31 Jul 2014

Speed blogging

  1. I made four videos about Living with Water Scarcity (tap water, irrigation, bottled water and climate change). Check 'em out

  2. Colorado river math: Flows - rights < 0 means trouble

  3. Water prices are at "record levels" for California farmers. Good. Maybe they will protect their groundwater and use more markets

  4. California bureaucrats want $500 fines for water "waste." The idea is stupid compared to raising prices and allowing people to find ways to use less, but it's tragic for excluding irrigation of lawns and fields. FAIL

  5. The Santa Cruz declaration says the global water crisis is caused by injustice and inequality. Aquadoc has good reasons to disagree, but corruption does matter -- as I explain here
H/T to RM

30 Jul 2014

Markets for the win!

(via AW) This is a fantastic way to match supply and demand, using advertising AND lower prices...

My reddit AMA went pretty well!

Hmm... 13 percent of Redditors don't drink water?
I did an "ask me anything" on Reddit a few weeks ago. It was a great success, with 600+ upvotes and 500+ comments (250 from me).

My top-ranked comment -- in response to "What aggravates/upsets you the most in terms of water being wasted in the Western US? Also what is your #1 tip for a person in the 1st world to conserve water?" -- was:
I REALLY dislike cheap water, as people feel fine using a lot of it. Water in Las Vegas is 20% of the price of water in Amsterdam (and lower than the price in most US cities), so we shouldn't be surprised that Las Vegans use it all over the place. It's not really their fault, since we're in the habit of using as much as we want when we pay (for gasoline, food, etc.)
Tip: Don't have a lawn. If you're SERIOUS, then don't eat meat. If you're ridiculous, then don't have kids.
That response -- and many others -- are probably not surprising to long-time readers of this blog (or my books), but most of the people had not heard of either, so I had the opportunity to answer a lot of questions I've considered over the years as well as a few new ones.

Here are some of the stereotypes I tried to dissuade people from holding:
  • Just take water from farmers! Me: Not possible, given water rights
  • Split California into 6 states! Me: Six times the lawyers and bureaucracy?Ack!
  • Desalination everywhere! Me: Maybe for cities, but it won't fix broken management
  • Farmers pay way less than cities! Me: Not if you consider rights, quality, etc.
  • Ship water from Canada! Me: Legally difficult, but desal would be cheaper.
  • Take water from the atmosphere! Me: Nope. Desal/recycling cheaper.
  • Free water as a human right! Me: Not if you want sustainable services
  • Mandate efficiency! Me: Incentives are better than command & control
  • Waste at City Hall! Me: Charge departments for water use
...and then there were some interesting, new ideas:
  • Use drought tolerant grass that doesn't need to be watered!
  • Replace surface water with desalination to restore environmental flows
  • Communities that exhaust their groundwater will need to move
  • A house should come with TCO (total cost of ownership) certificate for the annual cost for energy, water, etc. (given its fixtures, lawn, etc.) so buyers or renters can see all costs
A big thanks to Paul Wyrwoll for helping set up the AMA. I'll be doing another in the fall :)

Bottom Line: "Q: I know we can all do our part but who is really the problem here?" Me: Water managers who declare a shortage should be fired. Politicians who direct "public" water to private use (e.g., from environment to irrigation) should be jailed.

29 Jul 2014

Anything but water

  1. The Great Philosophers: Epicurus recommended friends/work/calm over sex/money/luxury. Hegel discussed the messy nature of "progress"

  2. Tim Haab goes nuts on Australia's carbon tax repeal "...because it raised prices." Tim: "That's the freakin point!" and I totally agree. Related: California approaches its moment of truth (higher energy prices) and how little we know -- or have thought about -- the impacts of climate change

  3. The seven habits of highly mediocre people will help you to succeed -- or maybe relax

  4. A fascinating update on e-publishing shows (1) more popularity than paper and (2) ALL authors are better off self-publishing e-books

  5. Many macroeconomists mistakenly recommend population growth as a means of growing the economy or paying for pensions (example), but population growth is NOT necessary for economic growth

  6. Tipping in the US does NOT reward good service. It's a subsidy from customers to restaurant owners ($2.13 per hour? WTF?)
H/T to RM

28 Jul 2014

Monday funnies

(via RM) What happens when you mix two religions? [click to enlarge]

Your groundwater accountant is calling

Six months ago, I suggested a few ways to deal with the drought in the western US. Besides raising prices to reduce demand -- my first suggestion, always -- I mentioned that California needed to end unsustainable groundwater pumping ("overdrafting") by farmers.*

I and others have called for better controls on groundwater since at least 2009. In that same year, Tim Quinn (head of ACWA, which represents big water agencies and many irrigation organizations) estimated that overdrafting would increase from the "normal" rate of 2 million acre feet (California gets 40MAF per year) to 4 MAF, so we're talking from bad to worse.

How are farmers responding to this existential threat? In 2008, the California Farm Bureau said:**
We encourage landowners in critically overdrafted areas to continue to devise and implement, under local control, groundwater management plans. We believe that local control over groundwater management is best accomplished through existing water entities or new water entities formed by local landowners for the purpose of groundwater management.
That policy position, as I predicted in a 2009 post ("Chronicle of a Death Foretold") has failed, as we see from this recent update:
A new study by University of California, Irvine and NASA scientists finds more than 75 percent of the water loss in the drought-stricken Colorado River Basin since late 2004 came from underground resources. The extent of groundwater loss may pose a greater threat to the water supply of the western United States than previously thought.
This story is based on the GRACE project led by Jay Famgletti at UC Irvine,*** which continues to reveal how deep a hole we've dug for ourselves. farmers have dug for themselves. GRACE data say that 75 percent of the 51MAF overconsumption of water has come from groundwater, i.e., 41 MAF in the last ten years.

Those numbers refer to the southern Colorado River Basin, not California. They are probably representative and may even be better less worse than California's numbers.

Why do we care? Groundwater helps in drought because we can draw on multiple years of storage when surface water flows and storage are below trend. That "dry-day fund" has allowed many people to ignore the current drought and helped farmers make money without surface water deliveries, but it's going fast and it's VERY HARD to replace.

Bottom Line: Groundwater depletion is a precondition for environmental collapse, economic disruption and outbound migration. Plan accordingly.

* I repeated that advice two weeks ago at my Reddit AMA.
** I'm quoting from the blog post, but the source -- CFBF's "policy guide" -- is NOT posted online
*** Read this great interview with Jay. Then pack your bags to leave California.

H/Ts to DPG and RM

25 Jul 2014

Friday party!

Party hard, but don't die from stupidity.

(For extra safety you may want to check out these airline announcements... by Sports Illustrated models)

The Starfish and the Spider -- a (mini) review

Over-controlling CEO or empowering Catalyst?
CH sent me this book by Brafman and Beckstrom, which I started -- and stopped -- this morning.*

I stopped because the prose was far too excited for the authors' point, which is that a starfish has a decentralized "leadership" that allows individual arms (even polyps) to "decide" what to do, without consulting any center. A spider, OTOH, needs to keep the entire web in order if it's going to eat. The obvious figure at right "explains."

