30 Apr 2012

Monday funnies

I never tire of the Daily Show's exposure of shallow hypocrisy, in this case, a comparison of the war on women to the "war" on Christmas. Watch and cringe.

Speed blogging

  1. Frackers outbid farmers for water in Colorado. Good. Now farmers can see how valuable their water is on the field,or in the market. In related news, read this paper discussing water trades in Colorado (Big Thompson and Super Ditch).

  2. A good op/ed by a southern California business owner pointing out that privatization is not necessary if municipal utilities collect enough revenue to pay for their water systems. It's cowardly politicians, not "the business model" that's broken.

  3. "Take or pay" means that Melbourne customers will pay $176 million for desal water they do not need. Ouch.

  4. The WTF that happens in Vegas: State engineer won't give you water? Replace him. Lose in court? Have the new engineer "discover" new water for you. Sadly, the impacts will NOT stay in Vegas.

  5. Interesting details on getting clean water in India.
H/Ts to DC, DL, JM and TS

27 Apr 2012

Friday party

I've heard this song many times, but never seen the video. Pretty cute...

Oh, and this is the reaction from those who have heard it TOO MANY times :)

The roots of conservatism

While on the Shetland Islands (source of my surname but not my family), I thought a little bit about life on distant islands.

These people needed to be self-reliant because their connections to other places were so unstable. Sometimes the "regular" supply boat would not show up, sometimes a passing boat would sink, delivering a windfall of goodies.

In most cases, they needed to be careful with their resources, since rescues and bailouts were neither certain nor cheap. (Compare that perspective with Italians and Greeks who have had easy access to food and trade for millennia.)

That's why Scots and other people in harsh environments (including farmers!) hesitate to trust others, embrace "good" ideas, etc.

That's why most of these people practice what they preach: Don't live beyond your means because you can't borrow your way out of a shortage.

Please give me your thoughts on the origins and impacts of conservatism? As opposed to what "Conservatives" (Republicans, Tories, et al.) say?

26 Apr 2012

Proposed water laws in California

I read these on my news feed. No idea if they will become laws, but here's what they mean (to me):
Rep. Jeff Denham, R-Merced, has co-authored legislation that seeks a reliable federal allocation of a natural resource with a notoriously unreliable supply — California water.
A law requiring reliable allocation is easy to implement: water contractors will get a RELIABLE allocation of, say, 25 percent of their "rights" (the amount equal to the LOWEST possible flow), since that's 100 percent reliable. Additional, UNRELIABLE flows will be allocated if/when they arrive (as they are now).

That's not what Denham wants, of course. He prefers that the Feds TAKE water from where it's needed, to give it to contractors. That's a taking theft, but not when it's "legal," right?
A Central Valley Republican wants to mandate that officials determine the total cost before constructing a canal or tunnel to move water around the Sacramento-San Joaquin River Delta... In addition to requiring a total cost determination, the bill would also require that officials explain who would pay for the project.
Why isn't this a law already? Or is it a government habit to project a cost that's far lower than the actual cost, as well as allocate those costs to people who have no benefit from the project? Oh, right.

These politicians crack me up...

The Death and Life of... Cities -- The Review

I read Jane Jacobs's Death and Life of Great American Cities (1961) a few months ago.[1]

Jacobs, a lifelong 30-year inhabitant and fan of New York City, wrote her book in protest against the planners' assault on a complex, rich and robust urban life.[2] Her observations are still relevant these 50 years later; her guiding philosophy will remain informative for many decades to come.

Here are some notes I made while reading:

Old cities have an organic character that reflects hundreds of years of interactions among people coming from many places to do many things.[3] These interactions modified cities as they grew, a characteristic that may be harder to see by just looking at a city's current physical layout. The soul of the city is not in the streets or buildings, but the interactions among people that take place on these streets. Proponents of planned and charter cities often underestimate the importance of urban evolution through the act of living, or, in Jacob's words (p 238), that "cities have the capability of providing something for everybody, only because, and only when, they are created by everybody."

How is it that it's so easy to spot "social housing"? Because planners equate low cost uniformity with efficiency. That's not true if people do not want to LIVE in those houses or if sterile developments discourage human traffic. Jacobs spends MANY pages on these topics, lamenting the replacement of old lively neighborhoods with "modern" housing developments that are boring and deadly.[4]

25 Apr 2012

Anything but water

  1. Watch this 5 minute video on price gouging, why it should be legal and why it's probably moral.

  2. Some thoughts on the transition to a sustainable economy [PDF]. I agree with most.

  3. Good April Fools post on Ethical ethanol

  4. Long, interesting blog post comparing private vs public provision of transportation services to water services. Good backgrounder.

  5. Interesting impressions from Americans who biked around Holland to learn about "bike culture" and how to import it to the US (hint: raise gas prices!). In related news, the Economist dissects reveals the stupid behind US hybrid car policies (no duh).
H/T to MG, BW and JW

Speed blogging

  1. A video discussion of water management (and full cost pricing) in Ontario, Canada -- featuring Jan Beecher! On a related note, read her AWWA article [PDF] on why water budgets are not such a great idea. (Irvine Ranch Water District, btw, can use them because they can afford to spend big money on setting up a complex system.) Then read my post on why uniform rates are better than increasing block rates. Then take a break for a coffee.

