31 May 2012

Speed blogging

H/T to DL

A Dutch thing or a human condition?

Laws and contracts are sometimes vague (incomplete contracts) or enforced at the discretion of an official (principal-agent incentives).

The Dutch are great traders who may have a stronger familiarity with sticking with contracts when it suits them -- and ignoring them when it does not.

I can see this in the way that some Dutch will stop at a red light (on a bike) and wait, even when there's nobody there. Other Dutch will not.

I can see this in the say that some rules are ruthlessly reinforced -- even when there's social gain from allowing the rule to lapse -- because it suits someone, while other rules are flaunted...

Does this have to do with trade and sharp dealing? Does it have to do with moral ambiguity? Does it happen more with the Dutch and other trading cultures on sea coasts (e.g., the Mediterranean) and less with landlocked nations that are more inward looking?

Your thoughts?
Addendum (27 May 2013): It seems that they Dutch are tolerant if (1) there's a profit to be made, (2) lawbreaking is done quietly and (3) nobody gets hurt.

30 May 2012

Anything but water

H/Ts to CD and WM

Green oxymorons

Green products (recycling, solar power, hybrid cars, etc.) are more about consumption than production, since people are willing to pay/subsidize them to "feel good."

In the same way, green jobs (carbon adviser, sustainability director, etc.) are less productive than "brown jobs" because they must be subsidized before people will speak to workers...

In these senses, both are oxymorons: they are called "productive" but they are actually consumptive.

Please comment?

29 May 2012

Tuesday funnies

Cats rule the world, so this is a natural law:


The Empathetic Civilization

This video (via CD) covers a recurring theme in this blog (and political economy), i.e., how well we do as a society depends on how much we care about each other. Although there are many useful ways to "incentivize compassion" (i.e., the Invisible Hand), it doesn't hurt to actually CARE about people. (It's even more important in this Anthropocene Age, where our actions -- good and bad -- change the world we live in.)


28 May 2012

The pipe dream of energy independence

RM sent me this great clip from the Daily Show. Watch how eight US presidents have promised -- and failed -- to deliver independence from "foreign" energy sources. Why is this? Because (1) we like using energy and (2) foreigners can sell us energy at lower prices than we pay for domestic supplies.

Will fracked natural gas end this cycle? Not until (1) it replaces oil for fuel in transport and (2) comes in sufficient volumes to have a significant position in the market.

Bottom Line: We are not "dependent" on foreign oil. We buy it because it makes our lives better. Get over the silly nationalist rhetoric and welcome your market overlords. (Oh, and note how there's not a SINGLE sign of falling demand for fossil fuels. Prepare for climate change too!) Enjoy your holiday!

Speed blogging

H/Ts to CD, RO and RM

26 May 2012

Flashback: 21--27 May

A year later and still worth a read...

Public trust vs markets -- markets can save the environment at lower cost. On a related note, well-meaning destruction discusses how environmentalists who reject markets (ITQs for fish) endanger the vary fish they want to protect.

Israeli water technology -- part 1 -- lots of great technology won't lead to good outcomes if you have bad water policies (subsidies to farmers) or take water from your neighbors (Palestinians). Related: Poll results -- transnational waters discusses the potential for conflict or cooperation over mutual water resources. Nationalist aggression impedes cooperation.

25 May 2012

Friday party!

Crazy weird, via DW:

Can we end hydraulic mining?

I wrote this op/ed for the LA Times. It was rejected because "the column is too broad and some parts not explained enough for a mainstream readership... you don't have to 'dumb it down' but next time, it might work better to pick a narrow issue in the news and focus just on that." I disagree, since ALL the narrow issues in California (and elsewhere) are distorted by these factors. What do you think?
I grew up in San Francisco and Los Angeles in the 1970s, spending time in each city as I shuttled between divorced parents. In San Francisco, I used the garden hose for hydraulic mining in my back yard -- blasting away soil as I searched for treasure. In Los Angeles, I played in the lawn sprinkler on hot days -- shooting water into the air for hours at a time.

I remember the 1980 vote over the Peripheral Canal, which was NOT a good thing. Years later, I created the ``Peripheral Canal" entry in Wikipedia. Many people had forgotten the North-South acrimony over the division of water. Not me.

In fact, it seems like we are seeing more conflict than ever. And why it that?

Money.

Imperial Irrigation District doesn't want to pay to restore the Salton Sea its farmers have polluted. Farmers don't want to pay the Bureau of Reclamation the costs of building the Central Valley Project. The Los Angeles Department of Water and Power is trying to minimize its spending on stabilizing the dusty remains of Owens Lake. Environmentalists don't want to pay for their dream of restoring Hetch Hetchy. Citizens of Sacramento and Fresno don't want to pay for the water they use. The list goes on, but every example shares a common trait: a desire to pay costs with other people's money and get water from other people's supply.

Californians have a long tradition of getting something for nothing where water is concerned. Hydraulic miners in the Gold Rush could claim as much water as they could shoot from streams onto hill sides. Suburbanites got cheaper water because urban neighbors had already paid for infrastructure. Farmers shifted dam costs to taxpayers who paid for "public interest" flood control and recreation.

Those cheap water tricks worked pretty well while water was abundant, but growing demand eventually overwhelmed natural supplies. Scarcity has become the new normal: we now get less water for more money, time, lawsuits, and other forms of full employment for politicians, engineers, lawyers, lobbyists, bureaucrats and economists. (Remember CalFed? It cost $5 billion and didn't fix the Delta.)

