30 Mar 2012

Friday party!

This (via DC) will blow your mind. Especially when you consider that it's a joint effort of Disney and Dali.

Economic and environmental sustainability

...are the same thing. They are ALSO about security of water supply, food supply and social justice.


29 Mar 2012

Al qaeda won

This popped up at a French truck stop:

Anti-terrorist wifi registration? Right.

Macroeconomics and water management

The values and choices of economic actors -- like the values and choices of water users -- are too complicated to understand or manage. That doesn't mean that central bankers and water managers do not try to do so, often with poor results.

The economy, like a water system, needs to operate with simple rules that constrain total behavior within limits (e.g, the money supply and the water supply) without being either over-prescriptive on "acceptable actions" or over-optimistic on how people will behave. The former reduces our prosperity. The latter leads to nasty financial destruction (or water shortages).

Just a thought.

28 Mar 2012

Like the new banner image?

The image is from this photo that I took of the Pont du Gard, a Roman aqueduct in southern France.

It replaced the photo of windmills from Zaanse Schans in the Netherlands:

The new image is "lighter," so I hope it gives the blog more of a "spring" feeling :)

Any questions?

Corruption at the top

BS sent me this story, which surely rivals these corruption stories (on California's water resource control board, Cadiz buying influence in Sacramento and Mayor Sanders of San Diego as a lobbyist for Poseidon).

Check this out:
Merle Moshiri... filed a complaint... against John Foley, the board chairman of Metropolitan Water District of Southern California [MWDSC].

The complaint alleges that Foley failed to report upward of $600,000 in income that his wife, Mary J. Foley, received from consulting she did for both Poseidon Resources and the desalination efforts headed by the Municipal Water District of Orange County [MWDOC]. Mary J. Foley is the principal of Foley Consulting, Inc.
Gee, and I wonder what her qualifications were? Maybe only her last name, since the Mary J. Foley who runs Foley Consulting Inc. says:
Our clients are predominantly religious, educational and social service organizations located in the Archdiocese of Chicago and the Diocese of Joliet. FCI recognizes that each client we assist is utterly unique in terms of personality, personnel, philosophy and vision, and benefits most from a tailored mix of services that reflect the distinctive nature of the organization. This differentiation – from solicitation techniques and campaign language to training protocols and stewardship practices – enables our clients to experience greater levels of success and comfort.
Seems she's a little out of area and off topic, doing desalination in California.

What's Foley's defense? A shower of bullshit:
Foley said his and his wife's finances are kept separately and he was under the impression that he did not have to report her income.

"It was our understanding that because our incomes have always been kept separate, her income was not a reportable financial interest..."

"And, it was our understanding that because Mary Jane never worked directly on any matter for Metropolitan, nothing further needed to be done. I now realize that it would have been better to have abstained on votes pertaining to contracts between Metropolitan and firms that Mary Jane consults with, and I will do so in the future."
This is no defense, since MWDOC is a member agency of MWDSC and MWDSC was offering -- until the lawsuit with San Diego County Water Authority -- a subsidy of $250/acre-foot to Poseidon.

Bottom Line: Mr. Foley has maintained a conflict of interest between his personal finances and making policies that affect 20 million Southern Californians. He should resign from MWDSC's board and return the $600,000 in fees bribes his wife received "separately" from him [read more about the responses here]. MWDSC should re-consider all decisions made under Foley's watch that impacted MWDOC and Poseidon, with public access to the discussion and votes. Yes, that's a lot of work, but corruption needs a strong response.
Addendum: I cannot find any information on Foley Consulting Inc. (California branch :), but several people have emailed (also see comments) to tell me that she may be more qualified as a consultant than anyone else in California. That expertise does not excuse the conflict of interest.

Speed blogging

  1. The recording of my January talk at the Commonwealth Club ("California's water future") is now online (podcast on right sidebar).

  2. Great post on the fair, efficient way to price water (also my recommendation).

  3. March 31 (all day): "Should a Bay Area Regional Desalination Project be an Option for our Water Supply?" [RSVP]

  4. A video of my talk (90 min) on water scarcity, pricing and desalination in San Diego (hosted by the Surfrider Foundation) -- from last October! (On a related, but weird, note... here's a paper on desalination in the US Northeast !)

  5. Why we need flexible institutions for managing water (all in auctions!)

27 Mar 2012

Dutch paradoxes

After 18 months here, I tend to think that the Dutch are:
  • Precisely casual
  • Tolerant of what they do not know you do
  • Distant strangers and warm friends
  • Businesslike on the road and relaxed at home
Can you add more? What are your national paradoxes?

Business and water -- your thoughts?

I just wrote this paper, and I'd LOVE to get your thoughts on its logic and clarity -- hopefully in the next 10 days...

When Worlds Collide: The Interface of Businesses and Bureaus in the Water Sector

Abstract: The increasing importance of water scarcity and consequent increase in business influence is increasing the prevalence of high-powered capitalistic tools in the water sector, one that has been dominated historically by organizations operating under low-powered incentives. This paper compares the institutions of business to those of water management through three interfaces. The first compares bureaucratic management tools – such as water footprinting and conservation technologies – to business tools that rely on prices and markets. The second explores how high-powered incentives within a low-powered institutional setting can result in harmful outcomes, as when regulations on bottled water, hydraulic fracturing, and food exports fail due to mismatched costs and benefits. The third discusses how changes in information mean that business tools for managing risk from floods and drought are more appropriate than bureaucratic tools suited to a past of uncertainty. Institutions that match allocation mechanisms to water uses with appropriate incentives – high powered business incentives for economic uses and low powered bureaucratic incentives for social uses – will maximize our water wealth; mismatches will produce excessive negative externalities and opportunity costs.

You can download it here.

Anything but water

  1. "All told, Dogon women menstruate about a hundred times in their lives. (Those who survive early childhood typically live into their seventh or eighth decade.) By contrast, the average for contemporary Western women is somewhere between three hundred and fifty and four hundred times." All women should read this article on the Pill, cancer, etc.