  2. A fun interview: "David Zetland is Brash, Outspoken and Unapologetic... and He’s Usually Right."

  3. Solutions Journal published my article on why and how we can use all-in-auctions (the "no regrets" mechanism) for re-allocating water.

  4. If you are interested in "Monitoring Drinking-Water Supply Beyond 2015 - Preparing the Next Generation of Global Indicators," then you many want to listen to the MP3 [2 hrs 40MB] I recorded at the World Water Forum in Marseille.

  5. "How to Fix U.S. Water Policy? Less Government, More Market Pricing." Agreed!

  6. How deep did the Titanic sink? REALLY DEEP (click to enlarge).
H/Ts to BP and AR

24 Apr 2012

Green tax or greeenwash?

I just uploaded the first seventh draft of our paper, The Life and Death of a Green Tax that Never Was: The Dutch Groundwater Tax.
Abstract: In this case study of the Dutch national groundwater tax (GWT), we examine a ``win-win-win green tax" that promised to simultaneously provide revenue to government, reduce the relative burden of other taxes on productive behavior (e.g., income tax), and improve environmental outcomes. We find that the GWT generated revenue without having a noticeable impact on production incentives or environmental health. Although the GWT is often cited as an example of environmental economics in action, it was neither designed, implemented nor operated in accordance with environmental goals. In many ways, the GWT was just another source of revenue --- and one that bothered special interests. The Dutch government revoked the "inefficient" GWT on December 31 2011.
We're going to send it to a journal in the near future and present it in June at EAERE in Prague.

So -- please read, comment, critique and help us improve it!

Some notes from free Kindle books

I downloaded a few dozen free classic kindle books. Mark Twain's free stuff was boring (he wrote to pay the bills), the Scarlet Pimpernel dated, and others not worth more than a few pages, but these were good:

PT Barnum's Art of Money Getting (1880):
Here is a recipe which I recommend; I have found it to work an excellent cure for extravagance, and especially for mistaken economy: When you find that you have no surplus at the end of the year, and yet have a good income, I advise you to take a few sheets of paper and form them into a book and mark down every item of expenditure. Post it every day or week in two columns, one headed "necessaries" or even "comforts," and the other headed "luxuries," and you will find that the latter column will be double, treble, and frequently ten times greater than the former. The real comforts of life cost but a small portion of what most of us can earn.


The safest plan, and the one most sure of success for the young man starting in life, is to select the vocation which is most congenial to his tastes. Parents and guardians are often quite too negligent in regard to this... We are all, no doubt, born for a wise purpose. There is as much diversity in our brains as in our countenances. Some are born natural mechanics, while some have great aversion to machinery.
There's a LOT more good stuff in here (5 stars). Read this free book before anything written in the past 20 years for career and financial advice (hint!).

Chesterton's Man Who Knew Too Much (1922) was ok (2 stars -- read Sherlock Holmes), but I liked this complaint about people who profess to live simply but do not:
"Well, I am a trifle tired," said Fisher, "of the Simple Life and the Strenuous Life as lived by our little set. We're all really dependent in nearly everything, and we all make a fuss about being independent in something. The Prime Minister prides himself on doing without a chauffeur, but he can't do without a factotum and Jack-of-all-trades; and poor old Bunker has to play the part of a universal genius, which God knows he was never meant for. The duke prides himself on doing without a valet, but, for all that, he must give a lot of people an infernal lot of trouble to collect such extraordinary old clothes as he wears. He must have them looked up in the British Museum or excavated out of the tombs. That white hat alone must require a sort of expedition fitted out to find it, like the North Pole. And here we have old Hook pretending to produce his own fish when he couldn't produce his own fish knives or fish forks to eat it with. He may be simple about simple things like food, but you bet he's luxurious about luxurious things, especially little things. I don't include you; you've worked too hard to enjoy playing at work."
In the paid section, I read Salvatore's Crystal Shard (1988), a decent retelling (3 stars) of The Hobbit (about 70% familiar).

I really enjoyed Michael Lewis's Liar's Poker (1989), a book describing (yet another example of) hubris and abuse by Wall Street's financial innovators and their short-term, destructive ways of making money (5 stars). Regulators who read this book would have had a clue of how to see and prevent the crisis in housing finance. I saw it coming (experience from my days in real estate), but those in charge were either blind (naive) or blinded (corrupt). That's a pity, since the government-facilitated market collapse wiped many trillion dollars off our balance sheets and still has most of the world's economies in a twisted deep hole.

Bottom Line: There are good books out there -- for free. Enjoy!

23 Apr 2012

Monday funnies

I don't know what these salmon-fans were on when they made 3012: The Space Salmon Incident, but it's quite entertaining (and mostly true)...

A decentralized path to development and freedom

An update on this earlier post

Many politicians, intellectuals and bureaucrats have presented programs for world peace, but none have succeeded. I reckon that failure is the result of two big forces. First, it's difficult for any leader or organization to reconcile the various wants and needs of billions within a program of peace. Second, other leaders have the ability and inclination to block moves to peace that undermine their powers. That's because many leaders define themselves (and their followers) in opposition to another leader with followers -- an enemy. World peace, like a market, pits none against none, as everyone either ignores the others or makes favorable deals with them. That's why markets are peaceful but politics are conflicted.

