31 Mar 2015

Anything but water

  1. Think today's capitalism is bad? Read about the violent British and Dutch East Indian Companies (NB: both companies used state military power to increase their profits and take markets share over). Not unrelated: An expat takes on Dutch racism, i.e., their attitudes towards "allochtonen mannen" -- a perspective I sympathize with

  2. Ready for progress? Read and sign the Open Borders Manifesto

  3. What makes a city beautiful? Spaces for people, among other things

  4. An Econtalk on government's (destabilizing) control over money*

  5. Satellite surveillance may save fish from a tragedy of the (open ocean) commons

  6. America's industrialized food system may kill you. Related: McDonald's follows other fast food chains in pledging to buy chicken raised with less antibiotics. Scary fact: Antibiotics were saving consumers 10-15 cents/kg, which seems a small savings when the risk of horrible death is much higher
H/Ts to CD and CE

*Also read Pettis on the Greeks and Debt, i.e.,
Debt can be thought of as a moral obligation when a loan is extended from one individual to another, especially if there is no interest on the loan. But loans to businesses or to sovereign entities are business transactions, and they should be managed as such.


Monetary policy is as much about politics as it is economics. It is about some of the ways in which wealth is created, allocated, and retained. Debt restructuring involves allocating wealth in the most efficient way. It does necessarily not mean, however, defaulting on payments. The only goal of a debt restructuring is to reduce the uncertainty associated with the resolution of the excessive and growing debt burden. There are many ways to do so, and in many cases they require significant debt forgiveness, but pretending that all will be fine if we only grit our teeth and wait longer has almost never turned out to be true.

30 Mar 2015

Monday funnies

Seen on an Amsterdam street:

In memory of Connie Cahlil

This may a bit heavy for Monday, but maybe it is a useful disruption of work to consider something more important: life.

Prologue: My mother died of cancer at 47 years of age. I was 18 years old. Her death was not sudden, so we had a long time to talk and get used to the idea. In the end, her death relieved her from the pain. She was one of the wisest people I know, and a lot of that wisdom came from the introspection she went through as she fought for life and approached death. I was holding her hand when she died. I told her "it's okay to die now," and she stopped breathing. This point is important because we all face death at some time. Acceptance makes it easier for you as well as those around you. I often think of my death (or absence), and it bothers me in terms of interrupting my plans or enjoyment of life. OTOH, it's going to happen so it hardly seems worth fearing.

My friend Connie died from cancer a week ago, 15 months after being told that she had six months to live. I met her in 1991, I think, when she was an unemployed Harvard MBA. She was also a single, soon-to-be mother of her son Kai, who is now about 23 years old. We spoke over the years about many things, but our emails over the past year were the most interesting:

Me to her [May 20 2014]:
I think you may want to read this.
Her reply [May 20 2014]:
David, that essay is so wonderfully thoughtful and well-written, thank you for sending the link!

These issues occur often in discussions especially now when I appear well even as I can feel the cancer returning. Recently people have been saying things like, “You made the decision not to go through chemo back when the doctors thought the cancer would return quickly. But now you have new information – it is months later and you are still well. So you should re-visit that decision.”

But the reality is that even though I have “well-being” – I smile often, I am happy, I do as much as I am physically able – my body is not well. The decision not to have chemo was made exactly so that I could have a few months of well-being – and that is the experience I am having.

But people misinterpret “well-being” as evidence that the cancer has gone away. It hasn’t.

After the surgery in January the doctors estimated my life expectancy, without chemo, at less than 6 months. Now here we are in the 3rd week of May. Based on what I feel happening in my abdomen it seems like the doctors’ estimate may still be accurate – time may be very short for me now. That thought does not fill me with dread, or fear, or depression.

There are very, very few people who can really ‘hear’ me say where I am at with all of this now. I made the decision not to go through a long, slow, uncomfortable decline to death. I have no interest in revisiting that decision.

Last Saturday a friend invited me to go to the “Rejuvenation Festival” at the park down by the river. On the spur of the moment I said yes. There were reggae bands playing, and we kicked off our shoes and danced barefoot on the grass until I was too tired to dance any more. The muscles in my legs were sore all the next day. It was worth it. (smile) I am enjoying being alive.

Thank you for sending that email, David, it is very timely.

Love, Connie
Her to her mailing list:
Subject: It's a miracle!

Today, June 23, is my 61st birthday.

For most of the past six months I did not know if I would live to see this birthday.

Things could change at any time, but for today – I feel well enough to celebrate!

If you would like to participate – just dance a little, and send some joyful thoughts my way. (smile)

(Yes, for those who know me well and are surprised at the header for today’s post – LOL!)
I replied:
It's life.

Every year is a miracle, especially when you consider how we complicate our enjoyments.

Enjoy the cake :)
She replied:
Yes! You are one of the few people who ‘gets’ the joke – “It’s a Miracle!”

Even now I receive emails from people saying Don’t give up! You can fight this! Miracles do happen!

The reality is that life is a miracle every day and I don’t need to be ‘saved’ from cancer to enjoy that…

Love, Connie
Connie remarked at the cooperation of these "masses"
of hummingbirds outside her Santa Cruz window.
They were probably hungry due to the drought :(

Connie started a blog (tagline: "A belief is nothing more than the result of a decision to stop asking questions") just before she found out about her cancer, as a means of preserving the dialogue on depression that she was having with a young hacker (Aaron Swartz killed himself around the same time). That blog turned into an archive of her thoughts on life, cancer, community and death. It also has an amazing post on her 40-year battle with depression -- a battle that she eventually won (AFAIK).