It's time to recognize that times have changed. Santa Claus is not going to remove half the State's population, restore dry rivers, fill irrigation canals, or replenish groundwater. We have to set up a system that allocates our scarce water with minimum friction and maximum social benefits. I suggest the following:

First, every water diverter/extractor should pay an extraction fee in proportion to local water stress. That means a high fee in arid and heavily-populated Southern California and a low fee in sparsely-populated, wet Northern California. The fee will encourage users to find ways to use less water. Such fees have driven Israeli farmers to radically improve their water efficiency.

Second, use fee revenue to pay for monitoring and management of surface- and groundwater supplies. Many states and countries have transparent and uncontroversial systems for maintaining their water sustainability.

Third, reorganize water rights to protect minimum environmental flows, retire paper rights, and facilitate water exchanges within local watersheds or -- with appropriate protections -- across watersheds. Australia has been largely successful in making these changes over the past ten years. Such trade will ensure that adequate water flows to urban taps, California's best farmers stay in business, important environments can thrive, and businesses get the reliability they need.

Finally, either require that state and federal infrastructure users pay their remaining debts or bankrupt and shut down those systems. Debt overhang encourages managers to continue to run their inefficient systems under the mistaken hope that users will eventually pay. That's a forlorn hope -- under current rules -- for the Central Valley Project. The State Water Project is in better fiscal condition but subsidies from Southern California cities to Central Valley farmers encourage wasteful use of scarce water supplies.

Bottom Line: These actions will restore reality to California's water system by restraining demand to sustainable supplies, ensuring that users pay for the water and infrastructure they use, and facilitating the transfer of water from historical users whose claims depend on decisions made by their great-great-granddaddies to contemporary users who can put California's water to its highest and best use.

24 May 2012

The US is to NL as MX is to the US

Many people in the US ask me what life in the Netherlands is like. It's definitely about bikes and canals, and not about hookers and pot, but those examples don't capture the underlying feeling, culture or institutions.

So that's why was pleased to realize (while visiting Washington DC) that the difference between Dutch and American life is similar to the difference between American and Mexican life.

On corruption, the Dutch are better than Americans who are better than Mexicans. Compare them on crime: the high murder rate -- related to US drug policy -- in Mexico or crazy theft in the US vs. Dutch peace (Germany is similar; their police fired 85 bullets in 2011). From a different perspective, you can look at the murder rate per 100,000 people: 0.87 in the Netherlands, 4.8 in the US and 18 in Mexico.

On women, the Dutch are better than Americans who are better than Mexicans. Compare Dutch women (happiest in the world) to abortion and birth control debates in the US to the playboy girl who "facilitated" debate among Mexican presidential candidates.

On a more quantified level, consider these countries' Inequality-adjusted scores on the human development index (an index that balances economic output with quality of life): Netherlands at 0.85, the US at 0.77, and Mexico at 0.58.

But there are also some good -- or interesting sides -- to visiting or living in a less-developed country. Among them are more adventures, more open people, better shopping opportunities, and so on. These advantages are what attract me to visit and explore different countries, but they are not necessarily good for quality of life, i.e., quality of health, social systems, environment, economic value for money, and so on.

Bottom Line: The NL is more developed than the US, which is more developed than Mexico, but it's always useful to compare, understand and borrow good ideas from others when trying to improve our lives and the policies that affect them.

23 May 2012

Thanks cyanobacteria!

I bet you didn't know that cyanobacteria are not just responsible for the algae blooms that choke waters and kill life, but also for the oxygen we breathe? Well, they are, so keep an eye on this little sucker, the original photosynthesizer that's outlived us by several billion years.

(Oh, and it's also the source of natural blue-color dye :)

H/T to CD, for her birthday :)

Water pricing and metering

I wrote this for a website two years ago, but it was never posted. Sound right?
"Water is a gift from God." ---Argentine State's Attorney

"Yes, but he forgot to lay the pipes." ---Olivier Barbaroux of Vivendi
If you drink water from your own well or divert it from a neighboring river, then you can stop reading.

Everyone else should read on.

We pay for our water because we need to cover the cost of getting that water to our taps.

Those costs are fixed and variable.

Fixed costs are the costs of building dams, aqueducts, treatment plants and pipes. They are the salaries of the people who install and maintain equipment, answer the phones and make sure that you are paying your bill. For most water agencies, 70-80 percent of total costs are fixed. That means that they do not go up or down with the volume of water sold.

Variable costs do fluctuate with delivery volumes. There are costs from the energy it takes to run pumps and machines, the chemicals that go into water treatment and the costs of some staff.

The interesting thing is that there is not often a cost of water. That's because many water agencies have the right to divert water from a river or lake or pump it from underground. San Francisco doesn't pay a penny for the water it gets from Hetch Hetchy reservoir. It has the right to export that water from the Sierra Nevada because it has an agreement with the Department of the Interior.

So these costs need to get paid.

Our water bills used to be simple. We paid a flat charge, per month or quarter, and used as much water as we wanted. The goal was cost recovery, not water conservation. There was plenty of water, and revenue paid for fixed and variable costs.

Meters made an appearance when water conservation started to matter, and we wanted to do two things: Charge people for what they used and encourage people to use less.

Water meters always reduce water use.

People also like them because heavy water users (water hogs) use more.

Meters also made it possible to charge people in two parts: a fixed charge per meter and variable charge for the volume of water used.

There are three ways to charge for water volume:
  1. Uniform pricing charges people the same price per unit, regardless of how many units they use. This pricing is similar to the price we pay for gasoline.

  2. Decreasing block rates mean that people pay less per unit, the more units they use. This =pricing is similar to the price we pay for cellular phone plans. Buy more minutes, pay less per minute.