My idea for reaching world peace (rather, helping more people to achieve happiness) addresses these two problems by putting nobody in charge of a process that is flexible enough to accommodate many individual needs. My suggestion has two parts:

First, give everyone in the world a second passport. Citizenship in another country allows people to take an interest in one's second home, travel there, and pay attention to the good and bad sides of each home country. This knowledge will make it easier to improve local institutions by holding them up for comparison, as well as allowing people in the worst-governed places to escape. There's nothing like the absence of an oppressed proletariat to undermine a dictator's abuse of power.

Second, require that anyone migrating to his second country work for 1-2 years in national service (paid with room and board). Such service will simultaneously remove the objection that "foreigners" are out to take local jobs, introduce the foreigner to his second homeland, allow information exchange on different ways to approach similar problems, and provide the labor to address these problems. There's no doubt that a Dane can teach a Kenyan something about recycling -- and vice versa.

This idea faces two barriers to implementation. The first is that bad leaders do not want their citizens to leave (escape). The second is that nationalist leaders are not going to be happy if strangers citizens take an interest -- or residence -- in their country. New ideas can lead to regime change.*

From a logistical perspective, it would be easy for a SINGLE country to implement this idea: issuing passports to people from other countries (one or less for each "home" citizen). Russia and some other countries already do this for nationalist purposes; the difference here is that new passports would be awarded to citizens of ALL foreign countries, in proportion to their global weight, i.e., more Chinese than Andorrans.

Bottom Line: The best way to help people is to give them choices. Politicians (and monopolists) don't like giving people choices, i.e., a way to escape their poor leadership.
* Paradox: Nationalists who claim their country is great don't want others to join the greatness -- or question it.

20 Apr 2012

How to be happier, safer and richer

Legalization is SO cute!
On 4/20, Art Carden tells you why we need to end the war on drugs. I am in complete agreement. It's done NOTHING to "save" people from drugs, and everything to feed corruption and violence in Mexico, Afghanistan, Colombia, Central America, the US, et al.

Legalization/tolerance works fine in the Netherlands. It would work better if growing -- not just sale/possession -- was legal.

Friday is time to party, and lots of people will be using drugs, no matter the laws.

Bottom Line: The government cannot control the drug market, the same way they cannot control the alcohol market, car market, sex market, apple market or land market. It can regulate, it can interfere, but it cannot STOP people from making voluntary trades. Legalize, regulate and get back to REAL government problems.*
* This week's Economist:
Consumers will have little difficulty adapting to the new age of better products, swiftly delivered. Governments, however, may find it harder. Their instinct is to protect industries and companies that already exist, not the upstarts that would destroy them. They shower old factories with subsidies and bully bosses who want to move production abroad. They spend billions backing the new technologies which they, in their wisdom, think will prevail. And they cling to a romantic belief that manufacturing is superior to services, let alone finance.

None of this makes sense. The lines between manufacturing and services are blurring. Rolls-Royce no longer sells jet engines; it sells the hours that each engine is actually thrusting an aeroplane through the sky. Governments have always been lousy at picking winners, and they are likely to become more so, as legions of entrepreneurs and tinkerers swap designs online, turn them into products at home and market them globally from a garage. As the revolution rages, governments should stick to the basics: better schools for a skilled workforce, clear rules and a level playing field for enterprises of all kinds. Leave the rest to the revolutionaries.

Water chat -- Joe Troester

Celebrate the small things
How hard is it to get a glass of clean water in a developing country?

I talked to Joe Troester, who works in the Central African Republic, in Marseille about his work: bringing clean water to some of the world's poorest people.*

During our 16 minute talk [6MG MP3] Joe describes how to get cement into the jungle (to build the enclosure in the picture), why it takes 2 hours to pump up a tire, and why a missionary can't always talk about God.

This is from his blog post on the World Water Forum in Marseille:
Although the World Water Forum focused on the developing world, there seemed to be little interest in places like the CAR. It would be a slight misrepresentation to say that the conference was all about aid agencies and commercial companies in the developed world selling their assistance and products to the developing world. But that was clearly the focus of many. There were, however, others hidden in the corners that were interested in the poorest of the poor... keep reading
Bottom Line: Some people don't have clean water. Those who help them get it have to work very hard.

* CAR has a purchasing-power adjusted GDP of $700 per capita, but a Gini coefficient of 61. That means that a minority receives most of that income. Per capita income for the poorest is definitely under $1 per day.

19 Apr 2012

California Carbon -- and how NOT to screw up

California is implementing a cap and trade system for carbon (H/T to SS).

While I question the impact of such a system on global climate change (akin to trying to drain the Pacific Ocean with a pail), I agree that auctions (like this design) are the best way to distribute/re-allocate permits.

I also think that the State should forget about keeping/spending the money from the auctions. Better to just rebate it back to citizens (or taxpayers or -- best -- voters). Then, if there's no impact, at least there's been a tax on pollution that's gone BACK to citizens instead of wasted on boondoggles like the high speed train or a solar cooker on every roof.

