31 May 2011

Dangerous academics?

I got my PhD at the Department of Agricultural and Resource Economics at UC Davis. I entered the department to do development economics but ended up specializing in environmental and natural resource economics (ERE).*

But that didn't mean that I ignored agricultural economics. In fact, I learned quite a bit about farmers (most of it good), agricultural policies, and land and water management.

OTOH, I also learned about the "consultant-research machine" that one can find in most academic settings. In short, academics with credibility are paid to write reports for people in industry. Usually these reports are objective and based on the researcher's beliefs, but sometimes money can push the border between objective and "whatever you want us to say." It's hard to know.

In one case, we (ERE grad students) were depressed to see several of our professors and fellow students working on the cost-benefit of pesticide use, publishing "findings" for academic, industry and regulatory audiences that supported of the use of methyl bromide (MBr) for strawberries [PDF].** It seems that they assisted in winning an exemption from international protocols to ban methyl bromide (a carcinogen and ozone-depleting chemical).

MBr was eventually phased out, but now I see that its replacement -- methyl iodide -- is considered dangerous for farm workers, the environment (and perhaps consumers).

And guess who is writing in support of methyl iodide [PDF]? The same folks. This is a sad pattern.

Bottom Line: Academics should remember that costs on one group for benefits to another group involves politics, not just economics. And they need to be careful about taking money from winners to cast doubt on costs to losers.

* In one memorable rebellion, I presented evidence to the chair (an aggie) that 2/3rds of the professors were aggies, but 2/3rds of the graduate students were ERE-oriented. That fact was not well received.

** These folks also claimed to be environmental economists. We agreed that their work related to environmental issues; we were not sure that it supported a healthy environment.

30 May 2011

Monday funnies

From the Onion:

142 Plane Crash Victims Were Statistically More Likely To Have Died In A Car Crash

WASHINGTON—Following last week's deadly crash of United Airlines flight 9753, which claimed the lives of 137 passengers and five crew members, the National Transportation Safety Board announced Wednesday that the victims were actually far likelier to have perished in an automobile accident. "Although these individuals died tragically, it's important to remember that their flight was 80 times less likely to kill them than if they had driven to their destination," said NTSB chairperson Deborah Hersman, adding that their horrific deaths were "almost a statistical impossibility" when compared to highway travel. "In actuality, these people were 11 times more likely to die crossing the street than in the terrifying onboard fire and subsequent 10,000-foot free fall that took their lives." Hersman concluded by reaching out to the victims' families, stating that she sincerely wished they would have been able to see 24 of their loved ones eventually die of violent heart attacks, 20 waste away from cancer, and one or two commit suicide, as would be expected of a random 142-person sample.

Anything but water

H/T to RM, JWT and JW

27 May 2011

Friday party!

Biker style!

Public trust vs markets

I agree with California's Republicans (holy cow!) on this:
In 1989, Professor Sax declared, "The new era is one of reallocation. The direction is changing from agricultural to urban uses and in-stream flows for water quality, recreation, and ecosystem protection... No private property claims are going to halt this transformation." Contrary to that claim, water rights do not necessarily stand in the way of redistributing water resources, and in fact can facilitate it. A strong water rights system encourages those with rights to sell or transfer them to more valuable uses, as determined by a negotiated price.

On the other hand, an expanded public trust doctrine promises a different sort of water future for California, where allocations are centralized under the control of government planners. Private rights that can be subsumed by so-called public rights, which themselves are subject to constant redefinition, are effectively non-existent. Without certainty in their water rights, users have little or no incentive to invest in infrastructure or seek exchanges to maximize the value of their rights. No recipient will agree to a water transfer if the right to transferred water is subject to government takeover.
Gentlemen, I am available for consultation (first hour free!) on water markets and all-in-auctions.

26 May 2011

Israeli water technology -- part 1

The Israel Export & International Cooperation Institute hosted me and 46 journalists from 38 countries.

Although I visited Israel in the 1990s, I learned quite a bit about their water technologies* on this trip:
  • Zenith Solar uses a focal-lens system to heat water AND generate electricity [PDF brochure]. Total sun to energy conversion is about 70% (!)

  • Mekorot (the national water carrier company) opened its facilities to 600 start-up projects, allowing small companies to try to improve operations. They ended up adopting 20 ideas (3%). Mekorot also shares its data on these operations "peer-to-peer" with foreign utilities considering buying the technology.

  • We toured the world famous (and briefly largest) Ashkelon RO-desalination plant. It produces 118 million m^3 of water a year, at a price of $0.53/m^3, delivered (that price includes CapEx, OpEx and profits). Key statistic: It takes 3.5 kWh to purify a m^3; power costs $0.06/kWh so energy costs $0.21 of that $0.53. Big surprise: They remove boron from the water to make it compatible with farming. Yes, Israeli farmers get more than half their water from treated wastewater (75% is treated and reused), but they also take desalinated water out of Merkot's network.