This analogy is meant to apply to organizations (hence all the CEO endorsements) that want to balance between centralized and delegated control.

I get it. You get it. The main question, then, is HOW to find that balance.

When it comes to water, for example, we can leave a farmer with a well or reservoir to decide how much of his private water to use. He knows how much there is and how much he wants to use, and his decisions do not affect the water of others.

Change that scenario to a bunch of farmers sharing the same aquifer or reservoir, and there's a need to coordinate their use. This can happen by allowing each the same quantity of water, auctioning rights to the "sustainable" yield, etc. A "spider" needs to keep track of aggregate use, but there's no need to track the "why" of use (trees, row crops, pools, etc.) because we can assume the farmers know what they're doing.

Take it one step further, to water prices in cities. Water managers can try to tell people how much to use, when and for what. Or they can move towards a starfish type of management by setting a price that will keep total consumption within an acceptable range. The managers will not know who uses how much water for what (except when sending bills), but their ignorance does not matter. They don't know who should use how much water, and they should not try to understand. They only need to keep aggregates in balance.

If you like airport business books, then check out Starfish. If you want better perspectives on these ideas, then read Two Cheers for Anarchism or the founding papers on these topics: Hayek's 1945 "Use of Knowledge in Society" [PDF] or Coase's 1937 "Nature of the Firm" [PDF]

Bottom Line: I give this book TWO STARS for lacking anything sticky to hold me.

* This is a mini-review because I didn't read the whole book. I may have missed a masterpiece (correct me, please), but I cannot spend too much time looking when one may not be there.

24 Jul 2014

Ronald Coase, institutions and water

A LONG time ago, TS sent this:
Ronald Coase died this past week at age 102. I think many people continue to misinterpret/misuse his core ideas and theories, i.e., the hard core right using his stuff to support the argument that any government regulation or intervention is bad. As you know, he advocated for property rights (which government would facilitate) to help us efficiently manage our environmental challenges, among other things.

I think you've applied some of his insights to your writing on water, e.g., setting up water rights for people so they could sell some of their unused allocation to people who need water (example, farmers to urbanites).

I'd love to see a post applying Coase's ideas to water management.
I'll leave the summaries of Coase's work to Wikipedia, the Nobel Committee, Encyclopedia of Economics, this podcast, and this application of Coase to environmental issues. Go read more if you want a better view of one of the more original minds in economics.

Now why was Coase original? First, because his formal education only extended to his BSc in Commerce. Second, because he insisted on looking into the "real world" for problems and solutions. Third, because he brought a clean ("outside the box") perspective to economics.

Coase was an accidental iconoclast who used common sense to make a difference.

So, how can we apply his ideas to water?

Let's begin by defining the words that he used to establish entirely new dimensions of economics:

"Transaction costs" occur in the course of finding a trading partner, making and completing a deal. Economists who assume "zero transaction costs" have never bought a used car or gone on a date. Matching takes time; information is buried or obscured; some deals cannot be pursued to their conclusion.

"Property rights" don't just define who owns what in terms of private goods. Their absence or mis-specification affects club, public and common pool goods. Many problems, Coase would argue, arise from poorly-specified property rights.

"Institutions" are the informal norms and formal rules that affect our interactions. Good institutions clarify property rights and lower transaction costs. Outdated or missing institutions mean that property is mismanaged (inducing anything from litter to war) and transaction costs are high -- often leading to "missed opportunities."

I use Coase's ideas everyday. Sometimes, I decide it's not worth "spending" more time to get slightly cheaper fruit (maybe). Sometimes, I leave my bike unlocked because I am among property-respecting types (or community-minded types that will catch out thieves). Sometimes, I wonder why my roommates leave dirty dishes in the sink.

I can also apply Coase's ideas to water. You cannot have a water market without clear rights, low transaction costs, and an "institutional" acceptance of trading commodity water.

You cannot police water pollution without assigning the right to pollute (or be free of pollution). Even with those rights, you cannot enforce them when the transaction costs of finding the polluter or measuring pollution are too high. These will be even higher if there's no authority in charge of measuring pollution, since an individual may not have the incentive (costs>benefits) of measuring pollution that affects other people. Coase, thus, codified "the logic of collective action."

Taking Coase from a different angle, you might oppose over-complex water tariffs that require lots of measurements (transaction costs), violate property rights (lawns versus people), or fail to integrate with systems handing water before or after it's diverted into taps.

All of these examples have the same things in common. They bring a pragmatic, problem-solving perspective to issues that cannot be "solved" with the same global algorithm. Coase always began with the foundation of how things really worked (or failed) -- not an academic "simplification" that threw out the baby with the bathwater.

Bottom Line:It doesn't matter what Coase said. It matters that you apply his pragmatic perspective to identifying and removing the barriers to outcomes you want.

23 Jul 2014

Booze, cigarettes and sweets?

We regulate the sale and consumption of alcohol and tobacco to under-18s for their own protection, but why do we allow unlimited sales of candy bars, soda, energy drinks and so on?

Those concentrated sources of sugar lead to cavities (I've got plenty), obesity, immuno-suppression, learning problems, etc. They do little or nothing positive for someone's health.

I'm proposing a regulation that limits the percentage of calories from sugar in prepared foods, not a ban on sugar, home baking, etc.


Speed blogging

  1. Five things hippies get wrong about water -- a guest post I wrote for the (leftie) Angry Bear blog, featuring many disagreeing comments...

  2. Nice post on Israel's water complication (Palestine)

  3. We will not reach "the technical potential for water savings [on farms, in homes] without significant institutional and political change". Related: institutional inertia and the difficulty of change

  4. Miami: home prices up, sea levels up. Can growth overcome facts? Related: The Atlas of Loss and Death tracks an increasing frequency of natural disasters

  5. Reasonable: The US government may start to tell states to manage stop mismanaging their water

  6. A VERY useful paper [pdf] "reviews the cost of different water supply and water treatment options around the world"
H/T to BG

22 Jul 2014

So what about Detroit?

I have followed Detroit's fall with interest, mostly because I am hoping that an entrepreneurial government will allow a thousand flowers to bloom in the hollowed-out city (population has dropped by 60 percent; 200,000 properties are vacant). That process will take time, even if it's going in the right direction.

In the meantime, the city is bankrupt, and one-third of its debt ($5 billion) is linked to the Detroit Water and Sewerage Department (DWSD), which is trying to collect $175 million in past-due debt from its customers.

This action is sensible but controversial in two ways. First, DWSD is cutting service to customers who do not pay their bills. Second — and far worse — DWSD is going after debts of as little as $150 from 150,000 residential customers even as it waits for repayment from 11,000 larger customers who owe half the total.

These actions have led to a petition from the human-right-to-water crowd, asking the President to declare a human health crisis, i.e., to prevent DWSD from charging customers. That's a terrible idea because it undermines the utility's finances now AND later. Why would anyone pay for water they can get for free?