Catch the mice!

I met some of the folks from AquaFed, the International Federation of Private Water Operators, in Marseille.

AquaFed as an industry organization helps its 300 members in 40 countries improve their operations, but it is also a target of activists that do not like the word "profit" and public operators/unions that do not like competition. (For a brutal critique of how those biases hurt the poor, read Water for Sale.)

As most of you know, I am agnostic on the "public versus private" debate. I care most about results. And that's why I was so pleased to read these AquaFed documents on the policies they recommend [PDF], the results their members have achieved [PDF], and their spot-on economic recommendations [PDF].

Those are policy documents, but this is the money document [PDF] -- the one showing how much work is yet to be done:

Note the difference between the MDG "achievement" of less than a billion people lacking "access to an improved water source" (an inadequate measure of "success" that I've criticized) and the 3.6 billion who lack access to clean water and 4.2 billion who lack access to reliable water. There's a LOT of work to do!

Bottom Line: "I don't care if it's a black cat or a white cat, as long as it catches mice" -- Deng Xiaoping.

18 Apr 2012

Morality vs. Obedience

Photo by Carissa Snedeker

Speed blogging

  1. My paper -- When Worlds Collide: Business Meets Bureaucracy in the Water Sector -- is updated.

  2. National Geographic says TEoA "delivers analysis interspersed with fascinating insights into human behavior." (No jump in sales witnessed...)

  3. The political-economy of access to water is different from that of sanitation.

  4. Yes. "Community-Based Well Maintenance in Rural Haiti" says community matters.

  5. Crazy dam finance corruption in Malaysia.

  6. Asian cities need to restore their ancient flood defenses, before they are washed away.
H/T to NS

17 Apr 2012

Anything but water

  1. More trade and fewer subsidies in the Middle East would make Arabs richer.

  2. Clothing-size, school-grade and other inflations that distort our decisions.

  3. A guide to accounting fraud in government (with IMF report), i.e., Enron x 1,000,000. On a related note, the government's games to manipulate the costs and benefits of environmental regulations, and how political corruption works in China.

  4. "That's the exception that proves the rule," explained.

  5. If you are interested in cooperation, conflict and society, then watch this fantastic presentation on evolutionary dynamics by Martin Nowak (Harvard).

Water chat -- Thibaut Leloc'h

Thibaut was my roommate during the WWF in Marseille. He also happened to be working for the French Development Agency on access to water in Palestine.

We recorded this 42 min chat [15MB MP3] after a long day of sessions, talking and drinking with water wonks. (He is speaking as an INDIVIDUAL, not a representative of the FDA.)

You should listen to it if you want to know more about the "water apartheid" that Israel is practicing in the occupied territories, and the institutional, logistical and "capacity" constraints that the Palestinians have in taking care of their own water.*

Bottom Line: Palestine has enough problems with development, but Israel is not helping.

* On a related note, watch this video if you are interested in (pro-Israel) media bias in the US.

16 Apr 2012

Monday funnies

Before dams led to shortages.*
(via BH) Wow, this bit [PDF] from California's very own stand-up comedian, Rep. Tom McClintock (R), is lol-worthy:
Today the Sub-committee on Water and Power meets to review the programs of the federal agencies charged with the responsibility of harnessing the vast water and power resources of the United States for the prosperity of our nation...

Yet while the House is moving to restore abundance as the central objective of federal and water policy, it appears the administration is moving in precisely the opposite direction...to a future of increasingly severe government-induced shortages, higher and higher electricity and water prices, massive taxpayer subsidies to politically well connected and favored industries, and a permanently declining quality of life for our children who will be required to stretch and ration every drop of water and every watt of electricity in their bleak and dimly lit homes - homes in which gravel replaces green lawns and the toilets constantly back up.

I see a different future for our nation: I see a new era of clean, cheap and abundant hydroelectricity. I see great new reservoirs to store water in wet years to assure abundance in dry ones. I see a future in which families can enjoy the prosperity that abundant water and electricity provides; and the quality of life that comes from that prosperity. I see a nation whose children can look forward to a green lawn, a backyard garden, a family swimming pool, affordable air conditioning in the summer and heating in the winter, brightly lit homes and cities and abundant and affordable groceries from America's agricultural cornucopia.
Wait, so this guy from the great, dammed North of California has the cojones to call for more dams while claiming that "the opposition" is subsidizing favored industries? And he thinks that more water storage will create a "government-induce surplus"? First, he needs to read more about why we need more fewer dams. Second, he needs a few lessons in supply and DEMAND.

Luckily for him, I'll be in DC from 3-10 May. I'll be giving a few talks (NOAA, IFPRI), so maybe there's time to brief his staffers of what real abundance looks like in California.
* The path to shortage starts by cutting off water from its natural course (shortage to Nature), then directing it to people who do not pay the full price of delivery, let alone scarcity. As their demand expands to overtake "additional" supply, scarcity moves to shortage, then a call for more dams. These silly people need to read my paper on how this cycle has damaged Northern AND Southern California.