  2. Six things rich people need to stop saying. Supposed to be funny, but pretty sad that it's true.

  3. Coyote agrees with Zetland's Axiom.

  4. Watch this fantastic TED video in which James Hansen explains why we need to prevent climate change and how to do so (except for the lack of political will/cowardice/corruption). This post, OTOH, shows how screwed we are (+3-6 C). Sad.

  5. 8,600 researchers (I'm one!) and counting who are boycotting Elsevier (not the only one!) for charging too much for access to knowledge. Sign up!

26 Mar 2012

Monday funnies

(via DL) Ha!

Four years of aguanomics

Take a camel if you're going on a long walk...
Wow. I am, as usual, overwhelmed by the amount of work and reward that aguanomics has brought me in the past year (update from last year).

Let me begin by thanking everyone who sends me new material (whether or not I post it, I look at EVERYTHING you send), reads this blog, comments on posts and generally contributes to one of the finest discussions on water economics and policy that I've ever run across (seriously -- I'd read this blog if I wasn't writing it :).

Speaking of "AGuanomics," I recently heard about a book -- AQuanomics: Water Markets and the Environment by Gardner and Simmons -- that seems to cover some familiar topics. I emailed Simmons to inquire about the title, and was told that the publisher was not too worried about the similarity of the names (check out koka-kola.com). I am not sure if I am flattered or annoyed at this "brand borrowing." I reckon that quite a few people will think that their book is mine (recall that The End of Abundance is published by Aguanomics Press :).

The Numbers

Here's a short summary [PDF] of visitor traffic by country. The main news is that visitor numbers have fallen by a little compared to the year earlier. 53,000 unique visitors made just over 90,000 visits to the blog (unique visitors is overestimated, since it's by IP address not some form of user name). These numbers do not include traffic from about 1,400 RSS subscribers. There is an uptick in "new" visitors, but average time on the site has fallen from 1 min 45 to 1 min 17 seconds. This last statistic is a little annoying, since I prefer that people stay and read ALL the posts :)

Speaking of which, there are now over 3,700 posts on the blog -- about 500 more than last year -- so that's quite a bit of reading for those of you who have not kept up.

One of the most common questions people ask is "how much time to you spend on the blog?" I reckon that I spend about an hour per post, if you include sorting through all the stuff I get (most of it discarded), analyzing, writing and editing. That's about 500 hours in a year or 10 hours per week.

That time is perhaps the most fun I have as an academic and economist. It may also be the most productive time I spend, which leads us to...

Blogging versus academic writing

Earlier this year, I wrote posts on my changing business model, the failure of academic writing, and the contribution of blogging to learning and public debate. In the past month, I have written or revised 3-4 academic papers, and that process has stimulated me to think more about writing, persuasion, ideas and scholarship.

First and foremost, I am dedicated to finding and developing the best ideas I can. I am not interested in creation, ownership or control of ideas as much as borrowing, using and passing along the best ideas I can find, whatever their origin. I have these goals for reasons personal (I like to understand the world) and professional (I need to be intellectually honest and trustworthy). Last week, I had to deal directly with this fact, as I was accused of "selling out" my academic integrity. Although I am familiar with many examples of people -- and professions -- who rent their reputation to the highest bidder, I am not one of them. I am here to learn and discuss the truth, not to spin words into prepaid formations suited to commercial or personal bias.

This observation leads me to a interesting thought on "scholarly communication." My intellectual ancestor, Adam Smith, was a professor of moral philosophy. Smith wrote to persuade, and his two books (Theory of Moral Sentiments and Wealth of Nations) are masterpieces in the "reasonable analysis" method of debate that dominated the Age of Reason. That era ended in the 19th century, as formal logic and science gained in stature during the Industrial Revolution. Soon "political economy" split into the political and economic sciences, distinct disciplines that lost in their generality as they gained in exact analysis. The move to the rigor and formalism of mathematical economics helped for a time, as it forced economists to specify the logic in their ideas and remove inconsistencies. These methods soon dominated nuanced discussions that did not benefit from the Foundations of Economic Analysis.

Although some saw immediately the flaws in mathematical models that abstracted too far from human behavior and creativity, many others liked to use math to "prove" their theories of human behavior. Mathematical economists frequently "won" debates because their models used logic to connect causes and effects, but their models only worked with formal relationships and assumed parameters. One of the most important -- the assumption that "homo economicus" only cared about himself -- ignored other regarding preferences because it was difficult to find closed form solutions to equations that involved too many moving parts. Economists created a simple, elegant and logical world that did not really exist, a world in which people did not care for each other. This method -- combined with an increasing reliance on citing others as a source of intellectual authority (Zetland 2010) -- meant that economists spent less time on persuasion from a foundation of common sense and more time bludgeoning opponents with citations, statistical significances and lemmas.

And so it seems that we have come full circle: political economists used to describe the world we had and suggest ways to get the world we wanted. Those techniques were replaced by "rigorous" techniques that turned into a caricature of scientism and sophistry (relevant podcast). And what have we got? Experts who "prove" that kids who drink more have more unsafe sex [PDF], models of behavior that never happens, and other forms of mathturbation (see figure at right).

Why does this matter to you? First, there is the opportunity cost of very smart people spending their time on the equivalent of digging holes and filling them in. Many economists work in echo chambers, ignoring other scholars without adequate self-referential "proof." Blinded economists -- like conspiracy theorists -- sees flaws in outside critiques at the same time as they ignore their own weaknesses. Everyone has a hard time changing their opinions, but economists -- as professional thinkers -- should be better at adapting our ideas to new data and perspectives.

The second problem is that economists often get attention, and their bad ideas can lead to bad results. Some economists should be blamed for the financial crisis, either because they were blinded by their faulty ideas or because they were corrupt whores. Other economists have defended poor policies (e.g., corn ethanol) using sophistic rationalization instead of relying on common sense.