My opposition to the petition does not mean I oppose financial help for the poor or their continued access to drinking water. Here's how I'd handle the situation:

  • Drinking water SERVICES should NOT be a human right (=free) because they — like electrical services — cost money
  • Detroit has mismanaged many dimensions of life, including poverty, jobs and water management
  • The utility MUST continue to operate, and it needs money for that
  • Past debt may not be customers’ fault, since the utility may have over spent, etc.
  • Therefore:
    1. The poor should income support to pay for food, rent and water. They should NOT be given free water
    2. The utility should go after biggest customers FIRST, as the cost per $1,000 of debt recovery will be MUCH lower
    3. The government may face a welfare burden, but welfare works through income transfers, not cheap — or free — water
Bottom Line: The government (and taxpayers) should bail out the poor. Bigger customers should be chased for repayment. All customers should pay their future water bills.

H/Ts to BB, DC and RM

21 Jul 2014

Monday funnies

Why are people taking selfies in ALL the wrong places?

Anything but water

  1. If you want a great introduction to institutions (the ones that determine the difference between economic development and stagnation, for example), then read this 1991 paper [pdf] by Douglass North, Nobel Laureate

  2. I'm happy to find that Simon Kuznets (inventor of GDP)...
    ...was inclined to include only activities he believed contributed to society’s wellbeing. Why count things like spending on armaments, he reasoned, when war clearly detracted from human welfare? He also wanted to subtract advertising (useless), financial and speculative activities (dangerous) and government spending (tautological, since it was just recycled taxes). Presumably he wouldn’t have been thrilled with the idea that the more heroin consumed and prostitutes visited, the healthier an economy. [Unfortunately,] Kuznets lost his battle. Modern national income accounts include both arms sales and investment banking services.
    It's sad that his fears of distortions came true, as I described in "Economists owe ecology an apology"

  3. Read this very insightful article on monopoly regulation. The earliest laws encouraged diversity and competition. Later laws "harnessed" the efficiency of monopolies... until the monopolies took over politicians, regulators and markets. Too bad for the US

  4. Best way to invest $1? Read these deep -- and shallow -- responses

  5. Read this interview with a 15 year old who's been to Burning Man 12 times:
    What about the people who say that Burning Man is not as cool as it used to be?
    A: There’s a lot more people recently who have been going just for the party, and not for the art. It’s an ART FESTIVAL. If you just come to party and get wasted, that’s not what Burning Man is about. If you’re seeing it as a big party … it sort of is, but it’s an ART party. It’s not just for coming to drink.

    Is there anything else you’d want to say to people attending Burning Man?
    A: Take risks. Don’t take BIG risks, but take … a good amount of risks. If you’re going to go to Burning Man, be open-minded. Push your boundaries. If you’re not comfortable with something, try it anyway. Explore, experiment, try new things. Get to know yourself.

18 Jul 2014

Friday party!

Not exactly my favorite music but pretty awesome hooping!

Five thousand blog posts!

My first blog was called "another brilliant idea," but I was not regularly brilliant.

My second blog ("sex, drugs and water utilities") lost me a few job interviews.* I ended that theme when I took a UC Berkeley postdoc that focused on water.

I copied one-third of the posts (~170) from sex/drugs to aguanomics, which launched on 26 March 2008.**

This is the 5,000th post on aguanomics. I wrote most. Damian Park wrote ~25 and guests -- mostly students -- wrote ~280.***

Looking back, I can say a few things:
  • I really enjoy blogging
  • Many posts from past years are still fun to read
  • Many critiques (water is too cheap, etc.) are STILL relevant :(
  • I've learned a lot from different people's perspectives on water
Bottom Line: Nobody sets out to do anything 5,000 times, but it's possible when the activity is fun and interesting.

* Bonus points if you see their common element :)

** Six months of aguanomics, One year, Eighteen months, Two years, Thirty months, Three years, Four years, Five years and Six years of aguanomics. Check out the photos!

*** I forgot to mark his posts when I removed him as an author :(

The Quest -- the review

I was eager to read this book (subtitle: "Energy, Security, and the Remaking of the Modern World"), Daniel Yergin's follow-up on his brilliant 1990 book, The Prize.

The energy industry has changed a lot in the past 25 years, but this book was disappointing. I'm guessing that two factors are driving my disappointment. The first is that Yergin did not have (or could not find) a strong narrative arc for this book. The Prize jumped from discovery to exploration to nationalization, but The Quest lacked that momentum. Yergin's histories of non-oil sectors (electricity, cars, renewables, etc.) did not always overlap or respond to the same forces. The reader thus needs to ignore (or enjoy) loose ends until they bind together. (Electric cars were a big deal 100 years ago and today; the middle era was very well connected to events in the automotive or oil sectors.)

The book is really a collection of briefs: The New World of Oil (since 1990), Securing the Supply (unconventional fuels), The Electric Age (and nuclear), Climate and Carbon (and failed treaties), New Energies (from sun to efficiency), and Road to the Future (batteries, biofuels and e-cars)

The other drag on the book was its over-broad, over-vague lack of focus. Although it's easier to see trends with decades of hindsight, it's a challenge to see them in current events where many people in many places are trying many actions in response to many beliefs. A book that summarizes the mish-mash of current energy policies is going to be a bit mashed-together itself.

These observations do not make for a bad book, as it may not be possible to write a "good" book that describes so many current, overlapping and confusing trends. Taking this positive perspective as a starting point, I will say that Yergin does a great job at summarizing many complex issues clearly and without noticeable faults or bias. You can hear the voice of a man (and a large consultancy) that has worked for decades on all three frontiers of energy: conventional, innovative and fantastical.

Here are some notes I took while reading:
  • Yergin describes several missed opportunities on energy policy. Kyoto (1994) could have brought in emissions caps for LDCs, but that topic was verboten. Years later, it's even harder to raise the issue with countries that have shot way beyond the "stretch" targets debated in the 1990s.
  • Cheney and Bush (like Reagan before them) really killed international momentum for agreements.
  • Nuclear power also had several "bad luck" events (Three Mile Island, Chernobyl, Fukushima Daiichi) that damned a good technology.
  • It's not just sad to see international disagreements on "save ourselves" issues; it's sad to see them fail for the same reasons. The most common is a reluctance to increase the price of energy that's seen as a cheap way to get economic growth and political stability. The first is not true (cheap energy is used -- wasted -- instead of other inputs or techniques). The second is short-lived and short-term, since voters with cheap energy habits take it for granted and increase their exposure to future supply shocks. Then you need to consider the negative feedback loop from climate change.
  • In both of his books, Yergin borrows Churchill's definition of energy security: many suppliers. This definition still makes sense, even as America defies it with friend/foe diplomatic policies towards oil producing countries that seem similar. It's hard to see why Iran is an enemy if Saudi Arabia is a friend, just as it's strange to see the US importing so much oil from Nigeria, Venezuela and Russia. Are we interested in liberty and justice or cheap oil?
  • Hubbert (of "Peak Oil" fame) was a good geophysicist but poor economist. He missed the impact of incentives and innovation on the "economic" supply of oil.
  • Canada's government helped develop the oil sands, but I'm not going to believe the government was either necessary or sufficient. Oil sands -- like horizontal drilling and fracking -- would be developed when profits made it useful. Government spending may have sped up development, but it's not clear if more speed was good for industry, the environment, citizens or consumers. ("Cheap energy" is not all win-win.)
  • The OECD established the International Energy Agency after the 1970s oil shocks to defend consuming countries against OPEC and other producers. It's a pity that the OECD cannot devote 10 percent of IEA resources to an International Water Agency, as water flows -- real and virtual -- are getting pretty important.
  • The natural gas revolution got started in 1978, when the Carter government deregulated gas prices.
  • The deregulation of California's wholesale electricity markets failed "by design," since fixed retail prices impeded the interaction of supply and demand.
  • Japan's "top runner" energy efficiency regulation requires that ALL products sold x years from the present use as little energy as the most efficient product on the market today.
Bottom Line: I give this book FOUR stars for its overview of developments in the energy industry since 1990. It has enough background, context and explanation to give anyone a good idea of how trends have emerged and interacted, but you'll need to roll your own dice if you want to know where it's going.