Nature is a better water engineer

Is that an efficient curve?
My new favorite geek word is "hydromorphology," which may not sound as cool as heteroskedasticity but is far more useful. It refers to the way that water changes the shape of what it touches, most often in the way that flowing rivers change the surrounding landscape, in ways that improves the environment for flora and fauna, absorbs water in flood (recharging groundwater) and releases it in drought (the base flows that keep rivers running year-round).*

Besides letting water flow where it wants, humans can work with natural flows by using check dams or other means of slowing water so that it infiltrates into the soil. In urban areas, we can use permeable surface covering to keep water on land instead of forcing it into flood/drainage channels. This latter move -- so common in the Netherlands where flooding can turn nasty -- has the additional advantage of reducing CSO (combined sewer overflow) events.

Bottom Line: Nature has managed water for billions of years. We should take advantage of those lessons to maximize the value we get from water.
* These thoughts are the flipside of my increasing interest in removing dams to improve BOTH human and environmental benefits from water. For more on the benefits of removing dams AND a very good cap and trade scheme to do so efficiently, read this article [PDF] by Jamie Workman.

13 Apr 2012

Friday party!

He died of cancer of the liver/pancreas, which may have been related to his chain smoking...

Federal insurance fail

In my paper on business versus bureaucratic methods of managing water, I mentioned the problem of subsidized government insurance (against floods or crop failure) leading to excess risk taking.

Ric Davidge had such an interesting response to those thoughts that I post it here, in honor of Friday the 13th:
I think this is a solid model, especially for federal exposures. So often it is the first permit/permission by a federal agency that starts a process of risk exposure that may will cause economic harm in addition to ecological harm. And in almost every case the base resource is WATER.

In the early ‘80s, President Reagan and Congress tried to change some of these wrongheaded policies with the enactment and administrative delineation of undeveloped coast barriers along the Atlantic and portions of the Gulf Coasts.
The idea was basically very simple. Do not allow any federal permitting (Army Corps of Engineers, Section 404 permits allowing the development of wetlands, Dept. of Transportation permits allowing roads and bridges, etc) in these areas, as such permitting affected risk choices.
Additionally, Reagan and Congress attempted to end the cycle of risk underwriting by changing federal flood insurance to allow only one recovery. A structure could be insured once in consideration of what was in place -- essentially grandfathering them in. Any future risk after that would be on the back of the developer/homeowner and not the federal government.
Federal Flood Insurance is one of the largest “exposures” to the national treasury in existence. A vast unfunded mandate. Unfortunately this proposal failed in Congress due to obvious special interest pressure on key Members of Congress. (NOTE: I was the federal chairman of this initiative and delineation process. Job was done on time and under budget. A rarity in my Wash DC experience.)

12 Apr 2012

You think you have tax problems?

...and his government is even LESS competent in spending the money.

Water Chat -- Yoav Kislev

Late in January, I spoke with Yoav Kislev about water in Israel and Palestine, a topic that attracts more heat than light.*

In our conversation, I learned a few things:
  • Israel does not "take" water directly from the West Bank (WB, even if it pumps water from the aquifer that lies under both countries, via pumps on the Israeli side of the border).
  • Israel supplies piped water to Palestinian villages as well as settlements.
  • Settlements do not pump water from inside the WB (this is controversial).
  • Israel collects WB wastewater and then re-sells the treated wastewater to Israeli farmers.
  • Israel wants to provide desal water to Gaza, but they are not welcomed.
  • Palestinian farmers are NOT allowed to drill more wells for irrigation.
There are many more details, so I invite you to listen to this discussion [36 min; 13MB MP3].

I am also VERY interested in your thoughts and additional information (facts, please) on these topics. (I will post another chat next week on water in Palestine.)

For more, read Yoav's papers, especially this one [PDF] on Palestinian water and this one on the water economy of Israel.

Bottom Line: Israel exerts very strong influence on water supplies to the West Bank and Gaza. Some people try to make this control "fair;" others try to use it for national/Zionist/greater Israel purposes.
* See this post on water in the middle east and this, this and this on Israel.

11 Apr 2012

More on the value of water

I posted this question on a list of environmental & resource economists:
Has anyone ever measured the "value of water" in an economy, let alone to an individual?

I think not, and have written some reasons here.
Here are some responses (to be updated)...

NN says:
The literature doesn't seem to be very abundant on the matter (I've just been reviewing it as part of my PhD). Maybe these references can be of some help:
  • Young (2005) Determining the Economic Value of Water, Concepts and Methods. RFF.
  • Aylward, Seely, Hartwell and Dengel (2010) The Economic Value of Water for Agricultural, Domestic and Industrial Uses : A Global Compilation of Economic Studies and Market Prices. Ecosystem Economics.
BY says:
Your question sounds deceptively simple, but there are uncontroversial reasons why, for "an economy" it is difficult to measure the value of water. First of all, you appear to mean net benefit from water rather than the marginal value. If so, then net benefit is infinite since life cannot exist without water. If you mean marginal value of water, then it varies enormously across space and time. I have measured the marginal value of water in agriculture in Oregon, and it varies by a factor of 10 or 20 from parcel to parcel and week to week during the growing season.