  3. Increasing block rates mean that people pay more per unit, the more units they use. Ironically, we do not see this kind of pricing outside regulated (water, gas, electric) utilities.
There's lots of economic theory behind these pricing regimes, but the basic idea is to encourage use with decreasing block rates and discourage it with decreasing block rates. Those incentives generally work, but they can be weakened by:
  • Blocks that are "too wide," so that people do not face a higher or lower price point when they are deciding how much to use.
  • Blocks that do not "step far," so that the change in price is too small to notice.
Now here's the tricky part. In systems without meters, the flat monthly charge would cover both fixed and variable costs. When meters were introduced, it was easier to match fixed costs to fixed revenues, and variable costs to variable revenues. That would ensure that the utility would break even as consumption (or costs) rose and fell.

Note that municipal water agencies decide how much they want to charge. Investor owned private companies have their prices regulated by a Public [sic] Utilities Commission that's part of the state government.

Unfortunately, lots of people wanted to use variable prices to influence water use. That meant that the share of variable revenue had to rise, so that, for example, a utility may get 80 percent of its revenue from variable charges.

It's not hard to see that these weights would lead to mismatches between costs and revenues.

Let's say that a family pays $100 per month for water: $20 fixed and $80 variable. If they use 50 percent less water, then their bill falls to $20 + $40 = $60. Unfortunately, the utilities costs fall by $10, from $80 fixed and $20 variable to $10 variable. So the utility has a revenue shortage and then -- often -- asks for price increases. This often annoys customers, since they end up facing higher prices after using less.

But this is the water business, and nothing is ever as straightforward as it seems.

I suggest that you get your water bill and try to understand what you are paying for, why it is that amount and how those costs may change -- or not -- with your behavior.

22 May 2012

I'll be tweeting at EU's Greenweek

I'm getting tired of hearing too many silly ideas at the conferences, so time for retribution.

Follow #greenweek or look to @aguanomics...

A libertarian constitution

In order to form a more perfect union, I propose this:

Article 1: Don't do shit if you don't want to, not because it's wrong.

Article 2: Harming someone is not allowed because that person gets to decide what they want to do or have done to them (see Article 1).

Article 3: Damaging collective goods is not allowed because everyone gets to decide what they want to do or have done to them (see Article 2).

Did I miss anything?

21 May 2012

Monday funnies

I wonder what happened next to the sitting guys... (where is this?)


Conservation subsidies and agricultural water use

Macarena Dagnino-Johns wrote this guest post based on her article analyzing the effectiveness of subsidies for water conservation programs in the Rio Grande Basin in NM.*

Water conservation programs are under debate in areas where water is scarce, irrigation is significant, and food security is compelling. Subsidies for drip irrigation increase farm income, raise the value of food production, and reduce the amount of water applied to crops. However, our research findings in the Rio Grande Basin in New Mexico produced the unexpected result in that water conservation subsidies that promote conversion to drip irrigation can increase the demand for water depleted by crops. Our analysis showed that where water rights exist and water rights administrators need to guard against increased depletion of the water source in the face of growing subsidies for drip irrigation.

We used a model that analyzed five drip irrigation subsidies (a capital subsidy for converting from surface to drip irrigation that varied from 0% to 100% in 25% increments) in two water supply scenarios. For each run, income-maximizing water applications and water depletions were allocated among crops and irrigation technologies.

The results show that the shadow price will vary considerably according to the water conservation subsidy level and water supply scenario. A higher conservation subsidy raises the scarcity value of water. A lower water supply scenario also raises the shadow price of water. For example, when there are under base (full) water supply conditions, the shadow price of water is zero with no drip irrigation subsidy. However, that value gradually increases US$37.57 per 1000 m3 as the drip irrigation subsidy grows to 100%.

The substitution of drip for surface irrigation in the face of a rising drip subsidy increases crop yields, raises profitability of farming, and raises crop water depletion (ET) per unit of land irrigated. This growing economic value of depletable water with a rising drip irrigation subsidy occurs because water administration in New Mexico protects water rights by guarding against increased river depletions with alternative policies... water rights in New Mexico are based on the right to consume water, not the right to apply it.

Our findings suggest the need for continued work on the definition and implementation of the term "water conservation" since water conservation subsidies do not provide farmers with economic incentives to reduce water depletions and therefore are unlikely to make new water available for alternative uses.

Drip irrigation is important for many reasons, including greater water productivity, higher crop yields, and increased food security, but it cannot be relied on to save water depletions when considered from a basin scale.

What actions could be taken by water administrators to guard against increased water depletions in the face of growing drip irrigation subsidies? The right to an upper bound on ET associated with a water right could be posted in a central place available for all irrigation water rights holders and all water stakeholders to see. With greater crop ET induced by a subsidy to increase irrigation efficiency, farmers would be allowed to take any action to respond to the greater profitability of drip irrigation as long as total crop water ET did not increase.

Bottom Line: Water conservation programs should also observe crop water and land use patterns that can be altered in the face of a drip irrigation subsidy and maximize farm income while protecting existing formal or informal water rights holders.
* The article -- “Economics of Agricultural Water Conservation: Empirical Analysis and Policy Implications in the Rio Grande Basin, NM, USA” -- is available here.

Macarena Johns worked at Unesco-IHE as a researcher/lecturer and assistant program coordinator for the MSc program in Water Management. She holds an MA in Agriculture and a BSc degree in Geography. Her main interests include agricultural policy, food security and irrigation water management systems. During her time at Unesco-IHE, she actively engaged international organizations and multiple partners in the coordination of projects and teamwork related to the MENA region and WWF 6. She also instructed on-line modules in "Integrated River Basin Management, (IRBM)” with focus on strategies for the optimal use of land and water resources. After the World Water Forum 6, she is looking for a job as a researcher assistant or as a project officer in human geography, land grabbing, rural development, or similar.