17 Jul 2014

Pricing tap water for efficiency and fairness

I've opposed increasing block rates for some time, but I don't think I've got a simple post on how I WOULD price water.

This is from Living with Water Scarcity:
Reliable service and fair pricing

Utilities should collect fixed and variable revenues in direct proportion to fixed and variable costs so their finances are stable. All customers should pay the same volumetric prices to be fair. A surcharge can be added when water is scarce and demand needs to fall. Excess revenue from that surcharge can be rebated to each household --- without respect to their water use --- to ensure that the utility uses higher prices only as a temporary means of preventing shortage.

These ideas are summarized on the next page below, which illustrates how utilities can price water services for fiscal and environmental stability. The figure shows how water costs usually arrive (left column), the way that water is typically mispriced (center column), and how to price water correctly (right column). The light grey areas show the lopsided impact of conservation: A 50 percent drop in use reduces variable costs and revenues by 50 percent each, but total costs fall by much less than total revenues because variable costs are a small share of total costs while variable revenues are a much larger share of total revenues.

Copy, snip and distribute this sheet [PDF] at your next cocktail party. People love talking about realistic ways to live with water scarcity.
Bottom Line: Forget fancy pricing structures with dozens of customers classes. Recover costs to protect the utility's financial stability. Raise prices when water -- the cost of which is usually zero -- is scarce.

Anything but water

  1. Brazil has reduced poverty via cash transfers (Bolsa Familiar), but more education and access to jobs (for those educated workers) has played a bigger role

  2. Save the US... by modeling its government on the socialist, gun-free, scientific, anti-racist, anti-war, anti-spending US Military

  3. Academic economists are useless to students and society

  4. An investment adviser "realizes how stupid we are" when it comes to believing our biases and wasting money on financial BS

  5. NB: Expats in Saudi Arabia (KSA) are paid a lot to (1) compensate for poor living conditions (weather and culture), (2) enable them to get to nicer places (Rome, Dubai) and (3) find ways to coping with poor service and expensive goods delivered by unmotivated monopolists. What's worse is that singles cannot meet. Expats wait for weekly parties that cost $70 to enter. Saudis take many risks to talk or have sex. I have no experience in romance in KSA, but I'd worry about bad matches and matches-gone-wrong

16 Jul 2014

The Dalai Lama’s 18 Suggestions for the Good Life

The DL (via CC) does not seem to count in 10s...
  1. Take into account that great love and great achievements involve great risk
  2. When you lose, don’t lose the lesson
  3. Follow the three Rs:
    • Respect for self
    • Respect for others
    • Responsibility for all your actions
  4. Remember that not getting what you want is sometimes a wonderful stroke of luck
  5. Learn the rules so you know how to break them properly
  6. Don’t let a little dispute injure a great friendship
  7. When you realize you’ve made a mistake, take immediate steps to correct it
  8. Spend some time alone every day
  9. Open your arms to change, but don’t let go of your values
  10. Remember that silence is sometimes the best answer
  11. Live a good, honorable life. Then when you get older and think back, you’ll be able to enjoy it a second time
  12. A loving atmosphere in your home is the foundation for your life
  13. In disagreements with loved ones, deal only with the current situation. Don’t bring up the past
  14. Share your knowledge. It’s a way to achieve immortality
  15. Be gentle with the earth
  16. Once a year, go someplace you’ve never been before
  17. Remember that the best relationship is one in which your love for each other exceeds your need for each other
  18. Judge your success by what you had to give up in order to get it

Governance is like pornography

Nice three-way!
A few random thoughts that I wrote down awhile ago...

"Governance" requires borders, property rights, and a means of managing those rights. Borders can separate physical or economic space, e.g., US and Mexico or agriculture and urban. Property rights in water should clarify rights in quantity and quality, to individuals or communities. Management allows for trade and sharing as well as NOT moving rights. 

Borders reduce complexity by allowing people within a border to ignore actions and events outside their borders. Good governance minimizes spillovers into neighboring regions.

The institutions for managing rights do not need data as much as reliability. It's easier to say "restart the water allocation cycle on every full moon" than "take 12.34 m3 of water on your turn."

An exact, unreliable system will cause endless problems, e.g., (1) in this post.

Institutions must evolve with practice and change. it takes practice to understand a complex water system. Governance needs to change as social priorities, technology and outside conditions change.

Solutions emerging from public participation are more likely to balance and endure.* Non-monetary, communal or social solutions can often accomplish far more than monetary solutions that are distorted by market power or corruption. An acceptable governance framework allocates private (commodity) water with price or market signals and public (social) water via political mechanisms.

Bottom Line: Good pornography doesn't distract you with misplaced actors, intrusive lighting, and bad plots. Good water governance involves the right people, avoids peripheral debates, and keeps the right bits more wet than wild.

* via Fleck:
Good policy design contributes to three key public needs: progress in problem solving that will make tomorrow’s challenges easier than today’s; representation of sufficient interests, so that the policy has a positive balance of support and is politically feasible; and empowerment of the people affected, so that they can become engaged and better able to resolve their own problems.

15 Jul 2014

We ignore the drought to make money

In response to this post (and discussion), DW said:
San Diegan’s won’t take the drought seriously until local government put a moratorium on new housing development or water stops coming out of their taps. They ask "why are water agencies continuing to hook up to new sprawling subdivisions if there is a water shortage?"
To which I replied:
I agree. I'm writing an essay on "water waste" that has SD as the main case study. I wrote that the city CANNOT increase prices at the same time as approving development without causing trouble with residents and/or conflicting with "move here, plenty of water" advertising.

So they deny -- and desalinate -- until they get by or hit the wall...
Don't forget my AMA on drought Thursday!

Water rights, salinity management and remote sensing

[This long, useful guest post clarifies the inter-dependencies markets must consider.]

JD emailed me in response to this post on REAL water markets in California:
I think those markets are doomed without a (California) Constitution Change, as I understand it essentially says the State (the people of) owns all water, and only licenses its use to rights holders... that license is dependent on using it as the State values and -- needless to say -- (free) market forces are of little consideration to the State (unless it is explained to them by some special interest that doesn't want to be too bogged down by real free market forces!)