My mother was not exactly depressed in her life, but her other four sisters often said she attracted bad luck. Although my memory of our times together have faded, I do think that she ended up enjoying herself more often (I remember her saying "well, I like pesto so I'm going to eat it from the jar" and "what's the point of having best dishes if you don't use them?"). I know that she did not want to die, but I also know that she made the best of what time she had, even with the pain and bickering (everyone has an opinion).

Connie was thinking similar thoughts in this excerpt from her last post:
Sometimes when I am in town I run into people I know and they exclaim, “You look great!”, and they are surprised that I am not confined to bed at this point. (Well, actually, maybe they are surprised that I am not dead at this point.)

Honestly, I think a major reason why my quality of life is so good even now is because I DO NOT TAKE DRUGS.

My healthcare team is once again repeatedly suggesting that I take morphine. I’ll take morphine when I have reached the point where all I want to do is curl up on the bed with my mind lost in a confused daze. Because that was my experience of being on morphine when I was in the hospital.

And I’ll add – a hospice worker implored me not to write about this on my blog because it might ‘discourage people from taking morphine when they really need it’.

Here is one way to figure out if a hospice patient might ‘really need’ morphine: Ask them if they think they need it.

Seems simple enough but whenever I really get specific with my healthcare team about my symptoms at this point the response is almost always, “You should be taking morphine!”

So then I check in with myself and say, “Self, do you think you should be taking morphine?” So far the answer keeps coming back, No.

And it actually creates tension with my healthcare team which is unfortunate.

Sometimes in quiet moments I contemplate the reality that death might be quite near now. And when I think about how it all fits with the trajectory of my entire life, and the naturalness of death as a part of life – I am flooded with a deep sense of peace, of stillness, of gratitude. It is the outcome of years spent learning how my mind works, and how to explore and question my own thoughts, and how to identify when Ego has taken control with its fears and incessant chatter, and how to go beyond all of that to find the inner wellspring of peace. That peacefulness is so far beyond any experience that any drug could provide, I cannot even explain it in words.
May she rest in peace... and her example remind us of where peace resides.

27 Mar 2015

Friday party!

This video comes from Israeli sources, and it's great. The sad thing is that we could be seeing the same from the people of Gaza, the West Bank and Lebanon (and Syria, Jordan and Egypt, for different reasons). So... "glass-half-full-see-the-potential"?

Anything but water

  1. How Putin et al. are robbing the Russians blind. Coming from the other direction, Zimbabwe's Minister of Finance (from the opposition party, often undermined by Mugabe) describes his attempts to help his people

  2. State-by-state crony capitalism in the US, plus the $760 for $1 returns lobbyists get from US politicians (using other people's money, of course)

  3. How does drawing help us think? Probably in the same way that good teaching helps students learn

  4. The departing Secretary of the Florida Department of Environmental Protection got a nice present from staff: 26 pages of "Everything is Fine [since climate change isn't happening]"

  5. Israel's policies on Palestine are based on its own experience (and success) as a terrorist state against pre-WWII Britain

  6. Insurance companies will destroy the insurance business if they find out too much about us

26 Mar 2015

Seven years of aguanomics

Dutch mountain hiking...
Well, it's been seven years of digestion, if you think about the millions of words I've trawled through in preparation for the 5,000+ posts on this blog. It's been enjoyable, educational and -- hopefully -- useful to the thousands of people who have stopped by at one time or another.

So, what's happened since the last update? We've returned to Amsterdam after nine months in Vancouver to find the city and its people better than we remembered. I bought a flat (on the second floor, just to be safe) and found a job as an Assistant Professor at Leiden University College (LUC). Cornelia is busy with a masters degree in Urban Planning at UvA, where they seem to take "community-directed development" a little more seriously than in North America.

Just after returning here, I worked in Saudi Arabia for a month on an energy-water project. I learned more than I wanted about "water management" there -- an experience that echoed my time in California, where "that's not possible" seems to have replaced the California Dream. Oh, and if it wasn't clear... I've decided to emigrate to the Netherlands, mostly due to their competence, intelligence and joie-de-vivre -- which is still not too joyeuse to cut short le vivre!

I published Living with Water Scarcity in April 2014 at a price of $5 (PDF) and $10. Overall sales fell short of my patience, and I lowered the PDF price to "free" for my birthday. I am pleased with that decision, as the book has been downloaded at least 20,000 times since then, far far more than I would have ever expected at $5, let alone $1. It doesn't make sense to charge money when we are living in an economy of attention.

Free didn't make me money but it extended my impact. I'm seeing more debate of the ideas I have been promoting (I am not the first, of course), more media attention, and a greater willingness for others to see my role as advocate of sane policy rather than a guy trying to shift books. I've also been able to attract help from like-minded people. "We" should be releasing the Spanish edition of Living (Vivir con la escasez del agua) in the next month or so.

Perhaps my greatest increase in impact has come with my new work as a professor at LUC. Our liberal arts faculty teaches a diverse group of about 600 students, and they are fun for debate, discussion and passion. Looks like this blog will have some good competition for my attention!

Well, well. It looks like site visits and unique user numbers are up by about 50 percent [pdf]. That's good news (more eyeballs means more impact), and I'd like to extend it. But I'm wondering why so many people are visiting from Algeria (the second largest source country after the US)? Is there some water issue of interest? I think I understand India, Brazil and Canada, but Egypt and Tunisia? Perhaps readers from these countries can (a) tell me water issues they are interested in or (b) give insights on water management that maybe I've missed. The same applies to any of you, of course: Please suggest topics that you'd like to hear more about or that you can contribute as guest bloggers. Here's my email.

