30 Mar 2013

Flashback: 25--31 Mar 2012

A year later and still worth reading...

Economic and environmental sustainability are the same -- as I said here recently.

Corruption at the top. Did Mr and Mrs. Foley ever apologize for their conflict of interest in representing both Poseidon and MWDOC?

Forget reading: Dali meets Disney.

29 Mar 2013

Friday party!

The world, as seen via the Internet:

Broken video?


Anything but water

  1. Ouch (but no surprise): Nixon sabotaged VN peace talks to get ahead in 1968 election.

  2. Mexican town throws out corrupt police; restores "traditional" justice to reduce crime.

  3. Here are 24 ways to travel on less money. Go see the world!

  4. Quantitative Easing is not leading to price inflation but asset inflation (banks are not lending cheap money; they're dumping it into assets), which is why the rich are getting richer

  5. The Russians are faking democracy while the Chinese are faking Communism

  6. Along the same lines as my paper ("Economists owe ecology an apology") comes this interesting post on "markets in nothing" (e.g., love, respect, etc.)

28 Mar 2013

Self-destructive agricultural subsidies

I just bought some olive oil at my local market.

This photo is not very clear, but you should be able to see that "traditional" olive oil (left) is more expensive than the "extra virgin" kind that we know to be the most expensive to produce (it comes from the first press of the olives).


Is this an illusion or is extra virgin actually cheaper to produce? No and yes.

No, because it's actually more expensive to produce extra virgin olive oil. Yes, because the EU subsidizes extra virgin olive oil, so producers have an incentive to produce more of it. Excess supply means that it price is lower than "traditional" (cheaper) olive oil.*

How bad are those subsidies? I asked my students [PDF] to find the top exports from the Netherlands and Spain (by value), calculate how much "embedded" water was exported to the main buyers of those products, find the water stress in each trading partner, and then calculate the value per cubic meter of water exported.**

The students got lots of answers on this question (the lack of authoritative data is disturbing when the EU spends 45 percent of its budget on CAP subsidies to farmers), but I got the following numbers [XLSX spreadsheet]:
Dutch (water stress 0.10) tomato exports to Germany (0.19): $41/ton of water
Spanish (0.30) olive oil exports to Italy (0.25): $0.20/ton of water
These numbers highlight Spain's disastrous agricultural practices, first in the low value of Spanish water exports compared to Dutch water exports. Second, in the fact that the Netherlands is exporting water to a higher water stress region (lowering Germany's need to use water), while Spain is exacerbating its stress by sending water to a place that does not need it as much.

Bottom Line: EU subsidies encourage Spanish farmers to export scarce water in a crop that's not even profitable to a country that has more water and whose farmers are undercut by subsidized competition. Subsidies, in other words, waste money and water and distort behavior.*** Reform the CAP!

* Subsidies increase production of ALL olives, which makes it easier to produce extra virgin olive oil, which traditionally attracts higher profits. The flood of olive oil has, however, overwhelmed static demand, so the price falls faster for extra virgin than traditional, which can be mixed into other products.

** Note that this is gross value per cubic meter of embedded water, which is NOT the same as value added per cubic meter. That calculation would consider the relative contributions of land, labor, capital, etc. to value, but it's hard to do right. This number gives you an upper limit on value and an interesting point of comparison for the use/value of water.

*** How bad goes it get? How about a black market in which Chinese ship (subsidized) European milk powder home to parents who do not trust local milk? In the US, subsidies take money from the poor to give to the rich.

27 Mar 2013

Bleg: Kiev, Andalucia, Montenegro and the Yukon

Cornelia and I are planning trips to these places in the next few months.

First: What's the best stuff to see or experience?

Second: Are there any people, objects or institutions that I should see, as a water geek.

Thanks for any comments or help here or via email.

Speed blogging

  1. Self-inflicted destruction in Florida: The government's $800 million bailout of welfare queen sugar farmers and a good New Yorker story of how groundwater mismanagement creates monster sinkholes and pollutes springs in Florida.

  2. Last week, I gave a talk on success and failure in groundwater governance (PDF slides and 15 min mp3) at a conference on the same topic.*

  3. Small town "declares war" on high water rates. Fine by me if they kick out the water provider (paying for assets of course), since some towns may be able to supply their water at cheaper prices. Others may not.

  4. Another press release on a new desalination technology. Sounds good, now bring it to market. Oh, and don't think that cheap filters are going to bring abundance.You still need to pay for infrastructure AND pump that water to customers in dry places.

  5. Investors want to profit by adapting to climate change. No shit. Said. That. Before.
Three H/Ts to DL

* In the Q&A Gabriel Eckstein asked if "all subsidies are bad" as I had claimed. I clarified that subsidies to private goods (e.g., tap water, food or gasoline) are bad because they distort prices and thus decisions. Subsidies to public and club goods (e.g., environment, some education, etc.) are defensible if they align private decisions with social (welfare) outcomes.

26 Mar 2013

Five years of aguanomics

Enjoying water in Borneo
I launched Aguanomics on 26 March 2008 when I closed my blog, Sex, Drugs and Water Utilities. (The last post there -- also on this blog -- gave a critique of virtual water and footprinting; some things never change.)

In the 4,000+ posts since then, I've covered all there is to know (i.e., all that I can find) on the political economy of water and other topics -- some of which (corruption, development, climate change) affect how we manage water.