I’ve thought about it because salinization can only be controlled with return flows (i.e. any flows released to the environment) of sufficient quality and quantity. Salts need to be transported at low-enough concentrations that the environment is not trashed on the way and then deposited at a final (drainage) destination with adequate capacity. Current regulations often classify adequate return flows (especially if they draw on groundwater) as waste, meaning that the State may revoke the licenses of responsible dischargers.[1]

It wouldn't be so bad if the State allocated "surplus" to protect environmental return flows. Instead, it allocates the water to new homes or crops -- sometimes in a different hydrologic basin. Then they come back at the original user (who could have allocated appropriate return flows directly if it wasn’t considered a waste of water), who is tagged as a polluter since their release is now too strong to be assimilated into now-lower-volumes of water.

Which is why your idea of assuming all water use is consumptive absolutely must include the State defining and enforcing environmental flows to account for the need to assimilate and transport the residual wastes that inexorably result from approaching full consumptive use (i.e., 100% irrigation efficiency) and that cannot be kept out of natural systems (i.e., contained in a sewer or other dedicated waste collection system).

We are currently caught up in a water efficiency spiral to maximize consumptive use percentage that precisely parallels that which caused all prior irrigated agricultural societies to collapse due to salinization. They were very efficient but neglected return flows. Their ignorance is excusable, ours less so.
To this, I replied:
I agree, but I don't think it needs a constitutional change as much as a regulatory change. I also think return flows need to be incorporated into licenses.[2]
... and then JD replied:
You may be right (I’ve given up trying to understand water law rationally…especially the “right” to water) but regulators seem gun shy without clear direction from the top. I agree with you that free markets with transparent rules such as clear discharge standards and the ability to use their best resources towards meeting the standards are the most efficient, but if that freedom cannot be granted, then at least the State should not promulgate policy to trash the commons long term, for short term gains. I get it that some impacts to environmental flows may be reasonable in drought, but a free market would do better than "experts."

The return flows needs are variable (depending on the use), so it would make sense to license for a particular use. From a salinization perspective, the higher in the watershed and the more efficient the use (defined as maximizing consumptive use percentage), the higher the return flows must be, and they need to be properly allocated between ground and surface water. In many cases the surface water discharge can be reduced to zero so groundwater gets the return flows -- both to address quality of the aquifer (my primary concern here) as well as quantity.[3] An example of ways environmental flows could be incentivized is to give those who provide them an offset for a problematic discharge -- maybe even for a price -- be it captured storm water or any other water that can lawfully be used.
After reading this post, JD sent a further clarification:
Wow... just saw you link to the Chinese government using remote sensing to allocate water rights!

That’s the implementation I've had in mind to monitor salinization and groundwater overdraft. I recently read that wineries in the Napa area are using $2k drones for farm-level water management.

The implications are enormous. I understand from a colleague that satellite implementation costs the same whether for an acre or the entire Central Valley. If the State wishes to provide tools to manage both of the factors that will, if unchecked, destroy the groundwater resource, then it should collect and distribute data to the public in real time.[4] In theory, they could dispense with many of the expensive meters they are requiring agricultural users to install, and since 80+ percent of salinization is driven by ET, what better metric to deal with it -- free market or otherwise.
Bottom Line: Efficiency has limits, use water wisely.

  1. Caveats: Groundwater is a major reservoir whose use and quality must also be accounted for. Salt load is not the same as salinity because it's all about water use.
  2. [DZ here] JD has helped me see that my idea of assuming 100 percent consumption of licensed water will only work if environmental flows are not only excluded from those licensed diversions (my original idea) but ALSO specified to ensure that minimum return flows dilute salts and other contaminants that need to be "flushed."
  3. This is good in that things like nutrient/chemicals affecting surface water ecology are prevented at the source but bad on a salinization front in that the salts have no outlet and will accumulate in the soils and eventually the groundwater.
  4. A real time GIS type system remotely tracking evaporation and rainfall, coupled with flow and salinity quality data from the major reservoirs (i.e., water source) and some simple mass balance calculations can realistically provide the necessary insight to almost completely characterize the salinity management loads and mitigation needs for any area. This could be the necessary tool to provide transparent information to allow our (crowd sourced) civilization to avoid the fate of the ancient civilizations... if we pay attention.

14 Jul 2014

I'm doing an AMA on Drought in the West Thursday!

I'll be on Reddit doing an AMA (ask me anything) in drought and water in the western US this Thursday, starting at 7am Pacific (14:00 UTC). Feel free to stop by for the Q&A.

Reddit is an awesome online community where comments add lots of value -- and humor -- to questions, articles and issues. I suggest you use this opportunity to join (it's free) and find a few areas ("subreddits") of interest.

I made three videos discussing the drought and water in the western US with Paul Wyrwoll of the Global Water Forum, which is based out of Australia:
  1. Drought, governance and agriculture (20 min)
  2. Drought and urban water management (9 min)
  3. Drought, climate change, crisis and politics (14 min)
The URL for the AMA will be posted here on Thursday: Go!

Monday funnies

The booze guys have all the great lines:

Another blow against IBRs

Hugh Sibly published a paper which "suggests that IBTs [Increasing Block Tariffs] are neither fair nor efficient." Given my agreement, I asked for more detail and got this:
I started thinking about IBT/Rs when they were proposed as a solution to the water shortage during the "Millennium drought" here in Australia. Of course they were no such thing.

I think the simple and efficient way to price water is using a two part tariff when a variable volumetric rate which incorporates a 'scarcity' price. In Australia water utilities must make a normal rate of return, so the fixed charge can be varied to ensure that. Fairness issues are always raised here when one talks about pricing, so I've argued the best way to ensure that is to give the disadvantaged a discount off the (or even a negative) fixed charge.

The important thing, of course, is to ensure the volumetric rate reflects the scarcity of water. To economists this line of reasoning is, well, obvious. But there is a lot of resistance to it here, as so many people think IBR/Ts are a good (fair) form of pricing.
In this similar paper you'll find arguments in support his conclusions such as this:
IBTs are easy to justify politically, because their implementation can be blamed on water hogs, who are punished by their introduction. But the real culprit for the water shortage is climatic variability, and the way in which the country’s water authorities plan for, and respond to, it. The implementation of IBTs is an attempt to allow water users to avoid confronting the implications of variability in water availability, and it allows many users escape the cost of their actions.


Invoking the concept of non-discretionary demand as a means of allocating water is problematic from an economic perspective. The distinction between discretionary and non-discretionary demand presumably relates to differences in the willingness to pay for different uses of water. For example, water used for showers (non-discretionary) would have a higher marginal benefit than water used to wash the car (discretionary). However, only consumers can identify their demand for the duration and frequency of given activities. An efficient volumetric rate allows consumers to make this choice. Water authorities targeting, and then restricting, activities declared ‘non-discretionary’ removes this choice from households, and thus may lead to an inefficient allocation of water across uses.
Read the whole thing, and then tell me if you still think increasing block rates lead -- or impede -- fairness and efficiency.

11 Jul 2014

Friday party!