19 May 2012

Flashback: 14--20 May

A year later and still worth a read...

Free stickers aren't free -- the opportunity costs of "green" subsides.

Can we blame Goldman Sachs? One year later and no sign that they caused jumps in food prices (they certainly benefited from them).

On a related note, I offer this opinion on players in the financial crisis, some perceptive words that I said to a friend in a moment of pique:
Yes, we know that the guys from Goldman Sachs are certified cunts; the Germans are just tight.
My solution? Same as a few years ago:* Declare bankruptcy, pay 20-30 cents on the dollar/euro, and let sustainable finance get to work -- with more experience on what happens to foolish lenders.

Realpolitik means killing your own people -- still happening in Syria :(Economics is often called The dismal science by those who oppose its insights. The name was given to an economist who opposed slavery.
* Read this, this and this.

18 May 2012

Friday party!

Reggie Watts totally rocks.



Speed blogging

  1. "Everything is dead" in the Gulf of Mexico, due to the BP spill, it seems. Let's see how this story develops...

  2. I discuss fracking on Wisconsin Public Radio for an hour [21MB MP3]. Ed Dolan offers an EXCELLENT overview of the economics of fracking (perfect tutorial). The National Academies had a forum on the health impacts of fracking.

  3. Arthur Laffer has a book on "fixing" California and an op/ed on water that makes some familiar (and correct!) points:
    Yet that doesn’t mean there [need be] “shortages.” In a functioning water market, prices would adjust to balance increasing demand with decreases in supply.

    Higher prices would encourage conservation by making waste more expensive.

    They’d also create incentives to bring new supplies – such as water from desalination facilities – to the market.

    But the state’s politicized water control system prevents the market from doing so. Instead, politicians and other public officials determine who gets what and when. Well-organized political constituencies do everything they can to influence the rule-makers. That’s not necessarily good for the rest of us.
  4. WaterLex has a "Human Right to Water and Sanitation" Online Legal Database.

  5. In case you were wondering: "Floods becoming more dangerous, more costly, says World Bank"
H/T to JC

17 May 2012

Clippings from OOSKAnews

Here are a few items of interest from OOSKAnews*

KARACHI, Pakistan (19 Apr 2012):
Ten thousand people die in Karachi every year due to renal infections caused by contaminated water, according to ... the Pakistan Council of Research on Water Resources... “98 percent of functional [water supply] schemes were providing unsafe drinking water,” and 95 percent of functional water sources were unfit for drinking due to microbiological contamination.
LIMA, Peru (26 Apr 2012):
Peruvian asparagus exports... threaten the water supply in Ica... consuming 35 percent of the water in the area...in the last 50 years, water levels in the region have fallen by 50 meters, due to an over exploitation... now reducing water levels... at a rate of two meters per year.

* I have a complimentary subscription ($6,540, with discounts per user for site licenses) in exchange for posting clips of articles I like, so this post may seem to be an advertisement. You can get a free trial issue if you want to read it yourself.

Dutch water expertise does not apply

I've had some interesting discussions about Dutch water management, in which one theme persists:
Why don't others listen to the Dutch about water management?
I've got three reasons:
  1. The Dutch have been learning how to manage water -- and cooperate (via the Polder model) for 500+ years. You can't export those institutions.
  2. The Dutch have to manage TOO MUCH water. Most parts of the world suffer from scarcity (an end of abundance), not surplus.
  3. Dutch solutions are built to last for 50-100 years (or longer), which makes them expensive to people used to short run thinking (the US, developing countries) instead of investing in durable quality.
These characteristics are virtues in Holland but handicaps abroad. I am not sure if the Dutch should market "Holland-lite," but they certainly need to take these factors into account.

Links to my talks fixed

Sorry, blogger software misses "http://" sometimes.

The links to the MP3s and PDFs of my talks in my post from Tuesday are there now.

16 May 2012

The Facebook killer

Would be twitter for groups, with an archive...
  • Most people on FB are "tweeting" about this and that in their lives.
  • Some people care to look at another's past, or at their self description.
  • Few people care about who's friends with who or who updated their photo.
  • Nobody wants to read advertisements related to anything others have done -- beyond their simple tweets.
Do YOU think those functions are worth $100 billion? $10 billion? I don't.

Anything but water

15 May 2012

My recent talks in DC

On centralized (bureaucratic) vs decentralized (market) allocation of water (and more!) at NOAA [MP3] and slides [PDF]

On land and water grabs in Africa at IFPRI [MP3 -- much better quality than what what callers heard] and slides [PDF]. During the talk, Ruth Meinzen-Dick provided these useful links:

The International Land Coalition probably has the best site on commercial pressures on land. They start with GRAIN listings but only add deals they can verify. Also check the World Bank land conference website (2 years of case studies and macro analyses) and the International Conference on Land Grabbing that took place in April 2011.

She ended with this caveat: "There is no way to distinguish between a land grab and foreign direct investment without micro level data on performance." I totally agree.

Is your community secure?

For water security, you need information, institutions and investments. All of them, presumably, are both necessary and sufficient.

Your thoughts?

14 May 2012

Monday funnies

Totally NSFW (swearing!)