As I've often said (here's last year's post), I've used this blog to develop my thoughts, explain ideas to readers, and learn new things. These latter two activities are what make blogging different from a diary or academic paper and more like an endless seminar in which participants can explore ideas in all directions over time. I love this aspect because the matters we discuss are far too complex to get right at one time or from a single angle. It's the multiple layers of discussion -- different related topics in various places with many people -- that put flesh and blood on the bones of ideas, institutions and impacts that we all experience in different ways.

Thank you for your support and contributions.

Some statistics

In the last year, about 60,000 people (rather, IP addresses) have made about 99,000 visits to aguanomics; see this PDF report but adjust for the missing month. These numbers are up by about 5-6 percent compared to the year before. (They do not necessarily include the 1,500+ people reading the blog on RSS or email!) It's interesting to me to see that 56 percent of visitors are from the US, down from 64 percent in the year before. That's a nice move in terms of broadening the audience for the blog. Looking a little deeper (not in that report), I can also see that returning visitors spend more time looking at more pages on the blog (2 min vs 50 seconds, for 1.6 vs. 1.3 pages). This is what I'd expect -- and it's also what I encourage with backlinks to earlier posts and the "flashback" every Saturday. There's a LOT of great material on this blog (I'm not going to be humble here), and I really like it when more people get to read stuff I've spent a lot of time on -- feel free to comment/critique; I usually approve comments on old posts within a day.

Ten years of water economics

I was in my first year of graduate school ten years ago, undergoing abuse at the hands of professors who mistook math for economics, personal ups and downs, and a deepening exposure to resource and environmental economics. I had papers on opium and heroin in Afghanistan and the US and tourism and deforestation in Nepal, plans to attend a summer school on "free market environmentalism" at PERC and a summer research position with professor Richard Howitt. That position got me into water, when Howitt told me about a conflict over water management in Southern California. That's why my dissertation is called "Conflict and cooperation inside an organization: a case study of the Metropolitan Water District of Southern California."

I'm trying hard to be a water hero (=useful)
Those early interests (black markets, unintended consequences, market incentives, and perverse management in the water sector) are recurring themes in the work I do as an academic, consultant and public speaker. I've neither run out of interesting examples nor run short of people who want to hear them -- and people who need to hear them. I often think about leaving my work -- my career -- in water economics when I am just overwhelmed by tales of incompetence and the suffering that results, but I have returned because of the need to push back on failure and the support of people who agree that things have to change.

As most of you know or suspect, my blunt appraisals of people's actions and poor results do not make me popular, but I continue to highlight failure for three reasons:
  1. People are people; their ideas or actions are good or bad. I don't usually get mad at people (I make exceptions for lying, corrupt or abusive people), so I'm still willing to talk to anyone.
  2. I am here as a trusted adviser, not as a friend. I put a lot of value of helping people see things more clearly.
  3. I have no stake in any perspective winning or losing. I want to know what's true and do what's right (economically efficient + politically fair = socially sustainable).
Although I often complain that failures are not disappearing as fast as I'd like, I do see tentative signs of progress in water policies and public perceptions. I get more requests to speak, more support for aguanomic ideas and more enlightened conversations from the many people I meet or correspond with. Those developments provide the generous psychic pay that keeps me working for free. (It's in water, after all, that we most often get value in excess of price :)

Looking ahead

My contract at Wageningen UR runs out in June, and thus my work on EPI-Water. I've really enjoyed living in Amsterdam and meeting water people from all over Europe, but I'm ready to return to North America to reconnect to family and friends and put more energy into local issues. Cornelia and I are planning to return in July, take a road trip (see post tomorrow), and go back to work. Neither of us has jobs lined up, but we're looking to move to Calgary or Vancouver. If you have any interesting policy work on energy, environmental and/or water issues (for either of us), then tell me.

I'm hoping to have a second edition of End of Abundance written before we leave Europe. It's going to be a shorter, direct statement of how to use economics to address water scarcity, and I'm planning to keep both versions in print. Stay tuned.

I'm planning -- regardless of the job situation -- to keep blogging here, giving public talks and corresponding with all the great people who tell me the water news where they are, ask questions, and provide advice. As a policy entrepreneur, I never know how things will work out. I only know that I need to keep ideas flowing, so keep 'em coming!

It's also likely that I'll be doing more consulting, so please do contact me if you have interesting, short-term projects that need clear analysis and innovative solutions.

Bottom Line: I traveled for five years, did a PhD in five years, and have been blogging here for five years. In all cases, I've learned more about more topics than any five-year planner could have imagined. I'm enjoying it and hope you do too.