This has to do with the nature of water itself, and the ambiguity in your question about "value."
RH says:
Check these out:
  • A few chapters in: Lange and Hassan (eds.) (2006). The Economics of Water Management in Southern Africa: An Environmental Accounting Approach. Edward Elgar, UK.
  • Hassan and Thurlow (2011). Macro–micro feedback links of water management in South Africa: CGE analyses of selected policy regimes, Agricultural Economics 42(2):235-247
  • Hassan and Farolfi (2005). Water value, resource rent recovery and economic welfare cost of environmental protection: a water sector model for the Steelpoort sub-basin in South Africa, Water SA 31(1): 9-18.

Speed blogging

  1. Political views and climate change.

  2. Coyote shows how ridiculous First Solar's business plan was (hint: government subsidies) while discussing how silly Germany's solar subsidies are. In related news, Michael points out that DoE's equation of spending money and hiring people with "success" is wrong.

  3. Two new reports (here and here PDF) predict that coastal flooding from global warming-induced sea-level rise will have serious and direct consequences for the 3.7 million U.S. citizens living in those areas. (Check out this Surging Seas mapping tool to see the potential impact to your coastal area.)

  4. Lynne points out the parallels between one-size-fits-all nutrition (pun!) and economic policies. Hint: Do what works.

  5. The Dutch work ethic (or lack thereof) makes them happier. The secret? Less waste at work and less waste in government.
H/T to KO

10 Apr 2012

The value of water

Addendum: Consider Umwelt when you consider values (hover your mouse over the cartoon).
In my book, I mention "value" over 200 times and the "value of water" 12 times. When discussing value, I use the phrase "personal subjective value of water" to remind readers that the value of water varies among individuals, unlike the cost of providing that water or the price that's charged for it -- whether it comes in a bottle, in a cubic meter to the tap or a megaliter/acre-foot down an irrigation ditch.

These ideas -- explained in Chapter 1 [free sample chapter PDF] -- are related to the economic concept of a "demand curve" that describes how our value of water (or any other good) changes according to how much of it we have. Thus, we put the highest VALUE on the first unit of water we receive, a lower value on the next unit, and a lower value on the unit after that.

These values form a downward sloping demand curve that "exists" before we even talk about price or cost.

When a price is given for the good, then we consume as much of it as we can AS LONG AS THE VALUE TO US exceeds its price. Some people will consume more than others at the same price (liters of bottled water, length of shower, etc.)

The total SUBJECTIVE PERSONAL value of that consumption to us is then the difference between the value of what we consume and what we pay for it, or the area under the demand curve.* This figure shows value in the blue triangle:**

The most important lesson from this little example is that nobody knows how much value you get from that consumption. It's even arguable that YOU do not know the value of how much you consume, since you do not often face the choice of "how much is that first litre of water worth to me" in a true auction/market environment.

Maybe you say "a lot" and others would agree, but "a lot" means different things to different people, and THAT statement leads me to this RFQ (via KC and AL):
Value of Water to the U.S. Economy: Call for Papers and Request for Quotes
Under contract to the U.S. Environmental Protection Agency Office of Water, Industrial Economics, Inc. is seeking proposals from independent experts for the development of papers on (1) water's contribution to the U.S. economy, (2) current capabilities to analyze and estimate this contribution, and (3) the steps necessary to improve our understanding of water’s economic contributions.
Although this contract has been awarded, money will be spent, and values will be discovered estimated guesstimated made up, I'd like to point out that none of these numbers will mean anything in two ways:
  1. I may not agree with numbers that YOU give for the value of water used to grow a tomato, fabricate a silicon chip, etc.***
  2. Even if we agree on values, then those estimates will be wrong. Real values are based on personal choices, not the price paid or cost of delivery.****
I'm willing to bet that there's no policy recommendation to take, even if (1) happens, either because different values of water will not lead to reallocations (that's a political decision) or because those "values" may be wrong, which means that reallocations may lead to a LOSS in total value of water in use.

What do I recommend instead? Set up mechanisms that make it easier for us to reconcile our values of water, so that water ends up going to highest and best use. There's NO NEED to know values, just a need to reconcile them. These are scarcity-adjusted, full cost water prices (in the case of urban water service) or markets for water (in the case of irrigation or bulk municipal water). I've discussed these endlessly in this blog, but they are also discussed in Chapters 1 and 5, respectively, in my book.

For more on these issues, I suggest that you (and the EPA!) look at this report from the European Environmental Agency: "Towards efficient use of water resources in Europe," which relies on a discussion of "value" that I was very happy to criticize in Marseille. Here's the MP3 [60 min 21 MB] of the whole presentation and my slides [PDF].

My main point (see the slides) is that the EEA needs to set a minimum water flow to protect the environment, then use market mechanisms to allocate water to economic uses (urban, industrial, agricultural).