  • The managers at a plant handling wastewater from 2 million people tell people to dump used oil in their toilets -- rather than the ground or in the garbage -- since they can recover it at the plant. The mixture of recovered organic and mineral oils is used to make candles.

  • Farmers pay 1 NIS (about $0.30) for a cubic meter of wastewater ($350/af) that costs 3NIS to treat, settle/inject underground, and pump to their farms. That's not a 2NIS subsidy (because treatment is necessary), but an opportunity cost subsidy (the water could ALSO be sold to cities to reduce the need for desalinated water).

  • Israeli tap water is priced per capita (as I recommend). The price of household water is about 12 NIS/m^3 (about $9.50/ccf). That price will rise: Israel plans to get ALL of its household water from desalination by 2015; they are building three desalination plants that will be bigger than Ashkelon.**
* I offered to give a talk on the economics and politics of water management at their November Watec conference. Stay tuned.

** Oh crap. They are getting project financing from the European Investment Bank for one desalination plant. Ridiculous! (1) Israel is not in Europe! (2) There's no need to subsidize financing on a desalination plant!

Part 2 will cover drip irrigation, waste separation, smart meters, and water security. Yeah baby!

25 May 2011

Cleaning oily water

In Berlin, I met the Germans won an award for "Industrial Water Project of the Year." They use wetlands to clean "process" water from oil drilling in a cheaper and environmentally-benign way. Read "Commercial-scale produced water treatment using wetlands to reduce the environmental impact of oilfield operations" [PDF].

Well-meaning destruction

This article (via NT) speaks of a very positive development -- the move by the EU to limit overfishing using individual tradable quotas (ITQs) for fish (cap and trade based on sustainable yield).

The article quotes some skeptics of ITQs saying silly things.

Boris Worm, a noted fisheries scientist, said:
ITQs gives planning security to the industry, but it comes at a social cost - you end up with fewer operators, probably lower employment in the fishing sector, and probably concentration of shares in the hands of people who are good at acquiring them.
Yes, that's the point! Fewer boats with fewer and better fisherman catching fewer fish for more money in a sustainable fishery.

Markus Knigge of the Pew Environment Group went further:
Fish stocks are a public resource, we all own them; and access to this resource should be given to those who demonstrate they fish in the most environmental and socially beneficial ways, and it should not be for any great length of time...This is the virtual privatisation of the oceans.
"We all own them" is why we are all destroying them (cf., Soviet Union). Why "give" permits to the Kumbaya Crowd, for a limited time? They may not be efficient (higher carbon footprint per fish; more injuries; worse quality), and "a limited time" gives them the incentive to overharvest in their last year of owning "our" fish.

Bottom Line: Open access fisheries fail because of overharvesting; they can be protected and harvested in a sustainable way by the assignment of property rights (that get more valuable, the longer the fish are around) -- not by high-minded, but poorly reasoned, rhetoric.

24 May 2011

Coming soon!

TEoA is still on track for 1 June (may slip a bit -- working on it!)

Speed blogging

H/T to EB, RD, BL and DL

Fracking, groundwater and markets

RH wrote me with this observation in reference to The End of Abundance:
And with environmental damage not only to our surface water sources, but more troubling still, to our groundwater sources, we have a shrinking "pie" of clean water. I've just received an email from a friend of mine who is a professor at a college in central Pennsylvania, and he has been telling me of the heart-breaking and quasi-permanent damage being done to the aquifers there by the notorious "fracking" method of extracting natural gas. When I worked as a scientist for an environmental consulting firm in New Jersey - back in the mid-1980's - the cost of cleaning up contaminated groundwater typically was roughly 2-3 orders of magnitude higher than cleaning up a comparable toxics release into the soil matrix. So a spill that effected only the soil might cost $10,000 to clean up, but if it had gotten into the groundwater, the clean-up cost likely would be closer to $1 to $10 million. Intentionally injecting highly toxic chemicals into the groundwater is something that just doesn't make sense in today's world; yet despite all of our extremely advanced scientific knowledge, in so many places, people seem to be taking our fresh water supplies for granted.
I replied with this:
Short answer is YES, b/c the current system of abuses originates in bureaucratic processes where, at a minimum, someone decides how much pollution you, the landowner, will get.

A market would allow people to opt out OR be paid "enough" to take the pollution. I know that can be mishandled, but the bureaucratic system (or ZERO fracking) is worse...
Please comment. I am writing an op/ed on this issue soon and need to hear more pros and cons.

23 May 2011

Monday funnies

What's up with these Japanese?