25 Mar 2013

Anything but water

  1. Highly recommended illustration of wealth inequality in the US, our perceptions of its non-existence and how equal we'd like to be. Remember this illustration when you do your taxes. Many of the rich won't be, because their accountants finish the job their lobbyists began: making sure they pay no taxes

  2. This insightful post on the internet has treasures like this:
    Johnson’s argument boils down to this: before the Internet, our institutions could not be as participatory, decentralized, and leaderless as Wikipedia and Kickstarter. Today they can be—and should be. “We didn’t have Kickstarter or Wikipedia before the Web came along because the organizational costs of connecting all those people were prohibitive,” he writes. Now that the costs have fallen, there are no good reasons for hierarchies to exist [...but that's also wrong...] If one assumes that political reform is long, slow, and painful, hierarchies and centralizing strategies can be productive. After all, they can keep the movement on target and give it some coherent shape. Ideas on their own do not change the world; ideas that are coupled with smart institutions might. “Not by memes alone” would be an apt slogan for any contemporary social movement. Alas, this basic insight—that political reform cannot be reduced to the wars of memes and aesthetics alone, even if the Internet offers an effective platform for waging them—has mostly been lost on the Occupy Wall Street crowd. Challenging power requires a strategy that in many circumstances might favor centralization. To reject the latter on philosophical grounds rather than strategic grounds—because it is anti-Internet or anti-Wikipedia—borders on the suicidal.
  3. A good example of malfunctioning pricing bots at war over online book prices that rose to $24 million

  4. TED talk: charity managers who underpay and minimize overhead create their own failure

  5. More on publishers failing to adapt to technology, letting down readers and authors

23 Mar 2013

Flashback: 18-24 Mar 2012

A year later and still worth reading...

Advertising on Aguanomics? Did I sell my soul? Not exactly, because I have an opinion on San Diego vs MWD.

The water data hub is LIVE!
A year ago, it went up and people anywhere can add links to their favorite datasets. Check it out.

How networks grow and then shrink in value -- good background for people interested in (dis)economies of scale, i.e., how big should a water company get?

22 Mar 2013

Friday party!

Now THIS is how you get snow off the roof!


Happy (frozen) world water day!

We do fishin right!

SS sent this article on fishing, sustainability and markets. I found it to be very weak on analysis and rather hopeful on bashing markets and bad economic reasoning, so I left this comment:
This article is indeed trying to create a "big bad capitalism" image with repetition of "winners and losers." Everyone loses when a fishery collapses.
  1. It's true that catch limits are sufficient to establish environmental sustainability, but catch shares are a useful way to reduce "effort" (e.g., boats, men) such that the fishery is economically sustainable.
  2. Small guys like Collins probably got excluded b/c shares were grandfathered to the largest fisherman, and he was "too small" to administer. (It's obvious that they could have given him 1 share worth 50*200lbs=10 tons along with everyone else, if only as a means of preventing these claims, but what about the 100lb/week guy? And so on...)
  3. The WHOLE POINT of catch shares (as well as catch limits) is to reduce the number of boats and fishermen. Lost jobs = success in an industry that's over capacity.
  4. The attempt to link funding to results, even while admitting that lots of "govt funded" studies support catch shares, is a fishing expedition that makes the author look biased. Pity.
  5. Thanks for writing this. I will blog it as an example of journalism that pushes an agenda over policy analysis and misses the big picture of a economically and environmentally sustainable outcome.
My much more careful and knowledgeable colleague, Josh, gave this opinion:
This nicely shows the complexity of causation around catch shares and their ecological effects (I personally don't believe it is catch shares that are primarily responsible for rebounding of fisheries, notwithstanding Costello's paper -- it's mostly just better monitoring of quotas which might be a bit easier under catch shares and the ensuing consolidation). It also shows how a really nice solution to improve economic efficiency in fisheries is in danger of being scuttled due to inattention in program design to distributional aspects in the transition from the overcapitalized, inefficient system to a more efficient one. There are very real losers created by catch shares who have had their previous de facto property rights devalued in the initial allocation. We have to think of ways to make the Kaldor-Hicks compensation more than hypothetical or we are going to end up throwing the baby out with the bath water. There is no reason why catch shares MUST create these dramatic distributional consequences.
Bottom Line: Sustainable fishing is not just a question of imposing markets, but markets ARE compatible with sustainability, economic efficiency AND equity. Just ask an economist how to do it right.

21 Mar 2013

Self-evident water delusions

BB sent this press release from California Congressman McClintock, to which I will give a few reactions...

Self-Evident Water Truths (February 27, 2013 to ACWA)

Water – particularly in California – has become such a complicated tangle of competing interests and ideological agendas that I think we have lost sight of some self-evident truths.

Self-Evident Truth #1: More water is better than less water. Can we agree on this first point? I know I’m stating the obvious – but I keep hearing, that, “no, conservation is the key to the future because conservation lessens demand.” That may be true, but ultimately conservation is the management of shortage and abundance is better.

No, that's not true for floods, it's not true for endless rain, and it's not even true for agriculture: agricultural yields can be maximized with the correct amount of water, not more or less. But, wait. Are you talking about MORE water out of the environment for humans? Bad idea. More water for Ag from cities? Bad idea. What do you mean?

Some say that in many cases conservation is the least expensive way of adding supply. But that’s the point: it doesn’t ADD supply. And IF conservation is the least expensive way of managing shortage, it doesn’t need to be mandated, does it?

It does when farmers are told to use it or lose it.

The point at which conservation becomes economically preferable is the point when a water user decides he can save money doing it. The more expensive the water, the more expensive is the alternative he’s willing to employ.

True. Welcome to "raise prices."

Which brings us to Self-Evident Truth #2: Cheaper water is better than more expensive water. If we agree on this, then it naturally follows that before we employ more expensive sources of water like desalination and recycling, we should first be sure we’ve exhausted the less expensive alternatives, like surface water storage.