I do not like the excessive formalism of academic writing, its narrow perspective or its reliance on borrowed authority. I like clear, direct writing that addresses real problems at the same time as it integrates real constraints. That's why I blog. Blogging is about a return to common sense and a discussion that anyone can understand. The idea here is not to "prove" anything, but to engage, learn teach and persuade. I will continue to write as a scholar but my writing is moving towards the style of Adam Smith and others who engaged regular folks as peers in a discussion.

Bottom Line: I've enjoyed four years of blogging here and will continue. I hope that you're also enjoying the blog. Even better -- for all of us -- I think that we are starting to see more "aguanomics" in the debates over water policy. Yay!

23 Mar 2012

The plot thickens

I just got this email in response to this post:
David I am sorely disappointed in your selling your soul for an ad .  Your comments are not matched by the legal facts or reality. I would ask you, as a long time supporter of your scholarly endeavors ,to really analyze  the facts and report independently . You owe it to yourself to keep your intellectual integrity
And replied with:
I didn't sell my soul. I would had said that stuff regardless. I took the ad because i agreed with it, not the other way around. You still need to read my diss
Indeed, I would be pretty stupid to sacrifice my opinion for such a trivial sum, but I've turned down far greater amounts to maintain my integrity. It's all I've got.

Bottom line: I'm no cheap whore. I'm not even a whore.

Addendum from my correspondent:
David Okay, I feel better now, but I still think you are wrong to take Met on when I really think you don’t have all the facts. All San Diego is after is a cost shift to other Met agencies to make up for the cost of the IID transfer. This is a many year ongoing battle. Do I need to read your dissertation since I read your book and distributed copies to my senior staff?
Yes, you do. my dissertation [free here] is all about MWD and its member agencies. My book is quite general to water issues worldwide.

Friday party!


San Diego vs MWD

Some of you may have noticed this ad on sidebar of my blog:
The Truth about MWD

The San Diego County Water Authority says that the Metropolitan Water District of Southern California is run by a secret society (read more).
I agreed to post this ad for a few reasons:
  1. I wrote my PhD dissertation (Conflict and Cooperation within an Organization: A Case Study of the Metropolitan Water District of Southern California) about the conflict between SDCWA and MWD, so this is just the most recent development in a cold war that's lasted for nearly 60 years and a hot war that's lasted for 20 years. You can download it for free.
  2. I tend to believe San Diego's claim that other MWD member agencies have "conspired" to charge SD more -- and thus lower their own costs. These points were central to my dissertation.
  3. The solution to these fights -- described in Chapter 7 of my dissertation -- is obvious, but MWD's management (that's you Jeff!) and Board of Directors (that's you Mr. Foley!) have continued with business as usual, which has done nothing to promote sustainable water use in SoCal or efficiently distribute water among MWD's 26 member agencies.
To read more about the "secret society," check out SDCWA's website, its press release, or these stories [one two three four] in the SD papers. The response from MWD [PDF] reminds me of Putin's empty rhetoric.

Bottom Line: MWD will continue to under-perform on political, economic and environmental measures while it pretends to have abundant water for all its member agencies. MWD needs to change its water management institutions before change is forced upon it.

H/Ts to MD and RM

22 Mar 2012

Vizualizing groundwater in Times Square

Jay Famiglietti (UC Irvine, Hydrology/Engineering) tells me that the displays in Times Square (NYC) will show visualizations of NASA GRACE data on groundwater depletion, starting today and running for a month.

Check out the announcement.

Although this is totally cool, I hope that people then go on to ask WHY groundwater is being depleted. Then they should contact me to discuss how policies affect groundwater levels and how the political-economic sphere is destroying the physical-environmental sphere.

More impressions from Marseille

Brazilian work ethic
  1. The Brazilians had the best booth in the Pavillion -- excellent espresso, cappuccino and caipirinhas -- all of them free!

  2. The Chinese had "presence" with their booth. It may have been the second largest (after France), but its central location made it stand out. (The other BRIC countries -- Russia and India -- were either absent or invisible.)

  3. I went to a discussion of desalination in Gaza. Although it's clear that they need desalination as a water source (since their aquifer will be depleted in 7-10 years), I worry about the Palestinian president's insistence that the Palestinian Authority should control the $500 million budget for this project. Given the PA's reputation for corruption, it would seem wiser to entrust the money to a build-operate-transfer contract signed with an international operator. Too much corruption would lead to massive problems as water ran out. This video presents the Palestinian position.

  4. Isn't it interesting that both energy plants and water infrastructure are both so long lived that it's hard to predict how they will be used in 50 years, and yet politicians insist on having a greater role in the construction and operations of water facilities? Is that because "there's no substitute" for water? I'm not sure about that, but I AM sure that politicians can screw up both, e.g., the German government's hasty decision to shut down its well-run nuclear plants in a populist response to Fukushima.

21 Mar 2012

DC to NV: Drop Dead

BT sent this story in which Pat Mulroy -- a water manager with some of the cheapest water prices and lowest water supplies in the Western US -- asks for cheap federal money to pay for her boondoggle $800 "third straw" into (a draining) Lake Mead and "cover the costs of climate change"

Are you fucking kidding me?

Bottom Line: Vegas will not have problems if it stops giving away water at way too cheap prices, but right now it's run by a gambling addict who just wants "one more bump" from the house.

Sunset provisions

I am thinking that all laws should automatically lapse within 10 years.

What would happen if the EPA had to be re-authorized every ten years? The tax code?

The constitution would be exempt, so that means that freedom of speech, the income tax, and the right to an abortion would not be subject to these limits.

Your thoughts?

Does that make sense?

Quickies from Marseille

H/T to CF for this idea
  1. The Dutch told everyone how great they are at managing water but failed to talk about their water quality problems (farmers! nitrates!)

  2. The security people did not allow people to take bottles of water past checkpoints. WTF?

  3. For your lunch ticket, you could get a bag lunch or three courses and wine in the Grand Palais, which was the largest building and used only to seat 2,000 people for lunch.