Poll results -- transnational waters

Hey! There's a new poll (regulation and oversight) on the sidebar ====>
Trans-national waters are most likely to...
...facilitate peaceful cooperation between countries 38%25
...instigate hostilities between countries 58%38
...should not exist (redraw national borders) 3%2

A majority believe that transnational waters are more likely to spur conflict that cooperation. There are a number of examples of conflict (Israel and neighbors,* India and Pakistan, China and everyone, etc.), but most of these conflicts are "under control" through negotiations, agreements, etc.

In fact, there are very few examples of conflict OVER waters (the 1967 Six Day war, among them), and a number of examples of cooperation based on the necessity of sharing waters.

We probably pay more attention to conflicts that stick in our minds (and serve the rhetorical needs of politicians) than pragmatic "making do" cooperation.

Bottom Line: Transboundary waters can help neighbors build good relations, but populist demagogues prefer to use them to stir nationalist hatred of "others" (often for the benefit of domestic special interests).
* The Swiss recently released a report on Water and peace in the Middle East [pdf]

20 May 2011

Speed blogging

  • OTPR has a good rant on policy-makers' ignorance of the limits of science:
    This is not “bad science.” This is incomplete science and bad policymaking. So I’m tired of hearing about Science as an omniscient neutral kingmaker who is going to weigh in on an advocate’s side any day now. I don’t want to hear about whether science is good or bad from lawyers and politicians who determine the quality of science by whether they like the results
  • I was interviewed by Thomas Nehls of ARD ("the BBC of Germany" and world's largest public broadcaster) while in Berlin on water, business, human rights and politics. This MP3 is just 8 minutes long [4 MB], but hopefully it's interesting.

  • Good overview [PDF]: "Sustained water conservation by combining incentives, data and rates to effect consumer behavioural change"

  • Water History has a new article [pdf] on Colorado River water markets.

  • Veolia's "Growing Blue" website compares water availability and use. Maplecroft has a lot of water stress data (for sale). (I am guessing that underlying data may come from the same sources, but maybe they are subjective aggregations. Uh oh.) Someone interested in finding out -- and looking for more data -- should try the Zanran search engine ("Your source for data & statistics -- graphs, charts and tables")
H/Ts to DL and RM

19 May 2011

Free stickers aren't free

Sharon Shewmake (a postdoctoral scholar at Vanderbilt University's Law and Economics Program) writes:

California issued 85,000 yellow Clean Air Access stickers to owners of hybrid cars. These stickers allowed the owner to drive on HOV lanes without having to carpool. Many other states have similar programs. While incentives for hybrid vehicles might make sense, many policy makers saw these non-financial incentives as a ‘free’ way to encourage adoption of hybrid cars. In our research we found hybrid car owners were willing to pay $625 per year to drive on HOV lanes and when you add up the number of stickers available and the amount of time they were valid, California gave out $270 million to hybrid car owners, despite the program having no documented impact on the number of hybrid registrations. Sixty-percent of this $270 million was wasted outright by giving stickers away to cars that had already been purchased. The rest of it was wasted because a sticker is much less effective than a direct subsidy. If California had sold the right to drive in an HOV lane, and then used the revenue to directly subsidize hybrid cars, the state would have been at least four times as effective than if they’d given the stickers out to all new cars.

Because of the budget crisis, California is making deep cuts to education, public health, and the environment. Meanwhile, the state is continuing the program of giving away access to the next generation of plug-in hybrid electric vehicles and continuing a program for all-electric, natural gas, and hydrogen vehicles. If California were to sell, instead of give away, the 40,000 three-year permits it plans to give to plug-in hybrids, it could raise at least $68 million. A portion of this money could be used to more effectively encourage the purchase of clean plug-in vehicles, while the rest could fund cheaper air pollution mitigation measures, health care, state parks, or public education.

Please read our paper if you’d like to learn more about this issue or see the numbers behind these results.

18 May 2011

Anything but water

H/T to CM, RM and JWT

WaSH and Human Development

Sridhar Vedachalam* writes in with some useful analysis:

David talked about the relationship between access to water and quality of governance in an earlier post,** with the hypothesis that quality of governance impacts the reach of clean water to the people in that country. I want to take that analysis a step further and find out how access to clean water and sanitation affects human development. In the broadest sense, human development is a paradigm or an environment where people can develop their full potential and lead productive and creative lives. While several factors can hinder or enhance human development, I am sure everyone will agree that access to water and sanitation is one of the important ones. Clean water and sanitation not only helps in the biological development of a person, but is also a social and economic gateway to the rest of the society.

Human development is most commonly measured using the Human Development Index issued by the United Nations. HDI consists of three independent metrics – life expectancy index (LEI), Education Index (EI) and Income Index (II). If we think about it, lack of access to water and sanitation affects each of the indices. However, the question I want to ask is which one of two factors – access to clean water, or access to sanitation – affects HDI more. In other words, can the knowledge about one of these factors tell us anything about the HDI of the country?