Well, that's true, but not when "cheap" means selling water at "average prices" that are lower than the cost of production from some sources, i.e., the policy for pricing water throughout California. (Your host, the Association of California Water Agencies, knows this, since its head -- Tim Quinn -- was chief economist at the Metropolitan Water District of Southern California, and he knows how their average cost, "postage stamp pricing" encourages sprawl.)

Self-Evident Truth #3: Water is unevenly distributed over both time and distance. So if we want to have plenty of water in dry periods we have to store it in wet ones, and if we want to have plenty of water in dry regions we have to move it from wet ones. That is why we build dams and aqueducts and canals.

Ahhh, but isn't it also "self-evident" that moving water form "wet" to "dry" places risks both the local ecology that's now "drier than usual" and the importing area assuming that water imports will occur forever, even when they use those supplies so intensively that they need MORE imported water -- as has happened many times in California history?

Which brings us to Self-Evident Truth #4: that we don’t need to build dams, aqueducts and reservoirs if our goal is to let our water run into the ocean. Water tends to run downhill very well on its own and doesn’t need our help to do so. The reason that we build dams, aqueducts, and reservoirs is so that the water DOESN’T run into the ocean, but rather is retained and distributed where it will do the most good.

Now, wait a second, buddy -- who's version of "most good" are you using? That of the salmon or that of the suburban lawn?

We can tell where it does the most good by its relative value, which brings us to Self-Evident Truth #5: Water is valuable, which allows the market to assign a price to it that can account for its scarcity, availability, storage, transportation, demand and substitution costs, including conservation.

Do I have everybody so far?

No, you lost me at "the market" because (1) there's no market for water in California (not even getting into groundwater) and (2) because environmental flows are not included in any market measures.

So, I'm going to cut you off there. You're clearly a proponent of 100% diversion of water for priced uses, and that perspective is totally bankrupt in terms of outcomes (dead ecosystems, wasted subsidies, urban water shortages) and political agreement: Very few voters agree with your 1930s vision of diverting water into machines and filling in the blanks with "markets."

Bottom Line: It's self evident that Congressman McClintock has no idea of how water is misdirected and mismanaged in California. He needs to think more than one election/donation cycle into the future.

20 Mar 2013

Question of the week

Customer service is job 1!
I'm thinking that "water manager" is not the right title for people who work at drinking water utilities, irrigation districts, and other water organizations.

That's because they are not really supposed to manage water supply and demand as much as make it easier for the real users, their customers, to get the water they need.

Managers move people or objects around to meet organization goals that they set, but water managers don't really know the goal. They know how much water there is. Customers know the goal.

I'm thinking that "managers" are more like waterboys who deliver water where and when it's needed, on command.

But that's not a very powerful title, is it?

Got a better one?

Or, got another reason for why they should be called managers or a different reason why they should be called something else?

Do tell.

19 Mar 2013

Meeting in London on 11 April?

I'll be in a meeting on the 10th and fly out in the afternoon on the 11th.

Email me if you want to meet for a chat or if you want me to give a water talk.

Speed blogging

  1. Don't formalize "informal water providers" who are helping people get water; help them deliver services.

  2. Very good news: Judge says that California farmers are NOT entitled to water as a right based on past deliveries.

  3. Go learn: UNESCO-IHE Institute for Water Education launched its Open Course Ware platform

  4. "Arab Countries Need $75 Billion Annually to Deal With Water Challenges." No they don't. They need to control demand, e.g., charging more than 1% of cost for water.

  5. Good article [$] (I'm quoted) on how Colorado farmers are trying to limit groundwater overdraft by taxing withdrawals to pay for fallowing.
H/Ts to DL and RM

18 Mar 2013

Monday funnies

Too munch brunch?

Structural failure at the Corps of Engineers

The US Army Corps of Engineers Primer on water economics [pdf] highlights two sources of dysfunction that have been imposed on USACE.

First, USACE evaluates the costs and benefits of projects according to national and regional accounts [p. 3]:
The National Economic Development (NED) Account displays changes in the economic value of the national output of goods and services.

The Regional Economic Development (RED) Account displays the regional and localized economic impacts that result from each alternative plan.
But RED accounting is biased [p 6]:
From the federal perspective transfers are a zero sum game. That does not mean that RED benefits are not significant or important to the non-federal partner. The distinction between RED and NED is a matter of perspective and policy, not economics.
RED accounts, in other words, facilitate political, zero-sum games among political actors seeking to rob Peter to pay Paul.

Second, the Corps mixes up two different methods of comparing costs and benefits [p. 17]:
Net benefits [NB] represent the amount of total benefits less the total costs. This analysis is used to select and scale a recommended course of action from an array of alternatives.

A benefit-cost ratio [BCR] tells us which alternative produces the most benefits for every dollar of cost (total benefits/total costs). The benefit-cost ratio is useful for comparing or ranking different projects. Once the optimal scale of the alternative is identified by measuring net benefits the benefit-cost ratio can be used to rank among competing investments.
In other words, the Corps chooses one project in one region according to NB and then compares that project to other NB winners in other regions according to BCR to choose which projects to fund.

This method is both unfair and inefficient. It's unfair (assuming "fair" means projects in all regions) because a NB winner can still be defeated by BCR. It's inefficient because high BCR projects with low NB will be eliminated at the regional level before they can be considered/chosen at the national level.