  4. I walked out of the debate over public vs private water provision because the first (anti-private) speaker, David Boys, was so ridiculously divorced from reality. (He works for trade unions, work a baseball hat during the debate and can be seen checking his email while others speak). What I missed -- but you can see on this video (at 1 hr 11 min) is Winonah Hauter asking a question -- and getting quite slammed with the answer. Why is that interesting (besides that I debated her on full cost recovery last year)? She was invited to participate in the debate, told the organizers that she was too busy, but then showed up to make a speech. Classy.

  5. My overall impression is that the WWF was dominated by promoters of the conventional wisdom who made boring pronouncements of continued effort, reports and initiatives without saying anything new (see this excellent post, which happens to quote me).

20 Mar 2012

How bad is US fiscal policy?

Take away some zeros and then decide:

The water data hub is LIVE!

I've been looking for a centralized source of water data for over a year, a place where I could go to find data on any kind of water question.

Although that quest led me to IBNET -- a fantastic resource on water utility data in many countries -- I was unable to find a good centralized index of water data.

Even more depressing, I was unable to get any interest or support out of organizations (USGS, World Bank, OECD, et al.) whose missions might imply support for just such an idea.

So, I decided to set up my own water data hub (WDH) -- a central location that links to water data, no matter where it is, who owns it, or what dimension of water it describes.

Last November, I asked for help on this project, and Ian Wren (from San Francisco) joined me.

It's thanks to Ian's hard work (weekends and evenings!) that I can now invite you to visit waterdatahub.org!

[Link removed in 2016. The old URL now leads to a Chinese breast enlargement site (!?)]

So, please go there and add data sources. The WDH, like any network, gains value with the number of links.

Oh, and don't forget that anyone can add a link to the hub. You only need a WDH account (free and easy to set up). So, go ahead and add your favorite data source from the World Bank, Exxon-Mobile, the Nature Conservancy, et al.

Note by my wording that the WDH does not host, own or control data. It's basically an index of data controlled by other organizations.

The big goal now is to make a census of data, so that we know what exists, what's missing and what overlaps.

Future developments:
  • WDH 1.1: You can add records for data that exist but are not available to the public. This will make it easier to contact data owners to ask for access and -- hopefully -- to pressure them to release it to the public.

  • WDH 1.2: Anyone can comment on the quality of data sources held elsewhere; this will help everyone understand the uses and limitations of data -- information that is not necessarily available from data owners.

  • WDH 2.0 (2013): We will start the very difficult process of "normalizing" data from many sources (using translation tables) to make it possible to assemble a data table from 2+ sources linked to the WDH.
Note that the WDH will make it easier for anyone who analyzes data to do their job; analysis is too difficult to automate.

As you might expect, I am running WDH as a stand-alone, academic, non-profit. At the moment, we do not need money as much as your time.

Bottom Line: Please add new spokes to the WDH (get it?) and tell others about the water data hub.

19 Mar 2012

Monday funnies

(via AA) US policy can be truly retarded.*

* Those politicians get away with it because they cooperate with special interests without ignorant voters understanding what's going on.

How networks grow and then shrink in value

The move from abundance to scarcity (or non-rivalry to rivalry) does not just happen as the relative balance between demand and supply changes. It can also happen on a network, as it develops and then reaches capacity. That non-linear process is different from the linear process that we see with a resource (value rising steadily as it grows more scarce) due to the benefits of having more people on a network.

The change from increasing to decreasing value of additional demand goes like this:

At first, additional users (from a low user population) make a communication network more valuable since the fixed cost of the network does not change, but its value increases as there are more people to communicate with. From a water perspective, the same holds true, except that additional users lower the cost per user while the network is within capacity. Until this point, the value per additional user is positive.

But after awhile, there are too many users on the network. A communication network will get slow with congestion. A water network will not be able to deliver adequate water to all who want it. From this point, the value per additional user is negative.

Bottom Line: Some customers are good; too many lead to congestion that harms everyone.

16 Mar 2012

Friday party!

Marseille knows how to party!

Bleg: Statistics for water inputs to final products?

TS wanted to do a "silicon chip to potato chip" comparison of the output value per unit of water.

I cautioned him that we cannot just divide the TOTAL value of final products by the amount of water consumed. We need to measure the MARGINAL value of water to the output, i.e., removing the effects of other inputs, labor, capital, etc.

Does anyone know of statistics that quantify the value added from water across many industries or products?

15 Mar 2012

Men are more brilliant (and stupid) than women

I basically said this last year, but this compilation of "fail" helps you see the flip side of all the brilliance that gets our attention -- all the (painful!) idiocy that men pursue in their quest to "make a mark."

Watch it, but be prepared to cringe...

Here's a Dutch selection

From a statistical perspective, I'd use this image:
If call the outcome "innovation," then women (solid trace) are closer to average and men (dashed trace) are in the fat tails -- making relatively more contributions on the extremes of positive and negative outcomes (e.g., Pasteur and Hitler, respectively).*

In my paper on the effects of gender on cooperation games, it is women in fact who change their behavior to balance the group when conditions change. Their "buffering" equalizes groups payoffs, making it more likely that the group -- men and women -- can survive into the future (this is called, I think, an evolutionarily stable strategy).

Bottom Line: Men have a comparative advantage in finding new ways to succeed AND fail. Women are better at stabilizing groups and picking up the pieces. Those complementary gender roles help all of us.

* Want to be on the "right side" of history? Here are some ideas of how to be a better man.

14 Mar 2012

The paradoxes of our age

Please try to avoid these!

Speed blogging

  1. "Reading privacy policies for the average number of websites a person visits would take 76 days," which is why people do not read them. That's a problem if they are going to market your personal information to others but less of a problem if competition exists. If I was a competitor, I'd read your policy and make mine better to grab your clients. Do any websites do this?

    In related news, one organization claims that African women spend 40 billion hours collecting water. Unlike the policies that we do not read, these are hours that are actually wasted.