I love "Holland the Original Cool," and they* are back with more:

Can Cool be Taught (to an American)?

...and Can Cool be Experienced?

* KLM is sponsoring these, so there's some airline advertising...

Four Rivers, two losses

Triple-grande yuck!
I taught a fourth-year class at Simon Fraser University where I allowed students to pick a "natural resource" topic that they would study, present and write on. I learned a lot from my students (who enjoyed the experience [pdf]) and asked each to write a blog post on an interesting dimension of the area they studied.

Here's an edited post from JC:

"The Green Latte phenomenon" sarcastically describes the spread of green tides over South Korea's four major rivers. The tide comes with foul smells, dead fish, and risk to potable water supplies.

Myeng-Back Lee (South Korea's 17th president -- nicknamed "the bulldozer" as CEO of Hyundai Construction), pledged to build the Four Rivers Project (FRP) during his election campaign, but the project's realization has dragged the country towards economic and environmental disaster.

The FRP promised to improve water quality, redistribute water, and boost economic growth. The cost of the project was roughly US$18 billion (roughly 2 percent of South Korea's GDP), which was funded by higher taxes and lower payments for the poor. The FRP was one of the most expensive infrastructure project in Korea's history.

The FRP was completed despite opposition, but it failed from an economic and environmental perspective, lowering water quality, increasing flood risk and damaging the environment (wetlands shrank by 41 percent; dissolved oxygen dropped in rivers).

That waste of money is a sunk cost but now the project requires $1 billion per year of "never-ending" maintenance costs. Those costs may rise due to the poor quality of construction and below-par performance.

The FRP has revealed corruption in the government, which lied, ignored public opinion, colluded with construction companies, and directed bribes to politicians and CEOs.

Now the government proposes to pay for the project by increasing water taxes and selling off drinking water systems!
  • It is time to forget about sunk costs and move on.
  • It is time to look at the environmental destruction caused by greed.
  • It is time to remove the crumbling dams and let rivers flow.
  • It is time for our society to be transparent for the good of the community and hopes of the next generation.
Bottom line: The FRP wasted money and damaged nature. The project should be torn out so future Koreans can enjoy a healthy environment. A memorial made of broken dam pieces can remind them of the dangers of corruption.

10 Jul 2014

Don't shoot the messenger

A LOT of people get upset when politicians, bureaucrats and managers tell them that -- due to a drought, contamination or bad day at the office - there's not enough water for people to use in the same way as in the "good old days."

Their reaction is childish, but it's even worse when people complain about the end of their subsidized water. Get real.

Bottom Line: He who lives by the sword (cheap water from the government) dies by the sword (government water cut-off). Reliable water comes to those who pay full price and learn how to live with real water flows.

Thinking, Fast and Slow -- the review

Daniel Kahneman deserved to win the Nobel Prize in Economics for his contributions to "behavioral economics." He and collaborator Amos Tversky (who died before he could receive the award) used psychological insights to explain "irrational" behavior that economists had pre-emptively (and un-realistically) dismissed. Their most important contributions concern "cognitive bias" (we focus on some -- not all -- costs and benefits) and "prospect theory" (we put more weight on potential losses than potential gains).

I read Kahneman's 2011 book over several months because it was long (499 pages) and thorough repetitive.

My top-line recommendation that that you read this insightful book, but I suggest you take a chapter per day (or week) to allow yourself time to digest -- and experience -- the ideas. (Alternatively, print this review and read one note per day! :)