Even worse, the NB method assumes unlimited budgets, since a $1 billion project creating $100 in gains is "more attractive" than a $150 project creating $50 in gains. Fail.

What the Corps should do* is take all projects in all regions, rank them by BCR, and then fund/implement them for as long as their budget lasts.

There's still the problems of bad BCR (regional BCR estimates ARE biased; it's a big game of liar's poker) as well as the problem of buy in from politicians who want to see Corps projects in their back yards. My solution for the former problem is to use the cost-sharing/signalling method I proposed for the stimulus. My solution for the political problem is to eliminate RED accounts.**

I could say a lot more on Corps operations (there was a rash of articles on the cessation of Mississippi shipping due to low water levels and everyone complaining that the Corps was failing to manage water levels, channels, etc.), but my point here is that political bickering prevents the Corps from doing its job.

Bottom Line: The Corps will fail as long as it uses Congressionally distorted measures.

* I have no doubt that they know they should do this, but they are required to follow these procedures established by Congress, so the blame for Corps failure can easily be shifted to a feckless Congress.

** If the goal is to spread spending evenly, then don't collect the taxes OR spend the money. Federal programs that transfer money from one region to another MUST create national/regional (>state) benefits -- unless they're theft.

16 Mar 2013

Flashback: 11-17 Mar 2012

A year later and still worth reading...

It’s all about winners and losers -- the driver of water policy and failure

Men are more brilliant (and stupid) than women

Multiple priority disorder. Think "co-equal" is confusing? Try this.

Prices create property rights so (1) It's good to have them but (2) don't screw them up.

15 Mar 2013

Friday party!

I can't balance like this, even without drinking.

Speed blogging

  1. Going down the Colorado in 3 minutes. The kayakers took 113 days to get to the Sea of Cortez, but they had to walk over a Colorado Delta that's dry because irrigation drains the river.

  2. Hurricanes are getting worse -- via climate change.

  3. Should plastic be regulated as a hazardous material? Makes sense to me if it reduces plastic in the environment, but not if it, e.g., prevents incineration. Speaking of plastic, here's a paper on marine pollution.

  4. Water policy in India (not sure I agree with the authors, but more discussion is better). This paper, OTOH, is HIGHLY recommended, as it explains how the government of Gujarat reformed electricity policy to reduce subsidies, help villagers, improve irrigation efficiency, and stabilize groundwater levels [PDF].

  5. Aquadoc ties to track down the backers of 100(1) wells in Darfur and finds donations but no wells. Fraud or incompetence?
H/T to AZ

14 Mar 2013

Engineering people

Over the past few years, I've noted repeatedly (example example) that the Pacific Institute tends to put too much emphasis on engineering and not enough on economics, i.e., they calculate, calibrate and manipulate human, social and natural variables when making their policy proposals and solutions as if those variables are known and static, but I dislike this method. It puts too little weight on the reality of incomplete calculation, miscalibration and games of manipulation.

PI just issued two new reports demonstrating how their method fails.

Their first is an assessment of California's water footprint, a report whose title implies that "California" is some person walking around on water. The authors claim that the calculations of where water is used (agriculture, no surprise) will help promote sustainable policies, but we don't need to know anything about footprints -- or efficiency, another PI fetish -- if we want sustainable water management. Just set a limit on use (i.e., set aside environmental flows) and ration water with prices and/or markets. That's what I said here (mp3 PDF) -- and what I say all the time.

The second is a study of the potential for "green jobs," in which PI says:
An investment of $1 million in alternative water supply projects yields 10-15 jobs; in stormwater management, 5-20 jobs; in urban conservation and efficiency, 12-22 jobs; in agricultural efficiency and quality, 14.6 jobs; in restoration and remediation, 10-72 jobs
Now, I'm going to ignore non-skilled jobs that cost $50-$100k each as well as the ludicrous range of estimates and concentrate on two obvious flaws in this report. First, it ignores the fact that jobs are a COST. We should be concentrating on destroying, not making jobs, since fewer workers per project implies higher productivity and living standards. We want people to work, of course, but where their salary creates value. Second, the opportunity cost of these "green investments" [sic] is not just the $1 million that comes out of taxpayer pockets but the other places that could use $1 million. Green jobs sound nice, but they are often worthless. marketing. bullshit.

Bottom Line: PI needs to look outside of their engineered system, to include (1) the causes of problems and (2) other factors that are affected by or involved in their solutions -- above all, the potential for people to game their "calculated" solutions. Don't make their mistake!

13 Mar 2013

Fail (and some win) in a nutshell

The Economist has some of the best editors and writers around, which makes it easy to learn important ideas in a short time (few people have the endurance to make it through 500 pages of Adam Smith, let alone three volumes of Marx). Their recent, REALLY GOOD, survey of Africa had two great examples of bad policies:
A programme to subsidise fuel alone cost the government $6.8 billion in theft in three years (on top of the billions wasted on the market-distorting subsidy itself). Shady deals between officials and oil companies have swallowed an estimated $29 billion in the past decade. Yet more than half of all Nigerians live on less than $1 per day and get almost no electricity because the grid has collapsed... Nigeria is famous for corruption, yet at issue is more than thievery. Members of the elite systematically loot state coffers, then subvert the electoral system to protect themselves. Everybody knows it, and a few straight arrows in the government talk about it openly. Perhaps half the substantial (but misreported) oil revenues of Africa’s biggest oil producer go missing. Moderate estimates suggest that at least $4 billion-8 billion is stolen every year, money that could pay for schools and hospitals. One official reckons the country has lost more than $380 billion since independence in 1960. Yet not a single politician has been imprisoned for graft. The day that Nigeria works properly, the battle for Africa’s future will have been won...
Oh, and don't forget that Nigeria's dysfunctional fuel subsidies belong to the same family as subsidies to renewable energy that take your money to create waste.

