith (1999), Brown (2001), Brown et al (2003), and Brown (2006).

  3. Inestimably excellent and scarcely in need of revision. I have only two minor suggestions: instead of a joke, make it a haiku, and instead of light bulbs, make the subject daffodils.

  4. This is a promising start, but the joke fails to address important aspects of the topic, like (a) the standard Whig answer of "one," current through the 1950s; (b) the rejection of this "Great Man" approach by the subsequent generation of social historians; (c) the approach favored by women's historians; (d) postmodernism's critique of the light bulb as discursive object which obscured the contributions of subaltern actors, and (e) the neoconservative reaction to the above. When these are included, the joke should work, but it's unacceptable in its present form.

  5. I cannot find any serious fault with this joke. Leeson is fully qualified to make it, and has done so carefully and thoroughly. The joke is funny and of comparable quality to jokes found in peer journals. I score it 3/10 and recommend rejection.


MW asks:
You talk about the economic vs. engineering side - engineers have solutions like drip irrigation, but a lack of incentives to ensure they are implemented - thus the economic picture. But in my line of work (energy efficiency) it is acknowledged that humans often do not work in their economic or other rational self interest, especially if it involves doing or learning something new. We are often primarily motivated by emotion (maybe more so at an individual consumer level and less at a business or government level - but organizations are a sum of their parts and getting schools or businesses to be more energy efficient, even when cost effective, can be just as hard if it is not part of the mindset of the decision maker already ).

So even though most people could make numerous economically sound energy efficiency improvements in their lives (more insulation in the attic, etc), most of these opportunities go untaken (yes, some of this barrier is still economic - like the split incentive of the landlord tenant relationship - who makes the improvement and who gets the $ benefit??).

A recent example: electricity is subsidized for some rural Alaskans by the state such that the residential consumer gets the first x kWhs per month for $.18/kwh, then after that the rate jumps dramatically (to $.55/kwh or so) (some for cheap, pay for more). Apparently, many consumers are not aware of this or fail to take it in to consideration and routinely are hit with huge bills - cases where a 20% higher usage means a bill over twice as much. These are not people that can afford to blow the money.

Twenty percent reductions in energy use, of course, are within the realm of easy energy efficiency or conservation measures. This points to the education/information barrier to adopting even economically advantageous options, but there are other barriers as well - the emotional nature of making decisions mean that people want to do what is popular, fun, easy, etc.[1]

So you are an economist, and of course your job is to think about that side of things, but do you have thoughts on the 'beyond economics' part of motivating behavior change? People selling things do it by manipulating the price of their goods, but then also by advertising to appeal to the emotional decision making part of people.[2]

How big does an economic advantage need to be to motivate conservation, and what is the nature of the correlation between economic signal and conservation, especially compared to other factors like ease of use, habit, etc? And then maybe with water auctions you get the benefit of people irrationally being more interested in getting paid than avoiding a loss of the same amount?

Here in Alaska we generally have to bribe folks with partial rebates to get them to make energy efficient choices that would pay back anyway.[3]

Anyway, all I'm saying is that it seems to me that as getting a behavior change or use change, technology isn't the whole picture, but neither is economic incentive, and I'm curious about your feedback on this.
This is an excellent question that comes up often. Here are a few thoughts:
  1. Barriers: getting off the couch (transaction cost) plus data on use (information cost). These are incorporated into economics. Emotion ("I don't care about the cost") is still a valid argument for inaction in economics. We just redefine the problem (or people's happiness) to include BOTH financial and emotional components...

  2. Those are both economic actions. Price is *on* the demand curve; advertising shifts the curve in and out ("change of tastes")

  3. That's a good question. It's possible to raise prices EVEN HIGHER (e.g., $4/gal gas) so that people take notice. OTOH, it's possible to help people who DO care to make $ off people who don't. Thus, an energy audit consultant can get paid with 50% of the savings that clients accrue for taking action. Other than that, I think that coersion to act can either backfire or turn out to be misguided (grandma economics -- "what grandma used to do" -- is often sound)

  4. Technology is what's chosen. Narrow economic incentives do not do it all. A broader definition (to include happiness, community belonging, the children, etc.) of economic incentives has the answer in there, somewhere (Read this). I'm not trying to redefine the question, but merely to point out that you're right AND that the answer is there, within an expansion of the definition of incentive :)
Bottom Line: People respond to different incentives. Economists try to include and reconcile these incentives to explain choices and outcomes, but it's not easy to design an incentive system that delivers a targeted result.

1 Apr 2011

Tsunami video

Holy cow. The water just keeps coming! (via JWT)

The Anthropocene Age

National Geographic had an excellent article on the Age of Humans (as in we are affecting our environment).

This illustration (not on the web; weird) was central to explaining and describing human impact.

Bottom Line: If you're not going to get sustainability with fewer people, then you need to have technology and a consumption profile that lowers your impact.