Let’s begin by understanding the difference between access to clean water and access to sanitation, and see why they may not measure to be the same (purely in terms of numbers). Access to clean water is determined by the percentage of population using improved water sources such as household connections, protected dug wells, public standpipes, boreholes, etc. Similarly, access to sanitation is determined by the percentage of population using improved sanitation such as connection to a public sewer, septic system, pour-flush latrine, etc.

A simple plot of access to clean water vs. access to sanitation reveals a decent fit (R2 = 0.59) and the correlation between the two variables is 0.76. While the variables are somewhat correlated, it is pretty hard to estimate the access to improved sanitation using the numbers for access to improved water. Some of egregious examples include Chad (48% and 9%), Burkina Faso (72% and 13%), Ghana (80% and 10%) and India (89% and 28%). The numbers in the parenthesis denote the percentage of people having access to improved water source and improved sanitation, respectively. Except in a few countries like Afghanistan and Papua New Guinea, there is greater access to clean water than sanitation in all the countries. This may be due to several reasons, but one of the prominent ones is that sanitation requires water, and if there’s very little of it, most of it goes for satiating thirst and cooking.

Getting back to the earlier question of which one is a better indicator of HDI – access to clean water or access to sanitation, let’s plot both these factors against HDI.

A plot of HDI Score against access to improved water source reveals an R2 of 0.65 and the correlation between the variables is 0.80.

A plot of HDI Score against access to improved sanitation reveals an R2 of 0.75 and the correlation between the variables is 0.86. It appears that access to sanitation is a better indicator of a country’s HDI as compared to access to clean water. Does that shock anybody?

In summary, sanitation requires “more” development, since it is a next step to having just access to clean water. As a result, it is a better proxy for the presence of institutions for inclusive development that ultimately result in better HDI indicators. Sanitation (and water) access is not just an economic issue in several countries, but also an institutional, cultural and social issue. Hence, low access rate also underscores lack of action on several fronts, many of which are beyond the scope of centralized planning. However, targeted investments by governments in not just institutions, but also communities and individuals will result in sustained progress. By giving attention to the water and sanitation access issue, countries can hope to start chipping away at the Millennium Development Goals (MDGs) at the same time, given that access to these two issues are closely tied to all the eight MDGs and several targets included within them.

* Sridhar Vedachalam is a PhD candidate in Environmental Science at The Ohio State University. His dissertation is on wastewater management in rural Ohio and he plans to graduate in June 2011.

**Although David had posted his raw data, I had started off with a different data source. The plots are based on 2006 data for water and sanitation access and the HDI Index released by UN in 2008 (which corresponds to 2006 information). These numbers would have changed over the last 5 years (most likely gone up), but I don’t expect the central premise to change drastically in such a short span even if a few countries have made tremendous progress in any of the indices we discussed above. Raw data available here [xls].

17 May 2011

Can we blame Goldman Sachs?

JWT sent me this op/ed that claims that Goldman Sachs and Wall Streeters have "caused" high food prices by speculating on futures markets.

I don't believe it. Even if GS et al. have increased prices by demanding more delivery contracts in the short run, they cannot use that food in the long run. The real market is between farmers and eaters. If GS et al. take delivery at a high price per ton, they can only turn around and sell it at a loss. (Unless they are dumping the food in the ocean, making a bigger loss.)

What am I missing here?

Anything but water

H/Ts to JWT and DW

16 May 2011

Realpolitik means killing your own people

Protestors crossed from Syria to Israel at the border at the Golan Heights. The official reason was that they were protesting Israel's independence (and the Palestinians' dependence), but I think it's much more about Syria's Assad trying to divert attention to his own problems with freedom protests within his country. He's already shot 500+ of his own people. Maybe he will attack Israel too.

Monday funnies


The dismal science

Opponents of economic thought and analysis prefer to call it "the dismal science" instead of considering and responding to the analysis. What's interesting is how inhumane some of these opponents have been.

Consider Thomas Carlyle, the Victorian historian who coined the phrase (via wikipedia):
The full phrase "the dismal science" first occurs in Carlyle's 1849 tract entitled Occasional Discourse on the Negro Question, in which he was arguing for the reintroduction of slavery as a means to regulate the labor market in the West Indies:
Not a "gay science," I should say, like some we have heard of; no, a dreary, desolate and, indeed, quite abject and distressing one; what we might call, by way of eminence, the dismal science.
Carlyle argued that slavery was actually morally superior to the market forces of supply and demand promoted by economists, since, in his view, the freeing up of the labor market by the liberation of slaves had actually led to a moral and economic decline in the lives of the former slaves themselves.

Carlyle's view was attacked by John Stuart Mill and other liberal economists.
JS Mill, by the way, wrote some good stuff:
It is only in the backward countries of the world that increased production is still an important object; in those most advanced, what is economically needed is a better distribution.