I could carry on with more free-flowing thoughts, but I'll save those for future blog posts.

Bottom Line: Blogging is still an amazing way to communicate useful, pointed commentary on events and policies in the water world. I hope you enjoy this blog as much as I do but feel free to comment or email suggestions!

25 Mar 2015

Is desalination a boondoggle or helpful backstop?

JH emails:
I’m from Melbourne, and I was wondering if you could tell me more about you opinion on desal plants.

Melbourne only built the desal plant when our water levels looked dire due to a long drought. I was just finishing high school at the time, and remember how the newspaper began printing water reservoir levels in the daily.

In retrospect that the desal plant looks like an bad decision, but at the time I don’t really recall that there was significant objection to its initiation (there was a lot of political noise later due to its cost and delays etc.). Once the drought broke there was clearly no need for it, and it was a colossal waste of money. But what if the drought hadn’t broken? In that case perhaps the government that built it would have looked like geniuses.

Do you think desal plants have a role in preventing catastrophes if extreme droughts end up exhausting existing supplies, or do you think that with correct management and pricing this really shouldn’t be happening?
I replied:
The answer is "endogenous," i.e., there's no need for desal IF management keeps demand in line with supply, but that depends on supply "behaving." In the case of Melb, Sydney, etc., there was a doubt on whether supply would return to "historic norms" or if it was changing in an unprecedented way (i.e., Australia's 12-year drought), such that desal was necessary.

This doesn't mean that many cities and regions must go to desalination first. There are better ways to improve supply buffers for droughts (aquifers, then reservoirs), but desalination has the advantage of "making" water. The question is the appropriate scale given that big plants are more expensive. San Diego's $1billion plant can only meet about 6 percent of local "needs" that include lawns and pools -- so you can see that demand -- at 500+ liters/capita/day -- is still inflated there.

I think Aussies made the right choice (Sao Paolo is experiencing the results of the wrong choice), since it's better to have less money than no water. That's a hard point to make when rain arrives for "free"...
Bottom Line: It is useful to add desalination to the urban supply portfolio after all other demand and supply options have been implemented.

24 Mar 2015

Speed blogging

  1. I got mentioned a lot last week, i.e., over at Marginal Revolution, Reason Magazine and Knowledge Problem. Seems that "mismanagement" -- the word I used to describe the crisis on radio last week -- is good for business attention. Besides my own writing, I recommend PPIC's post on useful actions to take and ridicule the "anti-Nestle coalition of useless" for attacking a company responsible for none of the crisis. It's noise like this that keeps California on the edge of disaster

  2. Emily Green explains the history and role of California's Sacramento-San Joaquin Delta

  3. Submit a paper to win the ERRA [energy, water] Regulatory Research Award by 31 May! If that's too "advanced" for you, then attend the International Summer School on Regulation of Local Public Services in Torino, Italia (deadline 10 June)

  4. Businesses are pushing for resolution of California's drought, i.e., management reforms, since they can't push for "rain reform." I've supported this move (slow in coming) for years. Luckily, Ceres is trying to coordinate collective action to get businesses on board

  5. German brewers win protection from fracking pollution. Why isn't this everywhere?

H/Ts to BB and RM

23 Mar 2015

Monday funnies!

"There was a fork in the metro, and I took the path less travelled..."

The problem is water consumption, not use

Chris Perry, a water expert whose ABCDE framework of water management I admire, thinks that it's important for everyone to know the difference between "consumptive use" and "non consumptive use" when discussing water management in times of scarcity. I disagree with him in the short run but agree with him in the long run.

First, let's define what we're talking about. The impact of our water use somewhat depends on what happens to the water afterwards. On one extreme, water is not very "used" in a swimming pool, running river, or hydroelectric project. Many people can share the same pool water, look at or fish in a river, or benefit from water flowing below a dam. These kinds of non-consumptive uses do not really deplete the quantity of water currently available in an area.[1] On the other extreme, you have irrigation with sprinklers that results in high evaporation and leaves little water behind. That kind of "consumptive use" makes it much harder to stretch a lot of water across many uses and users.

The point that Chris wants to emphasize (and I agree with this) is that it is sometimes more important to manage consumptive use more than use per se. It's in this context that people in Singapore, Orange Country, California and other places with recycled water facilities should not worry about their showers or flushed toilets. Their water use is non-consumptive in the sense that the water can be captured, cleaned and used again. The same is true (to a degree) for farmers in Palo Verde Irrigation District who use flood irrigation. They apply about 9 feet of water per acre over the year and about 4 feet run off, back into the Colorado River. Assuming their soils are well-drained, their technique does not "waste" water because the excess runs back into the river, instead of evaporating.

The trouble is that most urban utilities and irrigation districts do NOT handle their water in a non-consumptive way. On the urban level, you have lawn irrigation that is consumptive as well as a tradition (based on cost, yuck and "abundance") of discharging wastewater into rivers or oceans. On the agricultural level, you have a tradition of "use it or lose it" water rights that are generous enough to deter investments in improving water efficiency -- especially when improvements that "yield" water cannot be rewarded by selling that water.[2]

So, why or how do these differences matter? Well, they are very important when considering the definitions of water rights.[3] They also matter for water managers facing supply shortfalls. Orange Country and Singapore count on recycled water to meet demand; Las Vegas has been intensively recycling water for re-use, but the problem there is consumptive use.

Which brings me to the question of whether these definitions matter. Yes, they do in the long run because -- as Chris rightly points out -- you need to understand and manage all water flows. In the short run, however the differences do not matter.