  2. Climate change is NOT the same as seasonal weather, but people treat it that way:

  3. Along the same lines, politicians and water managers in California are hoping that people who see the drought this year will commit to spend $billions over years on water projects boondoggles.

  4. Speaking of context, Belinda points out that managers wasting $1.5 million of ratepayer money on steak and fine wines should not be condemned -- UNLESS we also condemn them for spending $780 million on a unnecessary desalination plant. Good point.

  5. Fred Pearce follows up on the UN's non-achievement of the MDG for clean drinking water. I am happy to be quoted, calling them on their BS.

13 Mar 2012

It’s all about winners and losers

I am at the World Water Forum this week -- to give a talk (actually, reflect on an EEA report) on water value and water efficiency -- but also to listen to the "state of the art" in world water matters.

While it's definitely true that everyone here is truly interested in improving the ways we use water (for humans, the environment, and so on), I am not sure that many of them go to the FOUNDING force affecting how we allocate and use water. That foundation is the desire to maximize the benefits from water use, while minimizing the costs of acquiring and using that water.

Nothing new there, you say? Well, yes, everyone is used to weighing benefits and costs when making decisions, but the DISTRIBUTION of benefits and costs in water is what makes our activities, policies and decisions so interesting.

In the water sector -- more than any other sector I can think of (even finance!) -- it's fairly common to find one group bearing the costs for benefits that go to another group. Thus, you might find that taxpayers support irrigation infrastructure that benefits farmers, or that the environment experiences the "cost" of water withdrawals for urban consumption, and so on...

These mismatched costs and benefits are the reason why politics are so important in water, because the allocation of costs and benefits often takes place through some political mechanism.

What's troubling is that economists have often supported these mismatches, in their analyses of "net social benefits from policies."

Let's examine the range of cost-benefit distributions from most acceptable to least acceptable to clarify where things go wrong.
  1. I spend $1 to buy ice cream worth $2 for me. That 2:1 benefit cost ratio (BCR) is acceptable. This is an example of "maximizing your utility from limited resources."

  2. That $1 goes to Sue (the ice cream seller) who pays $0.50 for the ice cream. She, likewise, is happy with a 2:1 BCR. This is an example of "mutual gains from trade."

  3. Instead, I buy the ice cream for $0.50. I get a BCR of 4:1 and Sue breaks even. This example -- like the mutual gain from trade), is called a Pareto-improvement, since I am better off and she's no worse off.*

  4. Now a politician named Dick comes in. He's got an economic study that shows that I value the ice cream more than Sue does.** He knows that "society" will be better off if I have it, since I value it at $2 whereas Sue only values it at $0.50. So he takes the ice cream from Sue and give it to me, knowing -- under the Kaldor-Hicks criterion -- that Sue could THEORETICALLY be paid off, out of my surplus, so that Sue was no worse off. The problem -- to Sue -- is that the criterion says "those that benefit could in theory compensate those that have lost out... it is justifiable for society as a whole to make some worse off if this means a greater gain for others..." and stops there. Dick and I agree that society is better off and that Sue could -- theoretically -- be compensated but really does not need to be.***
Although these examples are probably pretty clear, let's use one with water.

Say that a dam will delivers $100 of benefits (irrigation, flood control, hydropower), but puts my land -- worth $20 -- underwater. Should the project go ahead? Yes. Should I get compensated? Maybe. In a country with property rights, I will get some money ("market value" may be less than the value to me), but people without property rights (China!) often get little or nothing.

What about water pollution? What if industry discharges polluted water that lowers the value of water to people downstream? A "pigouvian" tax may reduce that pollution to an "efficient" level from a SOCIAL perspective, but that tax doesn't help people downstream if the government keeps the revenue -- a policy that's normal in OECD countries.

Bottom Line: It's not enough that projects deliver a "net social benefit" -- winners need to pay for their benefits, and losers need to be compensated for their costs. Politicians who approve those projects need to match benefits and costs. Those who just help special interests are Dicks.

* It's an improvement as long as one of us is better off and the other one not worse off. Both of us better off is fine, but remember that we're not increasing TOTAL happiness with this ice cream trade -- just deciding who gets more money for the ice cream that I buy. Although economists tend to ignore who gets the money, regular folks pay CLOSE attention to it!

** I paid for the study :)

*** My jaw hit the floor when I heard that in graduate school in 2003. Professor Silvestre said (as I remember) "we do the calculations as if the other person was compensated, to find out if the BCR exceeds one. If it does, we go ahead but there's no need to pay the losers.

Multiple priority disorder

The organizers of the World Water Forum have taken the "co-equal goal" paradigm to a new level:
The International Forum Committee has adopted its Thematic Framework based on 12 Priorities for Actions within 3 overall Strategic Directions and 3 crosscutting Conditions for Success.

Maybe people are confused here because they are simultaneously trying to prioritize in 12 different ways -- or maybe they are ignoring these kumbaya mathematics as they do what they want and ignore "less than prior" priorities?

Bottom Line: Making everyone's priority a priority only confuses the issue.

12 Mar 2012

Monday funnies

You know you're in trouble when Dilbert ridicules you...

Prices create property rights

While in Arizona, I heard about a case in Orlando Florida, where a wastewater treatment plant (WWTP) was initially giving away -- and later selling -- treated effluent for non-potable uses (golf courses, etc.). Revenue from sales was a form of bonus to the WWTP, since its expenses were covered by user fees.

Effluent became even more valuable when a drought reduced water supplies in the area, but the drought also attracted attention to this "surplus" water, and the state Department of Environmental Protection (DEP) requisitioned all the water for discharge into wetlands.

Although the DEP was within a grey area of the law, it's obvious that WWTP customers and the buyers of that water were denied money and useful water, respectively. (It's also obvious that the "lost water" was sourced from elsewhere, perhaps creating even greater environmental damages than DEP was reducing.)