Here are some notes on Kahneman's ideas:
  1. Kahneman suggests that we process decisions by instinct (System 1 thinking, or "guts") or after consideration (System 2 thinking, or "brains"). The important point is that each system is right for some situations but not others. Order food that "feels right" but don't buy a car that way. A car (or job or house) decision involves many factors that will interact and develop over years. We cannot predict all these factors, but we can give them appropriate weights with care.
  2. Salespeople appeal to your guts when they want you to trust them. You should rely on brains to evaluate their promises. 
  3. We make better gut decisions when we're happy but worse ones when we're sad or angry.
  4. Kahneman says we often fail to look beyond "what we see is all there is" when considering a situation. This leads to misdirected gut responses. (Nassim Taleb's Fooled by Randomness addresses this bias.) People over-estimate the risk of violent death because the media loves exotic, bloody stories.
  5. People vote for "competence" (strong, trustworthy) over "likability" when judging candidates on looks. Many voters choose candidates based on looks.
  6. People believe that a beneficial technology's risk is lower and that low risk technology brings more benefits. This may explain why most people don't care about the risks of driving cars (far more dangerous than flying in airplanes) or using cell phones. It also suggests that policy changes (e.g., higher prices for water) will be more acceptable when they are small and reversible. After the sky does not fall, the "low risk" strategy can be expanded. 
  7. The measuring stick of risk (relative to what?) affects people's perceptions of risk.
  8. Bayesian reasoning: (1) anchor your judgement on the probability of an outcome (given a plausible set of repetitions), then (2) question the accuracy of your belief in that probability as outcomes appear. Put differently, take a stand and reconsider it as new data arrive.
  9. People will pay more for a "full set of perfect dishes" than for the same set with extra damaged dishes -- violating the "free disposal" assumption of economic theory (we can always dump excess). This bias explains why a house with freshly painted, empty rooms will sell for more than one with fresh paint but old furniture.
  10. Stereotyping is bad from a social perspective, but we should not ignore the information included in group statistics. Looking from the other direction, people are far TOO willing to assume the group behaves as one individual. (When I was traveling, I learned "not to judge a person by their country nor a country by one person.")
  11. Passing the buck: People "feel relieved of responsibility then they know others have heard the same request for help." This fact explains the importance of putting one person in charge, asking that person for a decision, and setting a deadline to evaluate the decision's impact.
  12. "Regression to the mean" happens when average performance replaces a "hot streak." It's not caused by burn out. It's caused by statistics. (Try to get a "hot streak" in coin flips.)
  13. "Leaders who have been lucky are not punished for taking too much risk... they are credited with flair and foresight" [p204]. Two of three mutual funds underperform the market in any given year, but lucky managers (and their investors) cling to their "illusion of skill."
  14. Successful stock traders find undervalued companies, not good companies whose shares may already be overpriced.
  15. Philip Tetlock interviewed 284 people "who made their living commenting or offering advice on economic and political trends." Their predictions could have been beaten by dart-throwing monkeys -- even within their specializations. They offered excuses to explain their "bad luck" (see Note 8).
  16. "Errors of prediction are inevitable because the world is unpredictable" [p220].
  17. Algorithms are statistically superior to experts when it comes to diagnosing medical, psychological, criminal, financial and other events in "uncertain, unpredictable" domains. See my paper on real estate markets [pdf].
  18. Simpler statistics are often better. Forget multivariate regressions. Use simple weights. For example: Marital stability = f (frequency of lovemaking - frequency of quarrels).
  19. "Back-of-envelope is often better than an optimally weighted formula and certainly better than expert judgement" [p226].
  20. Good (trustworthy) intuition comes from having enough time to understand the regularities in a "predictable environment," e.g., sports competition. "Intuition cannot be trusted in the absence of stable regularities in the environment" [p241].
  21. The "planning fallacy" might lead one to believe the best-case prediction when events do not follow the best case path. Use less optimistic weights -- and read this book.
  22. Overoptimism explains lawsuits, wars, scientific research and small business startups. Leaders tend to be overoptimistic, for better or worse. (Aside: I think men are more optimistic than women, which is why they discover more and die more often.)
  23. Want to plan ahead? "Imagine it's one year in the future and the outcome of the plan was a complete disaster. Write a debrief on that disaster." This is useful because there are more ways to fail than succeed.
  24. Our attitudes towards wealth are affected by our reference point. Start poor, and it's all up; start rich, and you may be disappointed. (If you own a house, decide if you use the purchase price or its "value" during the bubble.") You're much happier going from $100 to $200 than $800 to $900.
  25. The asymmetry of loses/wins in prospect theory explains why it's harder for one side to "give up" the exact same amount as the other side gains. This explains the durability of institutions -- for better or worse -- and why they rarely change without (1) outside pressure of bigger losses or (2) huge gains to compensate for losses. It also explains why it's hard for invaders to win.
  26. Economists often fail to account for reference points, and they dislike them for "messing up" their models. Economists whose models ignore context may misunderstand behavior.
  27. We give priority to bad news, which is why losing $100 does not compensate for winning $100. Hence, "long term success in a relationship" depends on avoiding the negative more than seeking the positive" [p302].
  28. People think it's fairer to fire a $9/hr worker and hire a $7/hr worker than reduce the wages of the $9/hr worker. That may not be a good way to go.
  29. "The sunk cost fallacy keeps people too long in poor jobs, unhappy marriages and unpromising research projects" [p345].
  30. "The precautionary principle is costly, and when interpreted strictly it can be paralyzing." It would have prevented "airplanes, air conditioning, antibiotics, automobiles..."
  31. Framing and anchoring affect our perspectives. The American preference for miles per gallon (instead of liters per 100km) means they cannot accurately compare fuel efficiency among cars. This is not an accident as far as US car companies are concerned. (Another non-accident is raising fuel economy standards instead of gas taxes.)
  32. People may choose a vacation according to what they PLAN to remember than what they will experience. That may be because we remember high and low points but forget their duration. 
  33. "The easiest way to increase happiness is to control use of your time. Can you find more time to do the things you enjoy doing?" (I have the freedom to write this review, but it gets tedious after 3 hours...)
  34. "Experienced happiness and life satisfaction are largely determined by the genetics of temperament," but "the importance that people attached to income at age 18 anticipated their satisfaction with their income as adults" [pp400-401]. I am fortunate, I think, to have started life with low expectations. That makes it easier for me to make 1/3 the money in Amsterdam that I would in Riyadh because it's definitely better to be "poor" in Amsterdam.
  35. That said, "the goals people set for themselves are so important to what they do and how they feel that... we cannot hold a concept of well-being that ignores what people want" [p402].
  36. "Adaptation to a situation means thinking less and less about it" [p405].
  37. [Paraphrased from p412]: Our research has not shown that people are irrational. It has clarified the shape of their rationality, which creates a dilemma: should we protect people against their mistakes or limit their freedom to make them? Seen from the other side, we may think it easier to protect people from the quirks of "guts" and laziness of "brains." (Hence my support for a ban on advertising.)
  38. "Brains" may help us rationalize "guts" but they can also stop foolish impulses -- when we acknowledge the limits to our reason and the information we rely on.
  39. "Gut" feelings can guide us well if we can tell the difference between clear and complicated circumstances.
  40. "An organization is a factory that manufactures judgements and decisions" [p417]. It's important, therefore, to balance between its "gut" and "brain" functions.
Bottom Line: I give this book FOUR STARS. Skip psychology and read it to understand yourself and others.

9 Jul 2014

Do you trust your neighbors?

A few months ago, I participated in a brainstorming on the future of water (American Water was paying) where this quandary came up:
How do we get good regulators* who can balance between the long term needs of the community (reliable water service) and short term temptations of the utility (less work, more profits)?
One suggestion struck me as perfectly appropriate: regulators should be drawn from the population of citizens in the same way as jurors, to serve for a year or so (i.e., meeting a few times per month, with compensation).

What I like about this idea is that it guarantees fresh, outside perspectives on the regulatory balancing act. Fresh perspectives will be neither "conventional" nor "captive" to the goals and views of water managers. Rather than being a drawback, I see regulators' lack of technical experience as a plus, as it will force managers to explain the projects and funding they need in common sense terms.

Is it possible that the regulators will be manipulated or deceived by their permanent staff or the utilities? Yes,  but those who understand their ignorance will be wary enough to make sure they have enough information to make an appropriate decision.

Your thoughts?

Bottom Line: The community needs to regulate its water services, so why not have members of the community appointed (by lottery or vote) to carry out that role?

*I discuss the dynamics of this "principal-agent-beneficiary" problem in this paper on international aid, this paper on a human right to water, this chapter on selfish water managers [pdf], and this exploration of customer power and customer service.

8 Jul 2014

Lost Rivers -- the review

I got reviewer access to this movie, which discusses the "lost rivers" (or their remnants) in Montreal, Toronto, Seoul, London, Yonkers and Brescia.

The 70-minute documentary was interesting, in terms of pointing out how people see (or overlook) these rivers, how their disappearance -- and reappearance -- affects life in the city, and the difficulty in restring rivers that have been covered over with shopping, parking, and so on.

The movie was a little "slow" because the narrator had a "dead" voice, and there was no pacing -- or thrust -- to the firm.

Bottom Line: I give Lost Rivers THREE STARS for discussing the flowing water dimension to urban life.

Geothermal energy: clean air or money?

I taught a fourth-year class at Simon Fraser University where I allowed students to pick a "natural resource" topic that they would study, present and write on. I learned a lot from my students (who enjoyed the experience [pdf]) and asked each to write a blog post on an interesting dimension of the area they studied.

Here's an edited post from LB:

Geothermal energy is reputed to be a source of clean energy for heating and power generation, but this article points out that geothermal wells increase emissions of H2S and CO2. Sulfur hydroxide (H2S) is especially worrisome as the cause of acid rain and soil vulcanization.

What's interesting is that the governments respond differently to this threat. Iceland's government does not worry about adverse impacts as much as the US government does.

What explains the difference? I think it's population density. There aren't as many people near geothermal facilities in Iceland as there are in the US, which means that the benefits of geothermal come with lower costs in Iceland.

Bottom Line: The balance between local pollution and local economic activity depends on how many people are around.

7 Jul 2014

Monday funnies

XKCD again:

Check out this one on Free Speech vs GTFO

Anything but water

  1. "What you learn in your 40s" resonates with me, especially "there are no experts"

  2. An excellent example of science-design porn from India

  3. The attraction of university in the US is falling as fees and student debt rise to cover the cost of bloated administration

  4. The sugar industry bribes politicians so it can kill you

  5. Two (cartoon) views of the Anthropocene: humans control 90+ percent of mammal biomass and the catastrophic potential of climate change

  6. "The people who tend to prefer the Oxford comma [a comma at the end of a series of items] also tend to be the kind of people who will tell a survey that they think their own grammar is excellent." I use that comma when it improves understanding, parallels and long sentences
H/T to RM

4 Jul 2014

Friday party!