In my post last week, I suggested short run and long run actions that California can take to reduce risk of water shortages. In the short run, I said to reduce urban irrigation and agricultural groundwater pumping (as well as raise prices, to maintain fiscal health), but I did not discuss consumptive vs non-consumptive use. Why? Because that difference is not important in the short run. Technology and infrastructure are fixed, and return flows and recycling rates are known. I was targeting "wasteful" uses on lawns (rather than drinking water in restaurants) and unsustainable (unknown) groundwater pumping because both reductions would leave water for other uses now and in the future. In my long-run actions, I got into market, regulation and water quality improvements where "consumptive differences" matter more.

Bottom Line: Water can be managed for efficiency, equity or physicality, for minimal energy demand, maximal environmental health, or targets of justice. Decide your community's priority and then manage in that direction, but don't forget to monitor impacts on your "less important" goals.

  1. I'm ignoring the fact that water in pools and behind dams evaporates, as well as the fact that dams disrupt flows and water temperatures.
  2. There some exceptions to this. San Diego paid Imperial Irrigation District $millions for water "saved" after a canal was lined (reducing seepage). The trouble with that deal (and others like it), is that some of the "lost" water was non-consumptive, i.e., it was recharging aquifers that other, Mexican farmers were using. They lost a lawsuit claiming damages from the lining because they lacked standing (=not American).
  3. Australia's rights are evolving as farmers find ways to use less water; the idea is to extract those savings from their licenses, rather than let them sell the savings, because their "savings" end up reducing the quantity necessary to keep other licenses "wet.

20 Mar 2015

Friday party!

Sometimes you just need to celebrate the fact that you're ready for a change -- even if others are not.

Speaking of which... happy Spring!

Speed blogging

  1. I gave a talk -- "Water markets, economics and politics" (PDF slides and 55m MP3) -- for a seminar on Water Markets at Leiden. (I didn't record the all-in-auctions demonstration, but here a video from one I did in Oklahoma)

  2. This review of Living with Water Scarcity gives a nice overview and context in two pages

  3. Field notes ("Cold showers and amazing little buckets") from Leiden students in the Philippines

  4. Agriculture Water Risk 2030 seems to connect projected water conditions to potential crop requirements. Check it out

  5. Climate: 2014 was hot on land and water, Iditarod (dogsleds race in Alaska) is doomed, and China's pollution may be driving record cold in North America
H/T to BB

19 Mar 2015

Those bastards are stealing OUR YOUR water!

I wrote that title after reading Robin Hanson's thoughtful complaint about the gaps between potential and action:
I must admit that the world shows far less interest in better designs for institutions and social mechanisms, relative to better designs for physical and software systems. Few talk about them, and even fewer business ventures pursue them.[1]


Yes in the last decade or so there has been more enthusiasm for social innovations embodied in physical and software innovations, like smart phones or block chains. But this enthusiasm seems to be mainly an accidental side effect of tech enthusiasm. For example, while many are excited by Uber achieving new value in cheaper-if-nominally-illegal cab services, most of those gains could have come decades ago from just deregulating cabs, an option in which there was little interest.[2]


I should admit that this all confirms Bryan Caplan’s claim that few people can generate much emotional enthusiasm for efficiency. Bryan says people are far more engaged by moral arguments. I’d say people are also far more engaged by following fashion and by us vs. them coalition politics.[3]
I mainly agree with Robin and offer the following comments (based on the numbers above):
  1. There's a huge difference between innovating for the common good and private profits. First because the private innovator is known to happy clients (no free riding in creation or implementation). Second because the clients cannot get the good without compensating or asking the innovator (no free riding in consumption).
    When I propose policy recommendations, they can be taken by others and used without acknowledgement. I know this, of course, and I also know that I'm standing on the many shoulders of others with these ideas, but those factors discourage people like me from coming up with ideas as well as others from implementing them, i.e., who gets credit for the benefits?

  2. This should be said much more. My "key innovation" in the water sector (rational prices and functional markets) are as painfully obvious to me as they are the poor buying water from tankers in slums and farmers trading water at canals, but politicians and managers are constantly chasing silver bullets (desalination, smart meters, rain making) that are far less efficient in costs and benefits.

  3. This is painfully true, but I think it applies more to policies and common goods than private goods. We are VERY enthusiastic about a faster smart phone while spending little time on robust, performing water networks that "belong to everyone." The most excitement you'll see around water issues are EVIL bottled water, a human RIGHT to water, or the neighbors stealing OUR water. Those issues sell papers and win elections, but they don't fix deeper problems. (They would be addressed through good regulation, governance, and property rights, respectively, but those are efficiency arguments...)
So, taking #3 as given, here's the impact version of Living with Water Scarcity:
  • Introduction: You're GOOD. Read this book to learn how BAD people waste water!
  • Chapter 1: Don't let others take YOUR water!
  • Chapter 2: Raise water prices to make EVIL water hogs pay!
  • Chapter 3: Watch utilities so they don't RIP YOU OFF!
  • Chapter 4: Reuse wastewater because your neighbors are DODGY!
  • Chapter 5: Farmers cannot HOARD water. Make them sell it!
  • Chapter 6: EVIL POLITICIANS will take YOUR water!
  • Chapter 7: Give me MY SHARE of the water!
  • Chapter 8: Don't steal MY MONEY for YOUR DAMS!
  • Chapter 9: Foreigners are EVIL (except neighbors)!
  • Chapter 10: GOD said restore environmental flows!
And now you know all you need to know about living with water scarcity.

Bottom Line: Don't let those bastards waste YOUR water! ACT!

18 Mar 2015

Will foreigners buy all of Canada's cheap water?