Besides protecting their deal through a change in law, I suggested another way to "perfect" their respective rights to engage in those transactions: the WWTP could have held regular auctionsfor that water. Those auctions would have created a paper trail of rights (the right to sell, the right to buy) and prices that DEP would have not been able to sever so easily. At best, the DEP would have had to make its OWN bid for the water, which would have protected the WWTP's cash flows and allowed other buyers a fair shot at the water.

Bottom Line: It's worth paying for something that's "free" if payment protects your future supplies.

10 Mar 2012

Where have the rating stars gone from posts?

From Outbrain, the free service I used to use:
Where has the rater gone?

Over time, we've realized the rating system on our widget hasn't been helping us in our core mission of recommending great content to your readers [making money from advertising links inserted in your posts]. We've found other ways to produce recommendations that have proven more effective at engaging audiences than relying on user ratings.

As a result of these advancements, many of our bloggers have started using the Outbrain widget without our ratings system at all!

In order to keep our focus on recommending content, we've decided to discontinue our rating system from our widgets. If you're using Outbrain ratings, you'll see them disappear at the end of February. Of course you'll still be able to keep using Outbrain for recommendations, and we expect to continue making that service better and better for you over time.
Looking for a new widget! Check out the little thumbs up or down! Like it?

9 Mar 2012

Friday party!


My talk at the World Water Forum

Our society and economy depend on access to clean water to function, making water much more valuable than its current price tag suggests. How can we achieve an efficient use of water resources? How can Europe break the link between resource use and environmental impacts while respecting the boundaries of sustainability? The new report by the European Environment Agency ‘Towards efficient use of water resources in Europe’ takes a closer look.

Join us on 14 March (19.15-20.15) in Marseille at the 6th World Water Forum (Parc Chanot - PEu 1 - Europa 1)

  • Towards efficient use of water resources in Europe (Beate Werner, EEA)
  • Water efficiency and economics from an industry perspective (Joppe Cramwinckel, WBCSD)
  • A view on water economics in Europe (David Zetland, University of Wageningen)
  • Water supply and sanitation efficient and at the right (Durk Kroll, WssTP)

Your government at work

I make a point of preparing my own taxes every year, to understand experience government at its most basic level.

I am filing them electronically, but there are still reams of instructions to read (I need to fill in at least 8 schedules).

This example (from D-11 [pdf]) is not so rare:
Enter as a positive number the amount of any section 1202 exclusion you reported in column (g) of Form 8949, line 3, with code "S" in column (b), for which you excluded 50% of the gain, plus 2/3 of any section 1202 exclusion you reported in column (g) of Form 8949, line 3, with code "S" in column (b), for which you excluded 60% of the gain.
Seriously? Is it any wonder that the US tax code is held to be one of the most-convoluted in the world?

In the Netherlands (as I currently understand it) you do not need to file taxes at all if you only work a salaried job. Investments, deductions, etc. are all handled automatically. I will report back on how difficult that process is -- even when I have to submit forms in Dutch!

8 Mar 2012

Bleg: Climate change and agricultural yield

Does anyone know if CC models have estimated the cost of adapting to precipitation patterns that change in both volume and timing? My intuition is that places that get less rain are in trouble but places that get more rain are not necessarily better off if rain comes with different variation.

Any thoughts on this?

Anything but water

  1. Business, the state and corruption in Arabic countries: "Food and fuel subsidies are often huge: over 10% of GDP in Egypt. In the region as a whole, fuel subsidies rose from 2.3% of GDP in 2009 to 3.2% in 2011... These subsidies benefit the rich, keep loss-making firms alive and damage the economy." Speaking of which, read this potted summary of why West Asia/North Africa (aka Middle East) is fucked up. Hint: British and French imperialism was just as bad there as in Africa.

  2. "Economists don't understand anything about the (macro-) economy." Unfortunately, this includes Jeff Sachs, who is lobbying to become head of the World Bank. I pity the poor if he does.

  3. Worst rail project ever? New Mexico's "Roadrunner" costs $30,000 per rider, per year :(

  4. Drug expiration dates are more about pharma profits than safety.

  5. The caging of America. A very sad story of a system that makes criminals, rather than protects society. (Related: US police will now use drones to survey spy on citizens.)

  6. Use Wolfram Alpha to answer interesting questions (my name is the 15th most popular birth name :) and make life easier around the house with these tips.
H/T to RM

7 Mar 2012

See you at the World Water Forum?

I'll be there all week and I don't have much scheduled (besides speaking at this session). Email me if you want to meet. Please give a reason and suggested time and place, so I can try to schedule efficiently...

No regrets about success

From the Reddit miracle:
Thinking about the past is one of the easiest ways to bring yourself down, because it is always the horrible stuff we remember the most (stupid brain). I used to work part time in a kindergarten, and one of the most valuable lessons I found was the total bliss and lust for life that small children have. THAT is what I taught my clients; To take back their lust for life, not by forcing themselves to live up to other role models, but to look forward to their own adventure... You are your own master, and you can walk down any road you like!

Ask yourself: "What keeps me from doing exactly what I want to?" The most likely answer is: "Myself."

What you have done in the past will only hurt you if you do it again. Make sure to tell yourself what you will never do again, and then tell yourself what you WILL do. Form your resolve, but base it upon your own courage and independence. Be honest with both yourself and those you love.

Don't try to live up to others, but make your own adventure. Regret is only good for telling yourself what you will never do again. Once you know which things you will never do again, regret turns into wisdom, and wisdom builds character.

When do water markets make sense?

SL writes:
As a complex adaptive systems person, I couldn't help but wonder [from your example] about the impact of a farmer's decision to stop producing alfalfa? Or cotton, etc.? How do we realistically forecast the impact of those choices as we fiddle with local “solutions”? It would seem (I say confidently with no justification for such bravado) that agricultural water use challenges have far greater social or collective impact. I am inherently conflicted on the balance between individual property rights in conflict with greater social “good”.