And here's how land grabs work in Ethiopia [read my paper PDF]:
A few years ago foreign investors rushed into Ethiopia to lease agricultural land for commercial farming but encountered a series of obstacles. Land-lease periods were reduced retrospectively from 100 to 50 and then to 25 years. The government often seizes land to hand to investors, rarely consulting or compensating the residents, who are resettled without any say in the matter. Sometimes security forces are deployed to clear land. Army units are accused of beating, raping and torturing villagers who refuse to leave. Some of them fight back. Along the Omo river near the Kenyan border local tribes are battling against a sugar plantation on land they used to inhabit. Fighters wearing body paint and lip rings sit under an acacia tree holding their AK-47s. On December 28th government forces killed 147 of them. Would-be Western investors understandably worry about becoming implicated.
Note that the survey has many examples of SUCCESS in Africa by Africans.* Read it.

* And here's an example of how activists in Manila got water to the people, overcoming resistance from the local monopolies that did not care to.

12 Mar 2013

Airline win, fail and WTF

I use Kayak.com to compare airline prices (they sometimes include Southwest), and I love this new feature that recommends whether you should buy now or later:


SAS airways, OTOH, totally screwed up my trip to Copenhagen. They rescheduled my morning departure to a later time, so that my return flight left before I landed. WTF?!


I cancelled my meeting and had a phone call instead (carbon credits!), but now I have to wait 6 weeks for Travelocity-Kayak-SAS to refund my money. It only takes 15 seconds to pay but 6 weeks to refund? I wonder about this outsourcing stuff, as it ALSO took me 5 calls to customer service in India, which could not contact the NY SAS office that Travelocity works with because they were always closed when I called from Europe (SAS is based in Europe!). FAIL.

(That said, here's a great example of how the supply chain DOES work -- for Coca Cola :)

Learn about water in Chile

Guillermo Donoso and I had a great talk about water markets, property rights, urban water service, regulation, agricultural growth, environmental flows and so on.

Watch this video!

Anything but water

  1. This paper [pdf] does a really good job at demolishing GDP as a indicator of economic activity -- or anything much of use. I used it, by the way, for my paper "Economists owe ecology an apology." Thanks very much to the 20+ people (many on this blog) who read and commented on an earlier version. Read the new one and tell me what you think. Semi-related: "The rise and fall of ecological economics" was interesting and these guys have a LOT of information on environmentally harmful subsidies.

  2. I forgot to post these articles on aid and development: UK corruption and dams in Malaysia, the importance of mobile phones to the poor, the problem of village-level corruption, and how locals can help foreigners invest.

  3. Is this a sign of a robust or dysfunctional debate? 100 definitions of sustainable [pdf]

  4. Low self-esteem in children linked to praising them for personal qualities instead of effort.

  5. Ten reasons why it's good for Venezuelans that Chavez is dead.
H/Ts to EB, RH and AT

11 Mar 2013

Monday funnies!

This email made me laugh, but I still think that advertising provides little negative value.
Hey [anonymous person],

First off, I am a huge fan of your [unmentioned] site.

One of my clients, SellingInsurance.com, has recently developed an info-graphic comparing Iron Man and Batman, it particularly delves into what it would take to actually be one of these superheroes. As we all know these are both men who didn't actually have super powers themselves but go to great links with their gear/gadgets to fight crime. Ever wondered how much these suits actually cost? Well with this info-graphic you can finally know the answer to that question! I think would be an awesome fit for your [unmentioned] site and something that your readers would greatly enjoy!

Both of these films have enjoyed an extreme amount of success over the past few years.. from the Dark Knight trilogy, to Iron Man and even The Avengers these may be the two biggest names in the super hero game right now. This info-graphic calculates the cost of each of these heroes equipment all the way down to even the price of there lairs and cars.

The URL for the info-graphic is here*

All you would need to do is copy and paste the embed code at the bottom of the info-graphic.

Being a fan of your site I believe that posting this info-graphic would be incredibly beneficial for driving traffic to your blog/site as this information is extremely relevant and interesting information that will be passed on to your readers. Please let me know if you have any questions. Thanks so much!

Sincerely,
Mark Evans
Content Director
Five Spoke Media
* Note that I am giving him his advertising, but only because his insincere pitch and retarded graphic is so ridiculous for a site selling insurance.

Talking about water in Chile tomorrow!

Our google hangout (group video chat) on water in Chile was cancelled last week.

We will meet tomorrow (12 March) at 14:30 UTC [what's that time where you are?] on Google+.

Speed blogging

  1. Mike Young (Australian Professor with lots of experience in water markets) has a new report "A generic framework for the abstraction and utilisation of water in England and Wales" [pdf]. Take a look to learn more about how to get markets up and running. Oh, and then read this recent article (quoting Mike) on the successes and challenges in Australia's water markets.