In a Reddit thread about BC's plan to sell water for $2.25/million liters, someone wrote:
You hosted an interesting AMA many months ago, and I remember you stating that you had no problems with bottled water being held out of the water system, as it would eventually be returned to that system.

Is it necessary for said water to be returned to the same area from which it was drawn? In other words, would it be a big deal if Nestle were to ship that bottled BC water to China, in order to capitalize on their demand for pollution-free water?
Here's my answer:
It's MUCH cheaper to clean that water (even sewage) IN China and then put it in bottles (or in aquifers and then back up and in bottles) rather than ship from BC. OTOH, BC bottled water may go into another watershed (still expensive, but not so much), in which case it will have an impact. That impact will also be ridiculously tiny, since it demand for such products (think Perrier) is minute compared to flows in BC...

17 Mar 2015

How much do you pay for the water you use?

The March activity for the 2015 Water Smarts Calendar (free download!) is to look at your water bill for your use and charges, to find the average price you pay for the water you use (actual calculations based on fixed and variable costs are much more complex).

non-metric swearing...
If you want to do this, then please go to the project page and click on the March link, which goes to a website I've promoted in the past. Note that it's easiest to enter data if you're from California, but the US is also possible.

For international readers, I suggest you convert your use to gallons (263 gallons/m3), your currency into USD, and put your location as Sparks, Nevada (a real place). Sorry to force you out of the much better metric system (see image).

Also feel free to complete the February activity. I will scoop the data and blog on that question next week (so do it now :)

Anything but water

The Brits are funny (unofficially)
  1. Utilities are freaking out about distributed power generation (e.g., solar panels) because (a), they sometimes need to pay for surplus power and (b) they lose revenue that covers fixed network costs (sound familiar?). The stable and efficient solution is to raise fixed charges and pay customers for their surplus. You're welcome

  2. Economists are pretty happy (I am, because I study and apply happiness-increasing technology :), but not necessarily from publication, which is seen as "a means to an end." Incentives, anyone?

  3. "Arabs" lost the wheel because camels were so efficient

  4. The US government bans itself from using its data. Chuckling at their incompetence? Then read this terrifying report on how US/UK spies hacked companies to access our mobile phones (handy for drone strikes, eavesdropping and guilt by proximity) and then read how the sugar lobby is manipulating and distorting diet recommendations as a digestief. If these examples give you heartburn, then join the Pirate Party (I did)

  5. An excellent blog post on why methane leaks are so common in the US. Related: Alberta steps towards better regulations on tailings ponds and pollution
H/Ts to TD and RM

16 Mar 2015

Monday funnies

"Wall Street Firm Develops New High-Speed Algorithm Capable Of Performing Over 10,000 Ethical Violations Per Second"

This would be funny if it wasn't also true :(

But forget that pathetic reality for a moment and check out what Reddit did for "pi day" this weekend (3.14.15):

I love Reddit.

Auctions will allocate water better than bureaucrats

DdDrought and "shortage" are leading water managing agencies to announce (again) that users will get less than 100 percent allocations, e.g.,
That's a reasonable statement of fact, but HOW will they cut users back? The normal response is to reduce everyone by the same 10-15 percent, but that fails to account for the FACT that some users may need value the water more than others. How can the bureaucrats find out the right values? They cannot when users can lie, mumble or merely get things wrong.

The fact is that the best way to reconcile values is in a market (you know, like the one for houses, oil, used cars, etc.), which is why I designed the All-in-Auction (AiA) based on my dissertation on the Metropolitan Water District of Southern California (see Chapter 7).

Water markets are hard to set up when you need to specify rights, figure out infrastructure, determine who can buy and sell, worry about environmental impacts, etc., but they are EASY to use WITHIN existing water users associations (see above), which is why the AiA can be implemented TOMORROW for those agencies seeking ways to re-distribute scarce water WITHOUT forcing users to sell (see the AiA materials for more.)

So... feel free to use those designs or contact me for more information.

The alternatives (lawsuits, conflict and economic and social disruptions) are far worse.

H/T to RM

São California

I was speaking to a reporter a few weeks ago about Sao Paulo, Brazil. He wanted my opinion on what would happen in their developing water shortage and how policy might minimize the harm to the millions of people living there.[1]

My response to him (in short) was:
  1. It's too late to use price signals to ration water because (a) the rich will pay and get water the poor cannot afford and (b) demand has to drop a LOT faster.
  2. Physical rationing will not work if people are connected to the network, since people facing service cuts -- water delivered 6 hrs per day in each neighborhood, for example -- will just fill tubs and tanks for insurance AND pressure changes will damage the network and water quality.
  3. Which leaves us with the de-industrialized option of closing down the network and distributing water in trucks, to make sure that human rights are protected. This is extremely inefficient (so many trucks for 20 million people when there's a perfectly good piped network there), but it's the only choice when there's no way to cut off each household after they take their "fair share".[2]
So it turns out that Paulistas are already in option 2 while suffering the distribution problems of option 1, i.e., the poor feeling that the rich are getting too much water.

What will happen next? I don't know, but it's looking ugly.

"LA Follies 2014"
And that brings me to California, which is entering its fourth year of drought with dwindling, mismanaged resources.[3]

How do we know? On the supply side, Jay Famigletti (a UC Irvine professor who continues to produce massive value for Californians) has described how the State has "only one year" of water left.

On the demand side, we see a total lack of vision or action to address the REAL drivers of scarcity -- retail prices too low to notice, permissive overuse of groundwater, failing water-as-charity policies, and the blinders of a historic pretension that water rights are properly allocated (nope) in the correct volumes (NOPE).