Cost recovery versus conservation incentives

MV writes with this description of his water bill:
Calculating over the last five years and including taxes, VAT, and the connection, I paid about EUR 3.66 per m^2. (The water price is EUR 1.26 m^2, so EUR 2.44 is administrative crap/overhead.) I do not use a lot of water, so I pay an awful lot for the water I use. There is no incentive to use very little water. There is just a small incentive to not use an awful lot of water.
This is a good description of two factors. First, of the importance of fixed costs in a water system. Second, of the small importance of variable costs for reducing consumption. As I showed in Table 3 of my book [PDF], a higher variable price per unit of water (say EUR 3.00 per m^3 instead of EUR 1.26) would increase the incentive to conserve water without endangering revenue dedicated to fixed costs. The resulting surplus of fixed and variable revenues could be refunded, per person, to reward people who use less water. This post has more details, but remember that a higher variable price does NOT need to include any sort of increasing block rate structure.

12 May 2012

Flashback: 7--13 May

A year later and still worth a read...

Floods, climate change and bad policies -- increasingly important as we get more variation in the weather.

Lies, damned lies and politics -- where I confront a politician with facts and she decides to ignore them :-\

The culture of Arabia -- a useful portrait of a people from a visitor in the past.

11 May 2012

Friday (political) party

Chris Rock(s it!)


Do the right thing

After ten years of careful consideration of the costs and benefits of various actions to save the environment, I have come up with a rule of thumb for recycling and other "environmental best practices:"
Ignore them and do what the fuck you want.
Regulations that tell you what to do "because that's what you're supposed to do" are not worth following if you can't see WHY you should do them.

This form of "citizen invalidation" will free you from onerous burdens without giving you the excuse to pollute when it's legal yet wrong. It also allows businesses to continue to pass regulatory costs, direct taxes, and other costs related to bad behavior or scarcity through to consumers, via higher prices.

Your thoughts?

10 May 2012

iPad FTW

A few months ago, I posted on my purchase of a Galaxy Tab 10.1. After some time and experience, I decided to go over to the Apple "dark side."

Why?
  • I couldn't get the apps I wanted (New Yorker and Economist) on the Galaxy.
  • The software on the Galaxy was kludgy (hard to switch between apps, close apps)
  • The hardware on the Galaxy was also poorly designed (can't charge while on the stand, off button where I kept hitting it by accident, poor tap recognition)
  • Turns out I don't care too much about all the "alternative" apps...
So I bought the new iPad. Yes, it's $500, but it's a DAMN GOOD $500 investment cost for the benefits I get:
  • Much easier to sync google, music, etc. with my laptop (Lenovo) and iPhone
  • Better layout of hardware and software
  • Cool magnetic cover that puts the IPad to sleep when I use it
  • More and better apps, e.g., iTransDC is free and awesome (they do several US cities)
Bottom Line: It's the little things that make the difference between an annoying computer product and one that is a pleasure to use.

Water Chat -- Don Gaydon

Don Gaydon is from Brisbane, Australia, but he just finished his PhD at Wageningen University in the Netherlands.

I had a chat with Don back in March on his research on how Australian farmers (and rice farmers in particular) are adapting to reduced water availability. Among other things we discussed in our 70 minute talk [25 MB MP3] were:
  • the move from land-limited to water-limited agriculture
  • the similarities of agriculture in Australia, Spain, California and other places with highly variable water flows.*
  • the tradeoffs between spreading a little water on a lot of land, or a lot of water on a little land -- read this paper [PDF]
  • trapping and using local precipitation -- watch this video
  • whether farmers target yield or profit per hectare (usually yield -- whoops!)
  • this proposition: "without the participatory involvement of farmers, modelling studies on adaptation will be academic rather than practical" -- read more about farmers' tacit knowledge but also note that Don's experience (he's 44) greatly influenced the "reality" of his academic work, which is more likely to help real people -- all else equal -- than the work of a 26 year-old who's grasp of reality has not been tested by life outside the ivory tower.
You can download his entire dissertation [PDF].

At his defense, one examiner raised an interesting question: "If water is scarce, then why does Australia export 85 percent of its agricultural production." That's a good question (and relevant to many countries). I have a few responses:
  • Farmers with the property right to water can use it as they wish. If "the nation" wants to leave that water in the environment (we're not talking about eating that food domestically!), then they should be paid for the water.
  • Sustainable water use is more important than the amount of "virtual water" that's exported. Australian rice farmers who use flood water for crops are more sustainable than Indian (or California) farmers mining groundwater for crops.
  • Those exports lower food prices in other parts of the world, improving lives for consumers at the same time as they deliver profits to farmers.
Bottom Line: Don's work is going to help all of us -- farmers, environmentalists, and citizens -- improve our water management.
* Don says: "In his diaries, early Australian explorer Charles Sturt explored the Murray-Darling basin in an extremely wet season. He was continually confounded by vast areas of marshland and flooded wetlands, which he presumed initially must lead to an inland sea (!). He didn't know that he was witnessing floods in a place that had droughts that were just as dramatic. These vast floodplains are what we now call The Riverina - the irrigated cropping region which has historically produced a large part of Australia's agricultural profit." For a perspective on the same type of climate BUT INCLUDING a warning on water variation, read JW Powell's fantastic 1879 Report on the Arid Lands

09 May 2012

Use drugs with caution!

On a more serious note, check out this Venn diagram for recreational drugs.

Donate to support clean water research?

Ning Jiang, a PhD student at UC Santa Barbara is collaborating with Safe Water International to develop and test a sustainable water filter to use in developing countries that lack clean water.

Here is her video aimed at raising funds and public awareness.



I asked her some questions about her video and work. Her answers are quite interesting...

Q: Why isnt safe water or your lab paying for testing? Is there a cost share? Is this "unrelated" to research funding?

A: For most university labs in the US, we as the students sometimes need to get our own funding for research. Professors get grants for specific projects. As a result, they can't use those funding for unrelated projects. My adviser is very supportive of my idea, but since this project is not directly related to her other funded projects, she can't just take out a big chunk of her grants to fund me.