Great dancing

Anything but water

It's Independence Day in the US, but individual freedom is under threat.

Read these articles to understand the problem and consider solutions (for the US and everywhere):
  1. A fascinating interview with the author of "Bullshit Jobs:"
    I think the spotlight on the financial sector did make apparent just how bizarrely skewed our economy is in terms of who gets rewarded and for what. There was this pall of mystification cast over everything pertaining to that sector—we were told, this is all so very complicated, you couldn’t possibly understand, it’s really very advanced science, you know, they are coming up with trading programs so complicated only astro-physicists can understand them, that sort of thing. We just had to take their word that, somehow, this was creating value in ways our simple little heads couldn’t possibly get around. Then after the crash we realized a lot of this stuff was not just scams, but pretty simple-minded scams, like taking bets you couldn’t possibly pay if you lost and just figuring the government would bail you out if you did. These guys weren’t creating value of any kind. They were making the world worse and getting paid insane amounts of money for it.

    Suddenly it became possible to see that if there’s a rule, it’s that the more obviously your work benefits others, the less you’re paid for it. CEOs and financial consultants that are actually making other people’s lives worse were paid millions, useless paper-pushers got handsomely compensated, people fulfilling obviously useful functions like taking care of the sick or teaching children or repairing broken heating systems or picking vegetables were the least rewarded.

    But another curious thing that happened after the crash is that people came to see these arrangements as basically justified... in many companies, there’s now an assumption that if there’s work that anyone might want to do for any reason other than the money, any work that is seen as having intrinsic merit in itself, they assume they shouldn’t have to pay for it.
    Related: An over-reliance on disruption (especially in financial "innovation") may cause more harm than good (Stiglitz makes the same point). Scott Adams on the "pivot" process of innovating by trial and error and a great rebuttal to techno-capitalists who will OWN our robot overlords, i.e., fix economic inequality if you want progress without backlash from the 99 percent)

  2. America struggles to translate economic power into political power when politicians battle over petty nothings (how Putin is taking advantage of that to destabilize Europe).

  3. More disruption communication improves healthcare outcomes

  4. Arnold Kling has a nice post on the difference between "Anglo-Saxon independence" and "clan-based interdependence" that reminds me a lot of how life works (for better or worse) in the US and Saudi Arabia, respectively (the Netherlands combines the both of both worlds -- individual choice but strong social bonds). Related (or not): punks and anarchists delivered good governance in Iceland

3 Jul 2014

Postdocs get no respect

PhD comics reveals the truth:

Speed blogging

More pictures of this amazing "Heavy lift ship" here
  1. An overview of the process for adaptive planning at water utilities

  2. A group of authors has written chapters on water economics; transboundary water; water and development; water and energy; and water concepts for Global Water, a 240pp book that's free to download. It's more academic than my End of Abundance but a great resource

  3. A new report by political heavyweights (Bloomberg, Paulson, et al.) explains the economic effects ($ losses) from climate change -- building destruction, lower farm yields, heat exhaustion/deaths, etc.

  4. Groundwater banking beats desalination "when the water's available," which applies to places with seasonal water flows. This related piece looks at water banking in Arizona. The irony is that water is only "available" there because it's taken from elsewhere

  5. Prepaid irrigation meters in Bangladesh help with accounting, corruption, pricing, and sustainability
H/T to MGC

2 Jul 2014

Alberta's emission regulations -- are they joking?

"This is where hope arrives to save the day"
I taught a fourth-year class at Simon Fraser University where I allowed students to pick a "natural resource" topic that they would study, present and write on. I learned a lot from my students (who enjoyed the experience [pdf]) and asked each to write a blog post on an interesting dimension of the area they studied.

Here's a lightly edited post from KW:

Alberta has promised to reduce annual provincial CO2e emissions by 50 million tons by 2020 and 200 million tons by 2050. To do so large emitters are now regulated, and must reduce their emissions by 12% annually. The government realized the importance of the Alberta energy sector to Canada's economy. They therefore developed a program which will not only meet these targets, but do so at lower economic costs than strict regulation. Under this program, the non-regulated sector can receive offset credits for reducing their emissions. Regulated firms for whom it is more costly to reduce emissions can alternatively purchase these offsets at the fixed price of $15 per ton of CO2e. Given this low price of offset accounts for 0.2% of the price of oil, it is sure not to harm the huge energy corporations which do business in Alberta. Furthermore if the free market is unable to supply enough offsets for the regulated sector, they can just pay an equivalent carbon tax on their extra emissions. This ensures that market pressure will not push up carbon prices.

If this were not enough protection for the energy corporations, the plan breaks down the anticipated reductions as follows: 12% conservation and efficiency, 28.5% greening energy production and 69.5% carbon capture and storage. This means energy firms will not have to incur the costs of significantly greening their operations (28.5%) as carbon will simply be captured and stored in the future (69.5%).

Agriculture is the main offset creator in this program but due to the low carbon price farmers are not changing their practices to earn offsets. However in order to appease both the regulated and unregulated sector, policy makers began lowering their standards for earning offsets, creating the huge problem of imperfect additionality. Now lucky firms are able to cash in on business as usual upgrades, sometimes even earning two-for-one offset credits. This means that farms can continue on with business as usual practices, the energy sector can continue with business as usual emissions, and the politicians can celebrate their grand achievement in reducing emissions.

From an economic standpoint the greatest attribute of this program is its ability to reduce emissions at a lower economic cost than strict regulation. It allows the free market to determine who reduces their emissions, and by how much. However this is also the punch line of the joke. By fixing the carbon price, the free market is not able to influence the price, therefore essentially fixing supply and demand with the price.

Bottom Line: The monetary incentive attached to the current carbon price is not enough to affect change on either the demand or supply side of the offset market. Therefore this theoretically sound program has been reduced to a carbon tax on 10% of regulated sector emissions.

1 Jul 2014

Watch this -- twice

Ernesto Sirolli (mentioned yesterday) wrote Ripples from the Zambezi years ago. It's the best book on development (for rich or poor nations) that I've ever read.

This TED talk summarizes his views with a passion -- and clarity -- that will bowl you over:

There are jobs, and then there are jobs

I left this comment on a Guardian article discussion jobs and climate change:
It helps to pay attention to the DETAILS of these claims:

There will be fewer fossil fuel and more renewable jobs if we switch from carbon, but these jobs are coming from and going into other sectors. There is, thus, a difference between "killing jobs" in the energy sector and "moving jobs" between sectors.

Putting that point aside, there will be MORE jobs in disaster recovery if we carry on burning carbon, but MORE jobs in a thriving economy if we move to an environmentally sustainable path. There is, thus, a difference between jobs that "fix broken windows" (doing nothing to improve our lives) and jobs that "contribute new benefits."

Bottom Line: The jobs discussion changes when you change your perspective.