Taken together, the excess of demand over supply and failure to address that fact means that California is heading the way of Sao Paulo, with twice the population at risk.

What will happen?
  1. I don't think that riots and protests are likely. First, there are many places with many alternatives to address scarcity. Some will cope. Some will fail. Second, California has the option of taking water from other sectors for urban use.
  2. Will farmers suffer? Perhaps, but only after the environment is sacrificed (dry streams, drained aquifers), businesses are closed, and huge sums are wasted (emergency desalination?). This is because farmers are protected by politicians and water markets are non-existent/dysfunctional.
  3. Managers and bureaucrats will keep their jobs throughout this process because they are controlling the message ("drought isn't our fault!") and they serve powerful interests (farmers and politicians), not citizens.
What would I do if I was in charge?

In the short run,
  • I'd ban outdoor irrigation in cities, everywhere in the State
  • I'd shut down wells in overdrafted basins (most of them) until wells/pumps had meters and user-allocations were set and limited. This would take "motivated" farmers less than a month
  • I'd double urban water prices to lower demand and rebate the resulting excess revenue against fixed costs (see footnote 1)
In the longer (2-3 years) run:
  • I'd get measurement of stocks and flows in sync with allocations (per Australia)
  • I'd implement water markets for bulk water
  • I'd connect utilities into larger grids for sources, storage and recycling
  • I'd limit water transfers (i.e., south of the Delta) and return water to ecosystems
  • I'd charge farmers (but also many industries) for most of the costs of water contamination and cleanup.
There's more, I'm sure, but that's a start.

Bottom Line: Nature makes a drought, but Man makes a shortage. Perhaps it's time to put a different Man in charge?

  1. I wrote about the crisis a few months ago, but I clearly had no idea of "impending doom" back in 2011. I suppose that folks could have seen the roots of today's threat then IF there were signs of underinvestment into storage or a lack of demand management, i.e., cheap populist prices or incentives to make money by selling more water - two ideas I strongly oppose.
  2. Note that communities with smart meters/card readers could implement this solution. Too late (and too much $$) for Sao Paulo.
  3. One year ago, I warned that water manager's smugness ("we have plenty of water") would bite them in the ass if the drought continued. Whoops!
H/Ts to BB and RM

13 Mar 2015

The lies put before our eyes

I'm not a fan of advertising, which tends to distort reality in favor of the advertiser and against the consumer.

Take this box of "100% juice" for example...

As you can see, the manufacturer's image is clearly lying about what's in the box. Yes, a consumer can find out for themselves what's in there (you can find 56% apple by subtracting all the other percentages from 100%), but people tend to shop quickly, not slowly. They know that.

Going from there, what does this image imply about what they know or want to project?

Would you say that they are projecting a 50/50 ratio of genders, such that every one of the three students gets the same respect?

Do you have any good examples of "the lie in front of our eyes"?

Do you think advertising serves the public interest?

12 Mar 2015

Speed blogging

  1. My comments on BC's new water charges ($2.25 per million liters) have got some traction, e.g., this radio interview (6 min MP3)

  2. This faucet makes for a beautiful flow. It also saves water (via restriction), but I'd probably run it longer to watch it...

  3. Technology is bringing better, cheaper water quality testing: podcast and Economist article. Hurry up!

  4. Conference addict? How about the world water events map?

  5. An update on Vegas's refusal to reduce demand: supply via "rights" (theft)

H/Ts to AC and DL

11 Mar 2015

When government failure wastes your time

In economics (and perhaps elsewhere), we say that deeper "institutions" affect "transaction costs" in daily life. In an honest community, e.g., people do not need to use as much security to protect their possessions.

In the case of the United States, it seems obvious that a "young country" full of "new thinkers" from "diverse backgrounds" would be eager to dispose of old, inefficient and counterproductive traditions, but some seem to persist far longer than they should.

  • Using paper notes for dollars when more convenient coins would last longer. (The 5 Euro note is the smallest here. Canada's smallest note is $5.)
  • Using pennies that cost more than a penny to make. (The Dutch and Canadians have abandoned pennies but kept prices in cents; amounts are rounded at the register.
  • Using Imperial measures when the metric system is far easier to teach and use.
  • Dialling 011 for international calls when most of the world has switched to 00.
  • Setting prices without taxes that must be paid. (Most of Europe shows taxes as a line-item but prices are inclusive of taxes.)
There are many examples of low transaction cost efficiency, but they tend to come from the private sector and markets. Amazon's one-click buy-download for e-books, 800-numbers, ATMs, and pay-at-the-pump are good examples.

What I wonder -- and the purpose of this post -- is not exactly why the US seems to hold onto counter-productive "traditions," as there are explanations for those (examples: the zinc lobby for pennies or Imperial system as a form of trade protection). What I wonder is why the US -- and many countries continue the practice of changing times twice per year -- on different dates in different places -- when this "tradition" does nothing for energy efficiency, happiness, or any of the other (disproven) theories. All I see now are the ripples of twice-annual confusion (transaction costs) as people miss meetings, planes, dinner dates, etc.

Bottom Line: Governments should make rules that reduce, rather than increase, transaction costs for the majority of citizens. As a measure of "costs now for ongoing future benefits" I'd recommend a five year payback. The metric system may take as long to implement, but the end of pennies or daylight savings would probably have an instant payback. Your thoughts?

10 Mar 2015

Notes from the trenches

I really like hearing that my opinions on water policy make sense, e.g., this email:
I found your interview on Econ Talk very interesting and look forward to reading your book. As a civil engineer and someone with an interest in environmental economics and policy, I have put a decent amount of thought into issues surrounding water scarcity.