Safe Water International (SWI) is a wonderful but small non-profit that's run entirely by volunteers, and it doesn't have a big budget as some other large organizations do. But it also means that, since nobody takes any salary from the funding, all the $$ generated from Rotary funds and other funding sources go directly to projects. Taking funding out from SWI's budget means that less money is going towards other projects.

A little more about SWI. SWI is founded by Larry Siegel, who after retirement, decided to start this initiative and apply his knowledge in the water sector to help people in need. Other board members are also retirees or have other occupations. They have been doing great work in many countries, such as Malawi, Cambodia and Guatemala. Larry lives overseas in work sites more often than not. He is in Cambodia as we speak. (Please check out the SWI website for more information http://safewaterintl.org/)

That's why I love working with them and why I wanted to take the crowd-funding opportunity to generate public interests and get funding for us. Doing controlled, reliable science experiments is expensive. $2000, although is my SciFund target, does not cover all the costs. Any donations beyond the $2000 goal will also directly go to this project. In addition to crowd-funding, I am applying for other more conventional grants, such as government grants and institutional grants.

Q: Sustainable business models are for profit. Is there a plan to sell these filters for profit or will they just be given away?

A: The filters won't be just given away. As numerous case studies showed before, when a product is given away for free, the recipients often don't appreciate the value in the product. As a result, they either don't care to use it, or don't take care of it. SWI is not selling the filters for profit either. The sustainability aspect of the filter lies in that the villages will become self-sustainable at making and repairing the filter after the initial outside aid from SWI.

Q: $8/year may STILL be too much for people who cannot calculate costs and benefits...

A: You are exactly right! Filter development is only a part of the solution. It has to be complimented by education. One biggest problem we face in many developing countries is that people do not realize that dirty water is the cause of diseases. Pathogenic microorganism is a foreign term. People would rather spend a lot of money on hospital cares than spending a relatively small amount on a water filter. Also interestingly, in many places, such as Sudan, people would rather spend money on Coca Cola or cellphones than investing in safer drinking water. It's the marketing aspect of delivering clean water solutions. We have to help people see that safe water, before Coke or cellphones, is a "must have." SWI, as well as many other wonderful organizations, are actively implementing education programs that help the people learn about the importance of having pathogen-free or pathogen-reduced water. But that opens a whole new discussion.

08 May 2012

Q&A on water policy in England

Way back in November, I participated in a panel discussion on sustainable water policy in England and Wales. The forum -- hosted by Ofwat (the regulator) -- had several distinguished speakers (PDFs for list of speakers & attendees and summary of the discussion).

What interested me the most was that we, the panel, were told the questions in advance, questions that their submitters then asked "spontaneously."

So here are the (prepared) questions and audio recordings of the answers:
  1. Rose Timlett (WWF) asks: Damage is being done now to sensitive water habitats (like the Kennet). Why aren’t water companies trading more water and reducing the impact on wildlife? What one thing would the panel do to encourage value – and specifically is trading part of the solution? [MP3 of Q&A]

  2. Michael Jack (Former Efra Committee Chair): What can the industry and agriculture do together to avoid the sort of restrictions that were faced by farmers this year? [MP3 of Q&A]

  3. James Brand (Deutsche Bank): Damage is being done now to sensitive water habitats (like the Kennet). Why aren’t water companies trading more water and reducing the impact on wildlife? What one thing would the panel do to encourage value – and specifically is trading part of the solution? [MP3 of Q&A]

  4. Anthony Ferrar (Sutton and East Surrey Water): How will I justify to my household customers the effort going into increased competition for business customers? Can the panel explain why they think this needs to happen, and why households should care? [MP3 of Q&A]

  5. Bob Spears (Chairman, Utility Consumers Consortium): Given the range of environmental and other measures that are included in bills, what would the panel do differently to help combat affordability, both for hard-pressed households and for equally hard-pressed business consumers? [MP3 of Q&A]

  6. Ben Earl (B&Q): What do I say to my customers when they are told they need to buy a low-flow shower head but they don't want to? [MP3 of Q&A]

  7. Lakis Athanasiou (Evo Securities): Is the panel concerned at the possibility of consumer backlash against more and more being loaded on to bills (private sewers, environmental schemes etc.)? What does the panel think should legitimately be included in water customers’ bills? [MP3 of Q&A]

  8. Graham Mather (European Policy Forum): If you were EU president for a day (and didn’t have to worry about the Euro!), what one change would you make to European wide water legislation? [MP3 of Q&A]
Bottom Line: An interesting experience and useful example of how to engage "stakeholders" in a discussion on problems and answers.

Anything but water

  1. Cool: "A logical fallacy is usually what has happened when someone is wrong about something. It's a flaw in reasoning. They're like tricks or illusions of thought, and they're often very sneakily used by politicians and the media to fool people. Don't be fooled! This website has been designed to help you identify and call out dodgy logic wherever it may raise its ugly, incoherent head."

  2. The move from "he" and "she" to "they," as in "I don't know who bought that last book, but please thank them for lightening my luggage."

  3. Ariely on how to fix taxes in the US: Simplify them and give people a vote in how to spend the money (I recommend 100%, not 10%). Speaking of tax codes, remember that they are complicated because they deliver "rents" to special interests.

  4. Funny-informative, funny-strange, and funny-disgusting: WWII, as told through Facebook updates; the Zombie apocalypse, as told through social media; and the waste that is the TSA, in one infographic.