Bottom Line: The EPA should not waste its money (our money!) to "measure" water's contribution to the US economy. It should work on improving the ways we allocate water, to reconcile our PERSONAL SUBJECTIVE VALUES in a way that maximizes our water wealth.
* And above the price line, since the value under that price line is cancelled by the money we have to give up to get those units.
** If yo wonder why price/value (the independent variable and the outcome) is on the vertical axis and quantity (the dependent variable) is on the horizontal axis (the economic "norm"), then read my article [PDF] on the problems with that.
*** Note that a correct way to value water in use is NOT to divide total value by amount of water (that would make "lawyer water" far more important than "strawberry water"), but to evaluate the relative contributions of water and other inputs -- something that's very complex and not worthwhile, compared to pricing water correctly and letting people use as much as "makes sense" to them.
**** Economists agree that people buying a last unit "on the margin" pay a price that's at or just below their value for that LAST unit, but there's no way of knowing the value of earlier, "inframarginal" units.

9 Apr 2012

Monday funnies

Funny. Honest!

Why planners fail

Imagine an area where you are allowed to drive as slow or fast as you want, depending on the circumstances. That area may look like this.

Now imagine that there's a speed limit in the area. Does this mean that you will drive faster than before (more dangerous) or slower than before (more bored)? Either one is worse that driving your "natural" speed. And what's the goal anyway? A certain speed or safety? Some rules are useful for helping drivers work together (stop signals, side of road to drive one), but others are just in the way (and thus often ignored, except when it comes to meeting ticket quotas).

Bottom Line: The problem with planners is that they cannot be as flexible or accurate as individuals making their own choices when those choices do not affect each other or can be coordinated at a low cost.

6 Apr 2012

Friday party

Holy shit.

Anything but water

  1. "Blogging is quite simply, one of the most important things that an academic should be doing right now" say guys @ LSE with 350 co-bloggers. This caught my attention:
    We don’t think single-author blogs are a sustainable or genuinely useful model for most academics – although all praise to the still many exceptional academics who can manage to keep up the continuous effort involved... people start them with high hopes, in determinedly individualistic mode, but find that hard to sustain after a while. Coming up with fresh content, day after day or week after week, is hard work for any academic, especially in the current climate where there are so many other demands on people’s time. But if you don’t post regularly, in a rhythm that is clear to readers so they know when to come back, then it can be hard to keep things going.
    Dear LSE, thanks for the backhanded praise.

  2. It's that bad:
    The Japanese people’s trust in their national institutions, which had long been flat, had plummeted: it now hovers just above that seen in Vladimir Putin’s Russia. The nuclear accident clobbered faith in government officials and power companies. Trust in the media also dived... “The government lies all the time,” said one.
  3. Print this post because we do not remember so well, things we read on a (small) screen.

  4. The abuse of technopanics for stifling innovation and freedom.

  5. The Matt Ridley (author of the Origins of Virtue) prize for environmental heresy is funded by wind farm royalties. Really.
H/T to GG

5 Apr 2012

Orwell would be proud

170 percent of what?

JF sent this photo, which may contradict Imperial Valley's claim to grow 80% of winter veggies in the US. I think that these farmers need to do less lobbying for irrigation subsidies and more math.

I also think I was right to call IID's claim agit/prop.

4 Apr 2012

Why I blog

There are many reasons, but SM sent me a great comment on my paper on land grabs in Africa [now updated] -- a comment that not only saved me from making a few mistakes in the final version, but one that changed the bottom line result of the paper.* Thanks!

*Added to the abstract:
A comparison between 17 SSA countries with heavy "grab" activity and 27 others with lower levels of activity reveals that "grab targets" have the same or better governance and water resources, a finding that contradicts a hypothesis that these deals are harmful grabs but supports one that they are beneficial FDI. Deals called "grabs" may not be.

That dam zombie is back

At the World Water Forum in Marseille, I attended the "High Level Panel: Water Infrastructure for Development in Large Countries" in which speakers from China, Brazil, Mexico, the US and the World Bank gave their "state of the art" opinions, mostly on dams.

My (poor) recording of the speakers [2 hrs, 43MB MP3] is more complete than official videos that only lasted a few minutes here and there...

Roger Lanoue, representing the "official opposition," gave some good comments (again, listen to the MP3 to hear them all).

What most shocked and surprised me (I am still not cynical enough it seems) were the statements by Rachel Kyte of the World Bank (video of her but not the statements; listen at 1 hr 10 min on the MP3). She said (paraphrasing) that the Bank will support large scale hydropower as a response to climate change, to promote green growth, improve access to all, and fill a portfolio of sustainable energy -- a list of all things to all people that the World Bank needed to respond to especially when "access to project financing dried up in the financial crisis and the Bank had to step in, to lend."

I was horrified, not just to hear that the Bank is willing to take financial risks that others were not willing to take, but also to hear that BIG DAMS are back on the agenda. From an economic perspective, these dams are going to have worse benefit/cost ratios than existing dams (given our habit of building good projects first). From an environmental perspective, these dams are going to exacerbate the water cycle in extremes (I confirmed this with a nearby hydrologist, who said that dams which fail big when they fail offer a poor substitute to allowing natural flood plains to absorb excess water, let alone let the hydrological cycle run its course.)

I was able to ask a related question -- "why not have an anti-dam program" -- at one hr 39 min. I used the example of breaching Aswan High Dam (previous post), as a means of increasing water supply (25 percent of the water in Lake Nasser evaporates every year), improving soil fertility, healing the Nile Delta, and equalizing the distribution of water among farmers. (Note that "natural fertility" means less fertilizer, which is manufactured with natural gas). These benefits would come at a cost to "clean green power," but Egypt already wastes so much energy by subsidizing it (at a cost of 20 percent of the government budget!). The government could pay for breaching Aswan by ending the subsidies and see no shortages due to a decrease in demand with the increase in energy prices :).