While I cannot justify the idea that all resources must serve and ultimately only belong to the collective, I cannot ignore the impact of decision making which is driven solely by individual gain. What occurred to me when you were speaking [at the Commonwealth Club] is that perhaps our assumption that resources exist to serve humankind is our first error in thinking. What would happen if we started with the assumption we had no rights to these resources? How would we proceed in our relationship to water then?
SL raises two important questions, which I will answer in reverse order:

What if we had no rights to water resources? The implication here is that one could not divert water from its natural course without permission from some PERSON (leaving aside the possibility that some divine being or animal would have that control). In this scenario, property rights lie with "deep ecologists" who could insist that no water be diverted from its course. Assuming they could not be killed for intransigence, they'd have to be persuaded that some water should be diverted for, say, agricultural irrigation (food) or drinking and sanitation (health). Over time, I'd guess that quite a lot of water would be diverted, but not even close to what we divert today, based on property rights that have been allocated long before "environmentalism" was hip.

What about farmers' decisions? Taking an agricultural diversion as given, there's little need for deep thinking about how the farmer uses the water, except to acknowledge that the farmer is likely to try to make as much money as possible from it (there's also a place for "tradition" in terms of use, but we can wave out hands and roll that into "profit") -- given the farmer's choices. Some farmers are required to grow certain crops (e.g., cotton in Uzbekistan); others are incentivized to grow crops by subsidies (e.g., corn in the US); while still others grow a crop instead of selling the water for urban or environmental use because there's no market mechanism to make that transfer.

Bottom Line: Our water use choices do affect others and the environment. We can minimize their negative impacts by using a non-market mechanism (i.e., politics) to allocate water to social uses (the environment) and then a market mechanism (i.e., economics) to allocate water among personal uses (agriculture, industry, urban, energy, etc.).

6 Mar 2012

What is more likely?

I've been saying this for years to the conspiracy crowd:

Not so fast UN

Addendum: My freakonomics post on this topic from 3.5 years ago.
Headlines this morning report "UN meets Millennium Development Goal on drinking water," but reporters are confused about what the headline really means. The BBC, for example, writes:
UN Secretary General Ban Ki-Moon hailed the achievement of halving the number of people without access to improved drinking water [1].

He said it was thanks to people who had seen it not as a dream, but a vital step to improve health and well-being.

Improvement to clean water supplies [2] has not been even: 40% of those still without access to improved drinking water live in sub-Saharan Africa.

Worldwide, almost 800 million people still drink dirty water [2]. But in the past 20 years, two billion people have gained access to improved drinking water [1].
The confusion originates in the way this goal was originally promoted but then differently implemented.*

The original goal was to get CLEAN water to people, but that was changed to "access to an improved water source," which (1) says nothing about the QUALITY of that water and (2) is defined as:
...water supply in the home or within 15 minutes walking distance. Actually a proper definition should be adopted taking the local conditions into account; in urban areas, a distance of not more than 200 metres from a house to a public stand post may be considered reasonable access. In rural areas, reasonable access implies that anyone does not have to spend a disproportionate part of the day fetching water for the family's needs.
As you may well imagine, a reader with drinkable household tap water may mistakenly interpret these headlines to mean, for example, that the 87% of Ugandan urban dwellers defined to have "access" have piped water to their homes when only 7% do -- and who knows about its quality?

From the story above, you can see the confusion between [1] improved supplies and [2] clean water, which is NOT tracked by the UN. The reporter makes a simple, but legitimate mistake -- assuming a common sense interpretation of a goal that the UN has defined to meet bureaucratic -- not human -- standards.

Bottom Line: It's more likely that 3 billion people** -- half the Earth's population -- lacks USEFUL access to DRINKABLE water. That's the number we need to pay attention to -- not a fantasy that allows bureaucrats and politicians to declare victory amidst the misery of people who are still suffering.
* That's why the story mentions this curious item -- "improved water." WTF is that?
** Water geeks like me use 3 billion, but there's no good statistic -- since nobody is really tracking quality.

Interested in urban water tariffs?

Maybe you want to read this paper I just wrote!

A global survey of urban water tariffs — are they sustainable, efficient and fair?

Abstract: We examine the relationship between tariffs and sustainability, efficiency and equity using a unique dataset for 308 cities in 102 countries. Higher water tariffs are correlated with lower per capita consumption, smaller local populations, lower water availability, higher demand and a lower risk of shortage. Aggregating to the national level, higher tariffs are correlated with higher GDP and better governance. A different country-level analysis shows that a higher percentage of the population with water service is correlated with better governance, higher GDP and a greater risk of water shortage. The relationship between water prices and service coverage is statistically inconsistent.

Comments/corrections welcome, but hurry -- it's in the final stages of review...

Oh, and there's not really enough data to tell if private or public have lower tariffs (the average public tariff is lower, but there are 273 public vs. 36 Private/PPP tariffs).

5 Mar 2012

Monday funnies

This is one of many reviews for a 55 gallon barrel of lubricant on sale at Amazon:*
I knew getting back in the "dating game" would be a challenge after being out of it for over 5 years. When I was released from Joliet, I had to learn all the new things "the dating crowd" was trying. I knew about scented candles and Luther Vandross CDs, and sure was glad to hear people still use them. But I had no idea that "lube" was so popular with the "romantics" out there. All it took was one stroll through the Walgreens personal hygiene aisle to prove I had to learn a new thing.

"Where to start?", I wondered. I wanted something simple. However, all I saw in the stores were lubricants that were flavored with cinnamon and paprika, or designed to somehow "heat" your private parts. No way, Jose! (I experienced the "heat" thing personally once after an adventurous incident with a toaster. I'll stick with "room temperature" from now on, thank you very much.)
Keep reading...
* No, it is NOT being bundled with my book; I found this on Reddit :)

Poll results -- price and prejudice

Hey! There's a new poll (world water day!) on the right sidebar ===>

When do people change their minds?
When they are good and ready? 33%23
When they are confronted with logic? 19%13
When they experience cognitive dissonance? 23%16
When they are forced? 26%18
70 votes total

These answers are interesting in their dispersion. This blog is aimed at logic and dissonance, but I agree that most people change with either "external" or "internal" force.