  5. How much extra energy do fat Americans use? About 1 percent.
H/Ts to AC and AZ

07 May 2012

Monday funnies

Whoops!

Economics 1, Groupon 0

I've been a skeptic of Groupon and its business model for some time.

I was not pleased with their business because it was so easy for others to copy it, but their dodgy accounting (booking gross sales without removing fees to merchants as "revenue) sealed their fate.

The problem with the model is that consumers will get fatigued of using the interface (i.e., higher transaction costs) compared to just shopping -- especially when Groupons are used for "extras" that will not become repeat purchases. (Merchants are also not so pleased, for the same reason -- a surge in demand that falls, without increasing future profits.)

So I was interested to see that some directors are jumping ship, a ship with a sinking share price (After the $20 IPO, prices went over $30 but are now under $11/share):

DJIA up 12.50% in 6 months; Groupon down more than 50%
It seems that "the market" is also displeased with Groupon and its business model. That's bad news for investment banks playing with the tech bubble, but good news for fans of capitalism.

It's also quite "interesting" to compare these dynamics (zero to hero to zero in less than a year) with the norm in the water "business," where a failed business model (charging price equal to cost for a good that's scarce and thus worth more than cost, creating shortages) and failed businesses (Las Vegas, MWDSC, and MANY others) can keep operating for years. Why? Because water utilities are legal monopolies subject to political definitions of "success" that can stumble along, delivering poor performance to customers and society for decades.

Bottom Line: Businesses need to make profits over the long term to be viable. (Hear that Facebook?)

05 May 2012

Flashback: 30 Apr -- 6 May

A year later and still worth a read...

Full cost pricing, the poor, or both? I participated in this debate, arguing that markets and prices (not bureaucrats and subsidies) are better for the poor. Read more to understand why I am right.

Also (sorry!) read on to learn about two very important ideas: Regulatory risk and uncertainty

Monday funnies -- for those who like their BS served neat.

Bin Laden and terror -- he's dead, but the "war" won't be over until we stop fueling it...

...and that will only happen if people use more science on their closed minds

04 May 2012

Friday party!

This (via CB) is a hard-to-watch but brilliant illustration of a batshit crazy prisoner's dilemma strategy:

Poll results -- World Water WTF

Hey, there's a new poll (regulations) on the right sidebar! ===>
Is world water day/week/decade useful for solving water problems?
No -- a distraction from REAL work 15%18
No -- just smoke and noise 33%40
Yes -- people do things to hit deadlines 5%6
Yes -- it improves awareness and thus addresses problems 38%46
Yes -- it explicitly improves policy 1%1
Other (be prepared to discuss) 8%10
121 votes total

As, you may have guessed, I am in the "no" camp. I would not say "yes" as far as "ordinary" people are concerned, due to the way attention on water issues spikes for one day and returns to zero for the next 364 days. Water policies need to be discussed and presented day after day (as they are at this blog), since they are based more on psychology, politics and persuasion than simple, self-reinforcing market incentives.

The only "awareness" I got in Marseille, was an appreciation of the degree with which most water ideas and technologies fail to address the economics or politics driving water policies. That's more of an announcement of ongoing failure than way to address problems.

But I DID appreciate the opportunity to do some networking :)

Bottom Line: Energy spent on useless leaves less time for useful.

03 May 2012

Good Engineers

Good Guy Greg, the Engineer
In response to this post, Magilson said...
As an engineer, I take issue with your aside. Engineers aren't, in fact, "notoriously good at building whatever you like without regard to the cost." We are good at building what we can at exactly the price you specify. At least of the hundreds of engineers I know and work with that is the case.

We don't design things willy-nilly. We ask for specifications and ask for cost expectations and then begin. A more correct statement, and maybe your point worded differently, is that we'll design exactly what you want if you tell us price doesn't matter. This point was taught to us on day one, class one, hour one of the engineering program I attended. Cost is what matters, the rest is just math and imagination.
and Appalling, Really said...
I agree with Magilson above, but would go further.

It is, in fact, politicians and other magical-thinking academicians that routinely build, mandate, regulate, and otherwise interfere and inhibit without regard to the costs, financial or otherwise... and certainly "without regard" is the most favorable interpretation. I would suggest that "cynically in spite of" is more accurate.
to which I replied
TOTALLY agree. My apologies. IMO, politicians are definitely driving the show, BUT there are SOME engineers who say "this is the solution and it costs $X" without considering other (non-engineering) solutions that cost <$X. That may be the case with ones who've been out of school for too long to remember their humility...

I'm on the radio 2 PT/5 ET TODAY

I'll be talking about fracking and other water topics on Wisconsin Public Radio from 5pm ET.

You can listen online... Go to www.wpr.org and click on “Listen to WPR online” in the red banner at the top...

How useless are macroeconomists?

You tell me:
Insanity (n.): "Doing the same thing over and over again and expecting different results" -- Albert Einstein

In related news, read this useful cartoon of the President's (non) role in the economy.

Is the WSJ incompetent or corrupt?

This story -- California Farmers Feel Pain: Water Allowance Cut Amid Unusually Dry Winter, Choking Key Region's Rebound -- appears to have been prepared by Westland WD's department of propaganda. It describes "farmer pain" in an area with weak water rights contracts and presents this totally useless figure (forget causation, I can't even get correlation!):


Three points:
  1. Not all farmers are in Westlands.
  2. Westlands is not "key" -- except to Westland farmers and the politicians and reporters they own.
  3. Maybe Westlands should lobby for better water markets, instead of trying to take others' water?
H/T to RM

02 May 2012

Watch this

Unlike the crap that FreeMarketAmerica or Thrive put out*, Henry Rollins gives us proper perspective and food for thought. Send this to young people, and remind older people what it means to be a good person, a member of society, someone who reaches for success with pride and dignity. Watch this.