It is lamentable to think how great a proportion of all the efforts and talents in the world are employed in merely neutralizing one another. It is the proper end of government to reduce this wretched waste to the smallest possible amount, by taking such measures as shall cause the energies now spent by mankind in injuring one another, or in protecting themselves against injury, to be turned to the legitimate employment of the human faculties, that of compelling the powers of nature to be more and more subservient to physical and moral good.
From the 1848 Principles of Political Economy [online]

Bottom Line: Economists like me take pride in calling attention to the unpleasant problems that impede human progress and happiness. I'm happy to take this dismal role.

13 May 2011

Friday Party!

The United States of GOOD beer (click to see lager larger).

Blogger fail

All posts and comments after 7am (PDT) on Wednesday, 11 May were deleted.

I am doing my best to recover past posts [done]. Sorry if I cannot recover past comments [still a problem]

Very sad that my FUTURE posts were also deleted. [fixed!]

12 May 2011

Bleg: good utility data

BW asks:
Do you know of any utility that tracks median consumption? I've seen only mean per capita and mean household.
Median consumption is a more accurate measure of "average" when there are significant outliers (heavy water users, for example).

The best measure wold be median per capita based on per meter readings that controlled for actual household sizes.


Speed blogging

  • Nestle's chairman says that water exchanges (markets) are part of the solution to feeding the world. That's true, in the sense that water needs to go to the most valuable uses, but food may not result while stupid policies are in place. Brazil, for example, is importing ethanol from the US. It's cheaper to produce it in Brazil, but the US government subsidizes corn ethanol production.

  • A water utility is refunding excess use charges to heavy water users because a water shortage did not materialize. This is a bad idea: (1) maybe the charges worked, (2) future conservation is discouraged, and (3) customers will not believe that that shortages are possible. It would have been better to refund water to ALL customers.

  • Cadillac Desert and more: "Powell’s Prophecy offered a startling prediction: If you took all the surface water flowing between the Columbia River and the Gulf of Mexico and spread it out evenly, you’d still have a desert."

  • Afghanistan Human Development Report 2011 (“The Forgotten Front: Water Security and The Crisis in Sanitation") offers a comprehensive overview of water issues in Afghanistan.

  • Circle of Blue reports that water prices in US cities have gone up (higher costs). Unfortunately, they have no data on water consumption or average water bills.
H/Ts to JC and DR

11 May 2011

The culture of Arabia

I finished Wilfred Thesiger's Arabian Sands (1959) in Israel. It describes life among the Beduin of southern Arabia, Yemen and Oman in the 1940s. It's not only well written but full of interesting cultural details. Here are a few:
Arabs rule but do not administer. Their government is intensely individualistic, and is successful or unsuccessful according to the degree of fear and respect which the ruler commands, and his skill in dealing with individual men. Founded on an individual life, their government is impermanent and liable to end in chaos at any moment. To Arab tribesmen this system is comprehensible and acceptable, and its success and failure should not be measured in terms of efficiency and justice as judged by Western standards. To these men, security can be bought too dearly by loss of individual freedom. [p 47]

The cooked meat as set apart. Sultan then divided it into seven equal portions. Tamtaim took seven twigs and named each twig after one of us. Musallim, whose back had been turned, then placed a twig on a heap of meat, saying as he did so "Here is for the best man," This lot fell to bin Turka [snip] "This is for the man who pokes the girls," and Tamtaim picked up the meat which had fallen to him. Bin Anuf grinned at the old man, and said "Evidently, uncle, you will have another son next year. Musallim went on until each of us had drawn his share of the meat. There is always trouble if the meat is not divided by lot. Someone immediately says that he has been given more than his fair share and tries to hand a piece to someone else. Then there is much arguing and swearing by God, with everyone insisting that he has been given too much, and finally a deadlock ensues which can only be settled by casting lots for the meat -- as should have been done in the first place. I have never heard a man grumble that he has received less than his share. Such behavior would be inconceivable to the Bedu, for they are careful never to appear greedy, and quick to notice anyone who is. [pp 85-86]

There is no security in the desert for an individual outside the framework of his tribe. This makes it possible for tribal law, which is based on consent, to work among the most individualistic race in the world, since in the last resort a man who refuses to accept a tribal decision can be ostracized. It is therefore a strange fact that tribal law can only work in conditions of anarchy and breaks down as soon as peace is imposed upon the desert,* since under peaceful conditions a man who resents a judgement can refuse to be bound by it, and if necessary can leave the tribe and live by himself [p 94.]

* This comment noted that Abd al Aziz Ibn Saud had imposed central authority on most of Saudi Arabia, but not the Bedu areas described in the book

"What is the news?" That is the question which follows every encounter in the desert even between strangers. Given a chance the Bedu will gossip for hours... and nothing is too trivial for them to recount. There is no reticence in the desert. If a man distinguishes himself he knows that his fame will be widespread; if he disgraces himself he knows that the story of his shame will inevitably be heard in every encampment. It is this fear of public opinion which enforces at all times the conventions of the desert. The consciousness that they are always before an audience makes many of their actions theatrical.
Bottom Line: Anyone interested in Arabic culture (Arabian Spring, anyone?) should read this book to understand its roots. FIVE STARS.