I was interested to hear that the only person who gave my question a reasonable answer was Steve Stockton of USACE. He mentioned the possibility that some dams would need to be decommissioned. Although I wouldn't expect such an answer from a Brazilian minister, I was displeased to hear nothing from Kyte.

Bottom Line: The World Bank is going to waste a flood of money on dams that destroy the environment and do little to increase energy, economic or national security -- "because we must." Consulting engineers, fixers and corrupt politicians must be salivating.

3 Apr 2012

Why I will run for political office

Candidates like Rick Santorum (watch him "speak from his heart ass" about euthanasia in the Netherlands, via DL) make me feel like this all the time:

...or maybe politicians think that April Fools is everyday?

Kurtz on Public vs. Private ownership

A guest post that underlines my post on the public-private cycle from a year ago.
Having just spent the better part of two days in Sacramento at the Water Education Foundation Executive Briefing, I left with a new perspective on the public/private debate on ownership of water systems. Several speakers were from large municipal water agencies, and they pointed out the present scary level of infrastructure neglect that most people ignore. This neglect not only wastes water through leaks and such; it could have serious economic and health consequences in a catastrophic failure. There is no money, and no promise of money, to address many of these things. Unlike the Feds, cities can not conjure currency out of thin air. Bonds still have to be repaid, out of something.

It seems to me that governments are very good at building systems (provided they have access to finance), but very bad at owning them. Democratically elected officials, with the powers of condemnation and the ability to tap the municipal bond market, are probably the right ones to develop a water and sewer system. But they never run them well. What local Pericles, faced with the choice of spending millions on two choices:
  1. ensure that their city’s sewer system will last for 80 years instead of 40 years or

  2. provision free yoga mats with his picture on them for the entire population
will choose (1)? Of course, there are more serious and immediate issues, like the economic obsolescence of a key industry, that force city governments to deal with acute problems, and ignore the chronic ones. I don’t mean to smear them all.

To me the answer is for municipalities to sell the developed infrastructure to private institutional investors (like pension funds, life insurers, pools of money for very wealthy people). Especially in this time of zero interest rates, when trillions sit on the sidelines with nothing to do, there is a great opportunity. Long term returns of 5% looks fabulous. The buyers get an asset, an immobile customer base and income stream, and some measure of inflation protection. The cities get money, and one less headache. A long term institutional owner will fund long term maintenance, because they aim to stay in business for a very long time. Obviously this presupposes that the private utility will be subject to the same oversight as any other natural monopoly granted in the interests of public convenience and utility. Rate payers will still provide the bulk of the income, but the enterprise will no longer see itself as a charity. An investor will question silly policies like using drinking water to wash sidewalks and fight fires. Leaks will cost him money. From what I have seen of the many municipal water utility employees I have met, they are neither overpaid nor underworked. Most of those folks should just be moved right into their new old job.

There are cultural obstacles, of course. I wonder if there are financial ones as well.

2 Apr 2012

Monday funnies

Strong impressions from the WWF

A few more thoughts...
  1. Associations devoted to sustainable use of water by businesses continue to avoid the elephant in the room: corruption that puts their operations in foreign countries at risk. I was hopeful that the Alliance for Water Stewardship was going to take on this problem. In their session, they proposed an evaluation of sustainable water use at member locations AS WELL AS use in the area (to get an idea of site impact vs total impact in the area), but AWS does not appear to be taking this brave step. Instead, they will wait to hear what the "community of stakeholders" (everyone it seems) has to say. That may be a disappointing wait.

  2. The "governance" crowd, likewise, is not grasping a very important requirement for local or national water management, i.e., the need to bring agricultural water users to the table -- by force or persuasion. On the OECD panel on governance [1 hr 53 min 40MB MP3], I asked (at 1:27:20) how they were going to involve farmers. The response -- it seems -- would be by promoting transparency. I'm not sure how that's going to do any thing, as farmers are quite content to pursue business as usual -- perhaps assuming that they will get extra water or money when they overuse what they now have. You can also listen to another high level panel on governance that was more wishy-washy [1 hr 57 min 40MB MP3] during which I sometimes held the recorder to my headset to get the translated English.

  3. I was curious to see that a young group of French performers were very skilled at playing "corrupt manager awarding water concessions to the sexy lobbyist" game. Even more so -- mostly from Francophone Africa -- was able to participate with their own variations on corruption and how to tackle it.

  4. I agree with Aquadoc:
    The WWC does not make much of an attempt to engage in a retrospective examination of previous fora to determine whether the items discussed, the commitments made, the solutions proposed, etc. have had any effect. So as far as I can determine no one really knows whether the previous fora have done any good - other than providing a huge networking/showcasing opportunity. That's not good.
  5. The World Bank appears to be gearing up to waste vast amounts of money, ruin the environment and weaken water management -- this is NOT an April Fools joke! I'll post on that depressing development in the near future.