Can you give an example of when you changed your mind and why you did?

For more on this topic, I recommend listening to this podcast discussing what we know and what we cannot know, and how the internet can be used or abused for the purposes of, respectively,  enlarging our knowledge or confirming our biases.

Why do I do what I do? Besides this recent rant, I agree with Neil deGrasse Tyson (one of America's top scientists):
Q: What grinds your gears?

NdT: Watching and listening to people in power who believe they know what they are talking about but do not.
Bottom Line: Action is easier when we agree on what to do. The trick is persuading others to take OUR action.

2 Mar 2012

Friday party

Do not stare at this too long!

Mike Young on water rights

Mike Young (who will hold the Australia Chair at Harvard next year) sent a great response to this post.

Please comment.

There are some important issues tangled up in your blog and in DC's comment that need to be clarified.

DC seems to assume a seniority allocation system. Your blog assumes a share system.

DC mentions a requirement for a diversion right to be used (taken) and used beneficially. In beneficial use right systems there is normally a use it or lose it restriction.

In a share system, the share entitlement is defined in perpetuity and there is no requirement that the water be used. I assume that you too assume that the share is a perpetual share but that use conditions could change.

In a share system, the share should always be a right to a share of the amount that can be taken sustainably whether or not the use is beneficial is irrelevant. Any person given an allocation is entitled to decide to never use that allocation.

If you also mean a perpetual share entitlement then there are two options:
  1. A share of the amount that can be diverted or taken

  2. A share of the amount that is diverted or taken less an estimate of the amount that is assumed to return.
To decide which of the two options is preferable, one needs to understand risk assignment and transaction costs.

In option (1) risks and transaction costs are lower as there is no need to monitor the efficiency of water use at the individual user level. Instead, it is only necessary to estimate mean water use efficiency and as efficiency is increased reduce the amount that can be taken per share. If this is done, then those who increase water use efficiency get an advantage until others catch up.

To ensure efficient managers need to make it clear that as the efficiency of water use in the entire system increases allocations per share will be decreased. That is, the risk of declining allocations per share occurring as a result of increasing efficiency is assigned to the share pool as a whole. As a result, there is an incentive and a short term reward for those first move to adopt more efficient forms of use. I have not modelled this formally but I think this means that in the long run system efficiency is likely to be greater than under option (2).

Under option (2), as one increases water use efficiency, the amount that one can take goes down. That is, risk is assigned to the individual and the amount allocated to a technically inefficient irrigator is never reduced when others choose to increase efficiency. The costs of monitoring use, however, are much higher. Moreover, as the exact amount that returns is difficult to measure one must expect lots of arguments. This can be managed by deeming the amount that can be taken but expect arguments.

Either way, the critical bit is that the effects of increasing water use efficiency (return flow reduction) are managed. Problems of the type described in both your blog and in DC's comment assume that the effect is not managed. In a well designed and well managed regime, return flows like changes in rainfall, etc need to be managed. If you assume bad management then you get bad outcomes.

In Australia, where management still needs to be improved, there are examples of both regimes operating. I tend to prefer option (1) but in specific circumstances have recommended option (2) in a ground water systems where increasing efficiency increased salinity which also had to be managed and they already had a quasi-option (2) system in place.

[A compromise approach is to assume 100% efficiency and zero returns. Australia has used this approach and then got itself into political strife because increases in water use efficiency cause declines in the quality of the environment. Explaining to people that the entitlement regime is expected to cause a decline in environmental quality is difficult. In most cases, the sooner the preferred environmental state is reached the easier it is to keep most people happy. Working out the optimal environmental state to maintain at any point in time is a separate issue.]

1 Mar 2012

Two reviews of TEoA

Lisa Lee (PhD economist) reviews TEoA [PDF] for the Australian Journal of Agriculture and Resource Economics:*
The narrative of the anecdotes makes for fascinating reading and is appealing to any reader. The book has many strengths, particularly the ease and clarity in which economic concepts and theories are explained... Zetland presents many examples of poor policy decisions which induce water shortages that are followed up with even more inefficient policy fixes... The appeal of the book is its ambition to suggest practical approaches to address water scarcity, with the aim of removing political interference by improving market functionality and increasing competition
for services.
Claus Haslauer (PhD engineer) reviews TEoA at planetwater:
David Zetland’s book offers some useful thoughts of how thinking along some economic principles might lead to change. I do think that it is not along “big” economic concepts such as free trade or financial speculation. Zetland’s thoughts are more along the lines of local economics. I would even go as far as saying that his economic thoughts are as simple as thinking through scenarios of what could happen if I paid that amount or an extra amount on the good x at time t , and not a different amount on a different good. This approach gets interesting, when you’re trying to think about the effects on other goods or the same good at different times, at different locations.
All excited to find out if they are right? Order the book here!

* Although most of her comments are worthy of discussion, Lisa misquotes the book a few times: (1) All in auctions do not require forced sales (p 115 says "it allows any farmer to “buy back” his water at zero cost, neutralizing any objections of being forced to sell"). (2) I did talk about deforestation linked to biofuels (p. 126 says "Biofuels also need land for production. This can mean that rainforests are cut down (for palm oil or sugarcane plantations) or that other crops are displaced (as with corn fields).")

Speed blogging

  1. Steven Spierer and I had a great conversation [60 min, 29MB MP3] about The End of Abundance.

  2. Emily Green does a great job on "follow the money" going to local politicians who may help Cadiz mine Mohave groundwater. In a followup post, she discusses Cadiz's habit of [rhymes with cock] teasing.

  3. Jay Lund has a great list of seven curious things about water management. My favorite: "Studies forever, are sometimes cheaper and more politically convenient than action or technically serious work."

  4. An Integrated Assessment of Water Markets: Australia, Chile, China, South Africa and the USA [PDF]

  5. The Center for Sustainable Development has an interesting newsletter with details on water projects in developing countries.
H/Ts to JC and MP