Lies, damned lies and politics

One of the speakers at Global Water Intelligence's conference in Berlin was Jennifer Hosterman, mayor of Pleasanton, California, and Chair of the US Mayor's Water Council.

In her talk, Hosterman said [paraphrasing] "water problems have big impacts... one California town has 40% unemployment; water shortages have led to thousands of job losses."

Knowing that these numbers are somewhere between disputed and wrong, I went up after her talk and said:
  • The 40 percent unemployment figure in Mendota, CA is persistent; it does not go up or down according to water supplies.
  • The headline figure of 80,000 job losses has been disowned by Richard Howitt. He and Jeffrey Michael collaborated on calculations to arrive at a figure of 5,000-7,000 job losses.*
Her basic response was "so what?"

I clarified: "No, you don't understand -- the researcher, Howitt, who made the estimates denounced them."

She said, "I don't care, I will use those numbers."


I've often worried that I am too harsh on politicians when I say that they will lie and distort facts to suit their purposes,** but here I was, standing in front of a mayor from California who was lying*** to make herself and her beliefs more prominent in front of an international audience that probably believed her.

As a parting comment, she suggested that I run for office. So, I guess she's a believer in the ends justify the means and that her constituents are fools. Great.

Bottom Line: Politicians who lie and distort reality to make short term gains with voters destroy our long term prosperity by leading us to make the wrong policies and take the wrong actions.
* Read this and this for more background. This recent publication [pdf] puts losses at 5,000.
** Unfortunately, I predicted as much and have other examples wrt water.
*** I call it a lie when someone gives you accurate information and you choose to use the wrong information.

10 May 2011

Floods, climate change and bad policies

John Whitehead blogs that the costs of saving Cairo, Illinois [town between river arms below], probably exceeded the benefits (Corps of Engineers blew out a levee to flood fields instead), but that's just the beginning, I hear (via JWT), of what will be the worst flooding in 500 years.

My thoughts are that it's always made sense to live near rivers, but that sense was bounded by the obvious problem of getting flooded occasionally. People around the world know how to live with floods (houses on stilts, moving around -- see this National Geographic article on Bangladesh), but that knowledge and action can get distorted by "help" from outsiders, whether it be subsidized flood insurance or infrastructure defenses.

I am just going to point out that these interventions were never a good idea; they are an even worst idea when combined with climate change, since water "events" (floods, tornadoes) are going to get more dramatic. (The Dutch are pursuing a program called Ruimte voor de Rivier, or room for the river, to allow for higher flows.)

Bottom Line: Don't subsidize people to protect them from the weather. Help them understand the risks, rescue them from folly, and then do not let them return to dangerous areas. Nature needs more room to maneuver as climate change increases water flows.

9 May 2011

Monday funnies

Flowchart edition!

Anything but water

  • Is sugar toxic? In excess, it may even causing cancer and heart disease (H/T to JWT)

  • Carbon dumping: Rich countries are using MORE carbon when we count the carbon from goods produced in developing countries but consumed in developed countries. This fact should be at the center of ANY international agreement on carbon.

  • Wow. Republicans have really gone nuts in trying to cut funding for information on energy that contradicts their world view (oil burning = good).

  • About 11 percent of land [in Dutch; view with Google translate] the Netherlands is "natural." The rest has been modified by humans. (I took lowest figures for woodlands -- ignoring plantations and secondary growth -- ignored water and counted ALL "nature") What's the statistic for the US? Canada?

  • An important paper on the mechanics of climate change: higher temperatures > need to redistribute heat > intensified hydrological cycle > heavier weather "events" = greater water flows.

6 May 2011

Friday Party!

Queen's Day in the Netherlands may elicit the greatest concentration of good vibes on the planet.*

This photo shows some of the action on the canals, which are packed with boats playing music:

Economists say that people facing high marginal tax rates on their income will tend to work less.** I'd say that this is backwards: people who don't want to work so much (and want to party more) tend to support higher taxes on those who work "too much."

I think I agree with this tradeoff :)

* Burning Man only has 40,000 people; probably 80 percent of the 16 million Dutch go out for a party on 30 April.

** Harvard Economist Greg Mankiw has said this; plenty of people want higher taxes, so we can hear less from him.

Science versus closed minds

RM sent this interesting article [pdf] on why people don't believe science (or evidence that contradicts their world view).

Here are some relevant bits:
"A man with conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point."