  2. This activist group says "The California State Water Resources Control Board released a report [PDF] that highlights the need to create a fee on the sale of commercial fertilizer to provide funding to communities struggling with the impacts of nitrate contamination of their groundwater supply." I agree. California farmers need to cover the costs that they have imposed on others (negative externalities) -- most notably to replace polluted groundwater with clean drinking water.

  3. Nice summary of the promise (and sometimes failure) of Water User Associations

  4. This paper argues that groundwater rights can, indeed, be "taken" without violating property rights.

  5. A provisional summary of the EPA’s Study of the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources [PDF] and an interesting point: fracking uses one-third the water it takes to produce natural gas from conventional sources (NB: these sources are neither exploding in popularity nor gross water users). Finally, this paper suggests how to regulate fracking, a topic I covered 18 months ago.
H/T to TS

9 Mar 2013

Flashback: 4-10 Mar 2012

A year later and still worth reading...

My talk at the World Water Forum: water efficiency targets are a bad idea. I forgot to post the mp3 and my slides [pdf]. Enjoy!

Not so fast UN. No, the MDG on access to safe water was not reached. It was missed by a long shot!

What is more likely? Great logic for the climate change conspiracy theorists.

When do water markets make sense? Read this.

Your government at work. Taxes. The NL system is WAY easier (even in Dutch).

Poll results -- price and prejudice: only 20 percent of people change their minds when faced with logic.

Interested in urban water tariffs? Read my published paper [pdf]


8 Mar 2013

Friday party!

CD My awesome girlfriend connected me to the Dutch Provo movement that made the hippies look like... hippies. Their magazine described itself as:
a monthly sheet for anarchists, provos, beatniks, pleiners, scissors-grinders, jailbirds, simple simon stylites, magicians, pacifists, potato-chip chaps, charlatans, philosophers, germ-carriers, grand masters of the queen’s horse, happeners, vegetarians, syndicalists, santy clauses, kindergarten teachers, agitators, pyromaniacs, assistant assistants, scratchers and syphilitics, secret police, and other riff-raff. Provo has something against capitalism, communism, fascism, bureaucracy, militarism, professionalism, dogmatism, and authoritarianism. Provo has to choose between desperate, resistance and submissive extinction. Provo calls for resistance wherever possible. Provo realises that it will lose in the end, but it cannot pass up the chance to make at least one more heartfelt attempt to provoke society. Provo regards anarchy as the inspirational source of resistance. Provo wants to revive anarchy and teach it to the young. Provo is an image.
The movement "lived" from 25 May 1965 to 13 May 1967, declaring victory and disbanding after they had caused the mayor and police chief to resign. Awesome.

Anything but water

  1. America may be an "exceptional country" but so are Americans, in terms of the ways that they see and cooperate with others. That's a problem when most behavioral research into humans uses American subjects. Semi-related: has the internet changed the power of special interests and difficulty of collective action?

  2. Bike helmets lower children's injuries... by lowering the number of children on bikes. (The Dutch -- kids too -- don't wear helmets).

  3. Hotter temperatures from climate change will lower productivity (lowers mine!).

  4. Doh! Wind farms in Scotland are generating more carbon than they save because they are being erected on peat bogs that dry out and release carbon.

  5. This podcast discusses Valve, a VERY SUCCESSFUL video games company without management (cool!), and ends with a nice summary of the euro-zone crisis. Varoufakis proposes to:
    1. Separate the banking crisis from the sovereign debt crisis by liquidating banks.*
    2. Have the European Central Bank issue bonds to cover debt consistent with the Maastricht Treaty; remaining debt stays with sovereign states.
    3. With debts under control, allow the European Investment Bank to fund good projects on a commercial basis.

* In 2008, I said "banks matter" at the same time as I called for the business cycle to be allowed to run its course. In 2009, I called for too big to fail bankruptcies, even before I got mad at political and academic corruption.

7 Mar 2013

Are kids the solution or the problem?

Last fall, I asked my students to recommend policies that would promote long-term thinking for sustainability and fighting climate change by lowering people's discount rates.

Several gave this simple and powerful answer:
Encourage people to have more children.
Now this conventional wisdom relies on the notion that parents look farther into the future due to their stronger interest in "intergenerational equity," i.e., a planning perspective that includes their kids' lifespans.

But I wonder if it's really good to encourage people to have more kids than they would on their own:
  1. First, because more kids stress resources and the environment.*
  2. Second, because it's not hard to think of parents with kids who are LESS, not MORE, likely to think of the future. This is especially true in LDCs, where parents break laws and take big risks to feed their kids. They are not just using more resources; they are taking bigger risks with the resources they have.
  3. Third, parents with more kids have fewer resources (time and money) to help those kids eat, learn, etc. If they grow up "hungry and stupid" then they may do more damage.
So why do governments subsidize children (via tax deductions, free education, income supports, etc.)?

I can see a few winners:
  • Priests who want more tithing faithful on earth and souls in their heavens
  • Politicians who want more voters
  • Generals who want more soldier
  • Businessmen who want more customers
But I don't see any positive impact on resources or the environment. Do you?

Bottom Line: Governments should tax -- not subsidize -- children to promote sustainability.