I have long thought that variable/surge price would be an effective mechanism for managing demand but until listening to you, I hadn't really thought about the potential financial disincentives for utilities implementing measures that would ultimately reduce water sales/revenue - I now understand why you favor keeping fix costs relatively high to stabilize revenues.

I was very pleased to see in your book that you mention the possibility of issuing rebates with excess surge rate revenues. I personally am fond of a pricing model where surge pricing is implemented rather liberally, but essentially all of the surge revenue is distributed equally back to customers on a semi-regular basis (quarterly maybe). I believe that requiring customer to pay a "market" rate on their monthly water bills would help manage demand, but rebates would help avoid complaints of price gouging or social justice. Additionally, utilities could require costumers have no outstanding balance in order to receive the rebates which should help reduce unpaid water bills - Detroit, Michigan for example has made a lot news due the fact that a huge percentage of customers never paid their water bill.
And then there's this, from RP:
First of all, I loved your talk. Water scarcity is something that I ponder often and your talk brought up some interesting things I hadn't thought about before.

I do have a scientific question though that your talk brought up for me. If water usage is greater than natural replenishment what happens to the molecules of water after they are used? Seems to me that they would go back to the "system". When I drink water, I later pass it as waste. When someone waters their lawn (even wastefully) the excess goes down the storm drain or evaporates to the atmosphere (to come down later as rain). Why can't cities capture this wastewater, clean it and then "balance" their problem. Let me restate that I agree with what your are doing... Just trying to think through the larger picture. Why doesn't the usage balance out? What am I missing? I know it has to be something as it doesn't appear to be working out that way? I understand the aquifer issue (we don't have millions of years to filter through sandstone) but seems like we should have an abundance of wastewater with all the wasteful use of previously stored aquifer water?
In reply, I wrote:
Glad you enjoyed it. The simple answer is that the water does not return to the right place at the right time to be 100% "replenished"

I tend to say that we use the water "economically" rather than "physically" e.g., it's THERE, but polluted.

Many cities are looking at closing the loop -- as opposed to discarding wastewater -- b/c the economics (and regulations) are converging. Check out chapter 4 in my book :)

9 Mar 2015

Monday funnies

Well, 115 million people have seen this already, but I found it funny -- and fascinating

Anything but water

  1. Write off Greece's debt (long but very insightful). Related: Give printed money ("quantitative easing") to the middle class instead of bankers and America returns to the 19th century (inequality, monopoly, booming prisons, etc.)

  2. Why America keeps losing wars (hint: uncommitted, uninformed posturing)

  3. Russia would probably be sociopathic (even without Putin). Related: How to counter the nationalist propaganda that is driving Russia's aggression

  4. Lebanon's "generator mafia" blocks proper utility services

  5. My book -- Living with Water Scarcity -- has been posted on the bit-torrent (pirate) network. That's funny because you can already download a better copy (for free) here
H/T to BB

6 Mar 2015

Friday party!

Angel or Devil? Celebrate the people you know and trust...

First one:

Second one:

H/T to DB

Speed blogging

  1. Here's an article on irrigation, the environment and fisheries in California (I'm quoted)

  2. Bio-toilets are a useful solution for communities lacking infrastructure (or competent sanitation authorities)

  3. Increasing block rates are "under attack" in California from water hogs facing steep charges (in excess of "fair" costs). I've argued against them as over-complex, inaccurate and fiscally destabilizing attempts at social engineering. Maybe this is a useful lawsuit?

  4. Israel and Jordan -- with US money -- agree on a project that will neither protect the Dead Sea nor change unsustainable water use (mostly Israeli irrigation). FAIL

  5. The Dutch are back in Indonesia... helping them use "green infrastructure" to protect their coasts. Speaking of Dutch, Jay Lund applies Dutch ideas to California's levees. Lesson one: "Define problems in ways they can be solved"

  6. Aqueduct launches the India Water Tool to improve risk management with crowd-sourced data
H/Ts to BM and RM

5 Mar 2015

Anything but water

  1. Banksy goes to Palestine... and does not enjoy it

  2. What's the difference between (North) Americans and the Dutch? The Dutch celebrate "warm sweater day" as a way of saving energy (google translate is messy)

  3. Speed cameras in New York raised lots of money, but they also reduced accidents and injuries. The Swedes have taken speed cameras a step further by distributing fines from speeding drivers to drivers respecting the limits. Awesome

  4. Congress is looking into the funding sources of climate skeptics. Coyote thinks this is a witchhunt, but I disagree: we know that fossil fuel companies have a lot to lose from anti-carbon policies, we know that they spend a lot of lobbying, and we know that climate change is much more likely to cause catastrophic damage than none at all. It's important to know if "experts" are speaking from a scientific standpoint or if they are paid shills

  5. The Class of 2008 (and recent classes) is likely to have lower lifetime earnings, due to a "bad start"

  6. Ben Casnocha has a long, interesting essay working with Reid Hoffman (LinkedIn)

4 Mar 2015

The tyranny of false choices

How do you get a misleading headline like this: "Field Poll: More Californians want mandatory water rationing"?

Start with a flawed poll that asks:
Governor Brown and most major water providers in the state are calling for Californians to voluntarily cut back the amount of water they use by 20%. Others are calling for mandatory water rationing with fines or steep penalties for those who do not conserve. Which policy do you favor the state and other major water providers to be taking at this time – voluntary cutbacks or mandatory water rationing?
People asked this question favored voluntary conservation over rationing, but the elephant in the room is the obvious third option: raise prices.