We're not driven only by emotions, of course -- we also reason, deliberate. But reasoning comes later, works slower -- and even then, it doesn't take place in an emotional vacuum. Rather, our quick-fire emotions can set us on a course of thinking that's highly biased, especially on topics we care a great deal about.*


We may think we're being scientists, but we're actually being lawyers.


Ironically, in part because researchers employ so much nuance and strive to disclose all remaining sources of uncertainty, scientific evidence is highly susceptible to selective reading and misinterpretation.


...one insidious aspect of motivated reasoning is that political sophisticates are prone to be more biased than those who know less about the issues... These individuals are just as emotionally driven and biased as the rest of us, but they're able to generate more and better reasons to explain why they're right -- and so their minds become harder to change.


If you want someone to accept new evidence, make sure to present it to them in a context that doesn't trigger a defensive, emotional reaction... you don't lead with the facts in order to convince. You lead with the values—so as to give the facts a fighting chance.
On the "accept new evidence" front, I always say that higher water prices are necessary if we want greater reliability in water services. Some people hear that (reliability good!) before their knee-jerk reaction against paying more kicks in. Some people don't.

Bottom Line: It takes work to really be objective; many people avoid it, and our politics and policies are weakened as a result.
* An example on gun control.


I am really hating on Facebook these days,* so I left:
We have received a request to permanently delete your account. Your account has been deactivated from the site and will be permanently deleted within 14 days.
* If the website is free, then YOU are the product.

5 May 2011


Philosoraptor asks:

Regulatory risk and uncertainty

EF asks:
How do you incorporate regulatory risks into your model of what to do, if you are running a business or water utility? Also say something on the effect of uncertainty in regulatory risk on innovation and the economy, especially as that relates the actions by politicians.
There are two words that matter here:

Risk can be quantified, as in the risk of getting 49 heads out of 100 coin tosses. Uncertainty cannot be quantified. That's like the uncertainty that a Japanese reactor will get into trouble and the German chancellor will shut down German reactors.

By these definitions, you can estimate the scale of risk and its impacts. You may even be able to buy insurance against risk. If that's the case, then you merely pass along the price of risk to your customers. If/when the risk environment improves, your insurance will fall and prices to customers will fall.

It's obvious from the question and reality that uncertainty is a bigger problem. Uncertainty cannot be quantified (very well), so it's necessary to either reduce activities vulnerable to uncertainty ("nobody ever got fired for buying IBM") or prepare for uncertainty by hedging operations or finances.

In the former case, innovation and experimentation will be reduced. In the latter case, excess reserves of capacity or cash will reduce efficiency.

This is the perspective of the business or regulated utility.

From the bureaucrat's or politician's perspective, favoring risk will make you more popular with businesses while reducing your power (100 percent risk turns you into a coin flipping machine). From this insight, we see that favoring (or signalling) uncertainty makes businesses more anxious and less happy. It also gives you more power, which is handy if you are corrupt enough to demand bribes (or campaign contributions) or like it when people bow before you.

These stylized facts help us see how a country may move from uncertainty (arbitrary changes in policy and/or penalties) to risk (clear and well-understood rules). That same movement represents the move from arbitrary power to the rule of law, from developing to developed.

Bottom Line: Good regulation and governance serves businesses and the people; poor regulation and governance serves corrupt politicians and bureaucrats.

4 May 2011

Full cost pricing, the poor, or both?

On 19 April in Berlin, I joined a debate in favor of the following proposition:
Is cost recovery pricing the best way to ensure the poor have access to good water services?
I was seconded by Dr William Muhairwe, Managing Director of the NWSC Uganda.

Arguing against full cost pricing were Wenonah Hauter (Executive Director of Food and Water Watch) and Anil Naidoo (Blue Planet Project Organizer for the Council of Canadians). Wenonah and Anil are colleagues of Maude Barlow.*

The conference used the provocative URL of "water meets money," and that name alone was enough to attract 15-20 anti-corporate greed protestors (there were about 450 attendees at the conference).** Their attendance was particularly ironic, since it was corporate money that upgraded Berlin's water system over the past ten years (at lower cost than was expected of the previous, public-only management).

We won the debate. That was not such a surprise with a crowd that has fought to get adequate money for water services. What I thought interesting was the way that Wenonah and Anil chose to argue their position.

Rather than pay attention to the ongoing failures of water service, governance and political leadership in places where the poor lack water service, they claimed that corporations should pay more taxes. Although it sounded like they were presenting talking points instead of responding to the position that William and I presented, I guess that they were thinking that this pot of money combined with the UN-backed human right to water would deliver services. But their argument was weak on several levels:
  1. They failed to address governance failures.
  2. They failed to acknowledge successes of full cost pricing in places like Uganda (and many others).
  3. They failed to consider how higher tax revenues on corporations (should they even be collected!) would somehow get to water providers, and THEN support water services to the poor.
I concentrated on two points:
  1. Subsidies to the poor (via income transfers or even some for free, pay for more water prices) are not incompatible with full cost pricing within a water utility.
  2. Subsides from the central government (or aid agencies) are unstable and come with strings attached. Given the problems that governments face (from the US to India), it seems folly to link water services to political games that would rank water way down the list of priorities.***
My partner, William, presented even stronger points. He spoke from experience of delivering water to the largest cities in Uganda. Compared to him, Anil sounded way more "let's sing kumbaya, guys" than realistic.