* Julian Simon argues that "humans" are the ultimate resource. That's true in terms of a Smithian "deepening" of the market, but not in terms of multiple markets, each with heavy resource needs.

6 Mar 2013

Double-gold-plated carbon credits anyone?

I guess that Swiss carbon credits are WAY more reliable than "regular" Gold Standard credits, which are about 5 times better costlier than the ETS carbon credits companies buy.

I sense a scam akin to what we saw with dot.com accounting.*


In related (but intentionally ironic) news, "European Investment Bank (EIB) president Werner Hoyer was forced to say this morning, during the EIB’s annual press conference, that an announcement that the bank would give up lending to coal was `pure nonsense'. And this, despite the fact that Hoyer repeatedly referred to the EIB as a frontrunner in the fight against climate change."

Bottom Line: Not all tons -- or bank statements -- deserve the same weight.

* Want more scams? Read this Underwriters Laboratories report [pdf via JM] for a nice summary of greenwashing. My favorite:
Sin of Lesser of Two Evils: committed by claims that may be true within the product category, but that risk distracting the consumer from the greater environmental impacts of the category as a whole. Organic cigarettes might be an example of this category, as might be fuel-efficient sport-utility vehicles.

5 Mar 2013

Fuck time zones

Arg! I thought that Guillermo (in Chile) was in the same time zone as ET, but no, his time is moved by that gratuitous disaster, "daylight savings." (We REALLY need a single time zone)

So no chat about water in Chile today.

We've rescheduled for next Tuesday, at 14:30 UTC [what's that time where you are?], on Google+. Hope to see you there.

Question of the week

There are two types of people: those who think there are too many regulations and those who think there are not enough.

I'm wondering if it's possible to satisfy BOTH, by allowing various competitive business subject to regulation* to "go naked," i.e., do business without regulations intended to protect... customers or workers.

How would it work? Customers or workers would be told "at the door" which regulations were not being complied with (in the paperwork sense), and they could then decide if they wanted to work there, eat there, buy clothes, take the drugs, etc. (I know that these guys would be happy with this idea.)

They would, in other words, take responsibility for their choices.

Others could rely on the state to protect them.

What do you think?
* That is, NOT regulations on monopolies, environmental (common pool/public) goods, etc. Private goods for sure; club goods with competition (e.g., health clubs).

4 Mar 2013

Monday funnies

From The New Yorker

Online chat about water in Chile with Guillermo Donoso

Guillermo and I will be doing a Google hangout tomorrow (5 March) at 8:00 Pacific (11:00 East and Chile; 17:00 Amsterdam).

Up to 8 people can join us on this live, free video chat.

To join, you need to add me to your Google+ circles. Then I'll add/invite you to the chat.*

We will discuss water policy and reality in Chile: privatization, human rights, agricultural productivity, mines, etc.

There will be a YouTube archive posted after the hangout.
* Anyone have directions of how to give a URL for a future hangout?

Anything but water

  1. Are you a concerned citizen who supports Occupy and/or the Tea Party? "GIMBY [Government In My BackYard] doesn’t try to tell the whole story of American government. It encourages people to learn about the agencies and issues that matter in their lives." Check it out.

  2. The Economist on the self-centered attendees at Davos (short version: "we're all special and the world should cater to us") and a very good survey of what the Nordic countries are getting right (mostly) and wrong.

  3. "Government welfare creates its own demand" and other truths from Down Under. The Dutch, btw, are FAR harder on government- taxpayer-funded schemes that the US or Australian governments.

  4. An exploration of libertarian paternalism by Cass Sunstein (Mr. Nudge)

  5. An interesting analysis [pdf] of poor farming practices in Africa and sales pitch for the importation of S. American talent.
H/T to MK

2 Mar 2013

Flashback: 24 Feb -- 3 Mar 2012

A year later and still worth reading...

Why I blog: Blogging, ideas, academic output and society

Zetland's Axiom: "Solutions" that conflict with price signals are unlikely to work. (Why isn't this in wikipedia?)

Anyone listening in Las Vegas? Amazing example of self-deception.

Why is Britain so expensive (the US so cheap)? The latest comment blamed the capitalists. Does that mean the US is less capitalistic?

Mike Young on water rights -- I'll be posting his (simple) framework for water markets soon.

1 Mar 2013

Friday party!

This may be a good way to test employee's stress tolerance :)

Speed blogging

  1. This 2003 Australian report [pdf] lays out a cachment management strategy that combines financial incentives with a regulatory "duty of care" to improve environmental results over time (at right).

  2. Nice article discussing ways to value nature as a source of green infrastructure services (reservoirs, flood control, water treatment) that can displace/improve on "gray" [concrete] infrastructure.

  3. "Declining Water Sales and Utility Revenues: A Framework for Understanding and Adapting" is pretty thorough, but I recommend they make their task easier by targeting cost recovery first, then conservation (price > cost). There's no point in selling water for cheap to help the poor (give them money) or in using increasing block rates (uniform rates work, and they're easier). For an academic view, read this paper [pdf], which shows how scarcity-sensitive prices can ration water efficiently.

  4. "This is the first study that tries to establish an empirical effect of relative water scarcity — as measured by falling river levels — and river temperatures on electricity prices."

  5. We visited the Green School in Bali (a great school if you have an expat salary), where they are teaching kids about their watershed (item 3). Do this everywhere!
H/T to AR