* If I wanted America to Fail and Thrive: What on Earth Will it Take? are both propaganda. I could spend quite some time tearing apart their non sequiturs, but I will just say that they BOTH (coming from diametrically opposed biases, ironically, while sharing the same soundtrack) have (1) lots of dots (2) that are not connected correctly and (3) are meant to persuade those who cannot think of what they should think (more thoughts on rhetoric and sophistry). Sad.

Die water footprinting, die!

While in Oxford, I attended a session in which Dr Dave Tickner (WWF-UK) gave an "apologetic" presentation ("Beyond metrics: can water footprinting improve water security?") in favor of using water footprinting as a tool -- one of many -- for managing water.

Despite his humble tone, I saw two big problems with this "one tool in the box" idea:

First, footprinting is an imperfect measure of "appropriate" water use. It takes the same amount of water to raise a cow on rainfed pasture as it does to raise one on irrigated alfalfa. Water scarcity (demand vs supply) matters more than water use (demand per unit).*

Second, footprinting is the wrong instrument for setting policy: a "footprint" disclosure/requirement is not necessarily comparable with price information, due to the first problem (what does it mean?) and an additional problem (what's the value/importance of water within the overall production or purchase decision?)

These two problems make me dislike footprinting, but a third problem -- political naivete -- makes me much more nervous, to the point where I want to remove "footprinting" from any discussion of public policy. That's because I can see how a politician would love to impose some naive form of "footprint disclosure" or regulation on businesses or consumers.**

Such a policy would enrich footprinting consultants, but it also risks creating the perverse impacts that we have seen with biofuels policies (corn ethanol leading to groundwater depletion, higher food prices and ecosystem pollution; biodiesel leading to clear cutting rainforests for palm oil plantations).

So, I don't care if companies want to waste money on measuring their water footprint, but PLEASE PLEASE PLEASE keep footprinting out of laws and regulations. It's MUCH better to concentrate on pricing water for scarcity and/or regulating water use for sustainability.

Oh, and I'm not alone. I asked one senior water guru from a Fortune 500 company how much of $1 million from his company he'd invest in footprinting and how much he'd put into programs supporting "local sustainable water use." His answer? Zero percent into footprinting. This is a guy who knows and cares about sustainable water use from field experience. That matches my "academic" intuition.

Footprinting is a clever attempt to measure impact in the absence of prices, but scarcity-adjusted prices (via markets or regulations) are far more effective at conveying useful information that can be integrated into production and consumption decisions.

Bottom Line: Forget footprinting as a measure of impact. It's more important to balance supply and demand to prevent shortage than to care about the number of units of demand that a product represents.

* This over-simplification is no accident. The "creator" and main proponent of footprinting -- Arjen Hoekstra -- is an engineer, and engineers are notoriously good at building whatever you like without regard to the cost. Economists are more sensitive to the tradeoffs in any project.
** I discuss the abuse of regulations in the business of water in this recent paper.

01 May 2012

Listen to my land grabs talk in DC?

I will be presenting this paper at IFPRI in Washington DC on 3 May at 12:30 (ET).

"Political Economy of Land and Water Grabs"

by David Zetland and Jennifer Möller-Gulland

Abstract: We discuss the impact of corruption as a contributing factor to "land grabs" in SSA and examine land grab deals by country pairs to identify which deals may be grabs and which may be normal FDI. Most deals are made by corrupt selling countries but buying countries vary in their corruption, indicating that some of these deals may be misclassified FDI. We also examine the potential for over-exploitation of water resources in these countries. Sudan, with high corruption and strained water resources, is likely to suffer the most from land grabs. 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.


You can participate...
  1. Remotely using GoToMeeting https://www3.gotomeeting.com/join/261897310
    Use your microphone and speakers (VoIP) or call in +1 (630) 869-1013
    Access Code: 261-897-310 (Audio PIN: Shown after joining the meeting)

  2. In person... email me one day in advance to get on the list, address, etc.

The trouble with engineers

...is that they are pretty smart, and they use their smarts to design "systems" that are highly efficient at connecting known inputs and outputs.

In the water business, these systems bring water to customers. They function well as long as the safety margins -- for droughts, leaks, etc. -- are not breached. The trouble begins when politicians ask "just a little more" out of those systems, taking them to their design limits. That's ok, until an UNKNOWN input or output arrives -- destabilizing the system. Life, unfortunately, is full of "known and unknown unknowns" so these shocks are inevitable (also see my review of Jacobs).

In the national security business, it's also possible to "design" a system for reconciling citizen demands with political supplies. These systems -- described in this Economist article on civil conflict -- can make it easier to understand what people want, but they are dangerous in two ways. First, because -- again -- they make it possible for politicians to push policies up to the limits. Second, they ignore a fundamental aspect of good governance: give people basic rights and services, then LEAVE THEM to find their social equilibrium.*

It's political hubris, then, that not only leads to instability but also unhappiness. That's no insight (it's as old as the Greeks), but it's increasingly important in a world where societies are increasingly engineered (developed).

The irony is that LDCs have both the potential to be more and less stable. More stable because the government does not have the tools or inclination to try to control so many parts of citizens' lives; less stable because the governments do not realize what their citizens want.

May Day Bottom Line: Design systems that help citizens improve their lives, not systems that monitor and control them "for their own good."

* Financial engineers are also pushing the limits:
When asked whether she thought all these quants made for more stable financial markets, Mirghaemi looked at me and said: “It is very, very risky and it brings a lot of volatility to the markets and it is out of control.”