But don't believe me, listen to the whole debate here [MP3 backup]. The first few minutes of my statement were not recorded. Here are my notes [pdf]; I didn't use them all.

Wenonah also made some funny claims about my previous ideas (she totally misunderstood all-in-auctions and called me a Stalinist for my idea of pricing water per person). Here's her take on the debate, which includes the classic line "...is it any surprise that we lost 75% to 25%? Anyway, Anil and I knew we won the debate on the merits and ethics of our arguments." Sounds like something that Gaddafi, Mugabe or Mubarak would say (as defenders of Their People).

Bottom Line: You can't change someone's mind when they cannot understand a logical argument or the lessons of success and failure.

* I've written about FWW and Barlow in the past.

** Unfortunately, the protesters did not attend the debate, as their group could not reach a consensus.

*** Wes Strickland has a great post explaining how economic and physical sustainability go hand-in-hand

H/Ts to KB and MD

3 May 2011

Loans on water supplies?

A reader asks:
I came across Aguanomics while looking for parties involved in water finance and investing. Any chance you would know of banks, funds or others that would lend against interests in groundwater leases and supply contracts?
Most contracts and leases have value in a secondary market, so financing should exist.

Does anyone know of companies or individuals that finance these water assets? Of any transactions of this nature? In the US or elsewhere in the world?

Speed blogging

  • An essay and photos of the living and dying Aral Sea PLUS 180pp of papers from a 2002 Asian Development Bank workshop on water in Central Asia!

  • Agriculture 1, environment 0: "The Spanish supreme court has backed the government’s right to transfer water from one region to another, overruling the requirements of regional environmental regulations."

  • Energy 1, environment 0: China's dams will harm fisheries and ecosystems in India and Southeast Asia. I predicted these problems in 2008.

  • The Governor of Texas asks people to pray for rain (during the Easter weekend, conveniently). I suggest he pray for more economics in Texas water policy.

  • "Urban water in Australia: future directions considers whether the sector's underlying institutional and policy settings need reshaping to improve performance now and in the future, and sets out the Commission's findings and recommendations."
H/Ts to KB, MC, DL, TS and MV

Bin Laden and terror

I am in Tel Aviv this week, attending a briefing on Israeli water conserving/cleaning technologies.

Yesterday, I turned on the TV to see the news and saw that Bin Laden has been killed. (BBC had the best coverage; CNN switched to twitter reactions; FOX switched to other programming after awhile...)

That's good news to most of us, and especially to people who think that punishment is a deterrent to bad behavior.

Unfortunately, I am not one of them.

The war on terror (what a stupid name) will only end when terrorists have nothing to complain about. That will happen when they stop being suppressed by their governments and have the freedom to succeed or fail -- and can congratulate or blame themselves for it. For the US, it will also end (or get better) when we stop supporting these odious regimes.

The good news is that the (perhaps related) Arab Spring has brought changes to a few countries run by dictators. Tunisia and Egypt are moving ahead (more or less). Dictators in Syria, Yemen, Bahrain and Libya are, of course, fighting bloody battles to continue their oppression. This is sad to see, but only a sign of how little their care about "Their People."

The Israelis, btw, made no outward show of celebration on Bin Laden. They were already commemorating the Holocaust (1 May), and they have a lot of other issues (some self-inflicted, wrt the power of their fundamentalists) on their plates.

It was also nice to see Obama doing such a fine job as president. Like many Americans abroad, I am often asked about failures of my government.

Just a few thoughts.


2 May 2011

Monday funnies

(via JWT) "The Turboencabulator... is a fictional machine whose alleged existence became an in-joke and subject of professional humor among electrical engineers."

Love the tag line at the end: "It's not cheap, but I'm sure the government will buy it."

Poll results -- windmills!

Hey! There's a new poll (water, war and peace) on the right sidebar ===>
Do you like the new header (windmills!) for the blog?
Yes 76%25
No 15%5
Don't see the economic angle 9%3
33 votes total
Glad that most of you like the photo. That's the best "yes" result we've had here, in my memory :)

Would the no voters please send their photo suggestions?

FYI, the economic angle on windmills is that they were used to pump water off land that was then used to grow crops (land surrounded by dikes that's lower than surrounding waters is called a polder in Dutch). Windmills were also used to grind grain for bread. Pretty handy in a country with lots of wind but not many rivers (for water wheels).

Bottom Line: Machines that take advantage of natural flows can be pretty.