Most people see voluntary cutbacks as the most "liberal" of policies because people can still do what they want. Others want mandatory rationing to "get the wasters."

Higher prices are better than both options because they give people the option of cutting back OR paying more to use the same amount of water. Prices are also good for (1) utility finances (they don't like voluntary cutbacks that kill revenues from water sales) and (2) allowing people maximum flexibility in choices. Mandatory rationing usually hits (front) lawns, large families, and water misers the worst. Rationing often makes little difference to water wasters, as a 20 percent cutback from "way too much" is easier.

Bottom Line: Stop with the cognitive dissonance ("save water but we have plenty") and command &  control. If you want people to use less water, then raise the price (here's how).

H/T to RM

3 Mar 2015

Speed blogging

  1. I'm on EconTalk this week... talking about water :)

  2. Alberto Garrido is giving a webinar on "Water Challenges in the Agricultural Sector" this Friday. Before you listen, read Gomez and Perez's paper on the paradox of individual irrigation conservation leading to greater total consumption

  3. I've got short bit on Marketplace but say more on a separate, two minute clip on underpriced water (and under-maintained infrastructure)

  4. Emily Green points out the dangers of replacing trees with rocks, i.e., not much water savings for a big loss in neighborhood values

  5. Chinese farmers are paying more for groundwater but rebating the money in the community. The policy is functioning, politically acceptable, and good for groundwater status. It's also very similar to my ideas of all-in-auctions for irrigation water and raise prices and rebate excess revenues for urban water

2 Mar 2015

Monday funnies

Cartoon Mick sent this over:

So why can't California fix its water problems?

PM emails:

"I am/have been involved with the operation of a water spring. Why isn't water derivative trading happening in the US? Australia has their water derivative tied to a dam and is cash based. Why not an actual deliverable contract?

I am in NY. In PA, frackers need on average 3 million gallons of water per well, which they can frack up to 15 times. Fracking has its own problems; nevertheless, the point is, demand. Moreover, the high tech companies building semiconductors need water (demand). The growth of craft breweries and breweries in general, need water (demand). I think it is Budweiser in California that has a problem meeting their water needs for brewing. Contaminated public water sources (happened at couple of times already in the past year in the capital region) increase demand. Farmers need water. You were in California, so you are aware of the water drought facing farmers in California. California has irrigation, New York does not.

So I as a supplier of water, I want to sell water to the demand. No easy market at the moment. However, I see a market as this:

  • Fracker Ltd, has 5 drills operating, wants 5 February water contracts. Oil is not so hot, so they are going to lay off 2 rigs; thus, he gets 2 March water contracts, holds off on the third to see if the price drops.
  • Hard Spirits Inc. can not keep up with demand. Needs water every month, but sees summer months hotter than normal and the price of water going up. He buys June water contracts for his need and speculation.
  • Appleseed Farmer does not expect a hot summer and decides to not hedge crop failure.
  • Oats and Wheat Ltd does not expect a hot summer but wants to hedge crop failure and buys June and July water contracts.
  • Morrill Water & Trading, sells water contracts in the spot market and the future market. I do not think it will be a warm summer and sell June and July Water contracts.
  • River Dry Water is all about a warm summer and holds off on selling contracts until the price gets higher.
These are just some examples of agents hedging, buying, selling, and creating a water spot and future market. Tax payers can stop paying taxes to insurance and assist farmers for drought, since the private sector has provide a hedging tool for drought crop failure. Politicians can sell it to the people as cost cutting and deficit reduction.

Now this is not an all inclusive paper, but just a quick "back-of-the-envelop" speculating. I have seen your comments about the difficulty of moving bulk water -- not to mention its annoying habit of expanding in cold weather (negative 7 degrees F the other day) -- nevertheless, I can see the pipeline running from the spring down into Troy where there is already existing infrastructure for commodity shipment and handling.

Why do I only here about Citi's chief economist talking about water derivatives and infrastructure, Dr. Sander's Environmental Financial Products consulting and talking about water derivatives. Why isn't anyone doing it? Making it happen? Making the idea a reality?"

These are great questions, even if most are rhetorical, and PM answered himself a few days later:

So... I see that Waterfind in Australia is trading water rights and has a forward market. They have gone beyond the water dam level cash payout future that I last heard of. I could see water right trading in USA as a potential problem. However, I did not know that California's agricultural economy is $42.6 billion, while Australia's agricultural economy is $38.2 billion. Nevertheless, they both have very similar water conundrums. Maybe California has something to learn?

Indeed, California has something to learn -- as I've pointed out in many blog posts -- but some people in California do not seem to understand the lesson. Case in point was Friday's op/ed by Peter Gleick, in which he said [my emphasis added]:

"Based on years of research by my organization, the Pacific Institute, here are key water-policy strategies that should be implemented immediately:
  1. The state should create and implement a water bank. It did so previously to great success. Here’s how it would work: Senior water rights holders able to cut use through efficiencies or by changing crops would sell saved water; the bank would resell that water at a higher price to willing buyers; profits would go to buy water for critical fisheries and ecosystems.
  2. Federal and state agencies should provide finance assistance to farmers to help them replace inefficient irrigation systems. This can save both water and the economic health of the farm sector.
  3. California should accelerate implementation of the state’s new groundwater law to eliminate permanent overdraft.
  4. Urban water agencies should greatly expand efforts to inform urban water users how to cut water use and costs. Particular efforts should focus on programs to convert water-guzzling lawns to low-water use landscaping, and efforts to replace inefficient indoor fixtures, identify and fix leaks and modify water-using behaviors.
  5. New management practices are needed to price water so that it encourages efficiency and conservation, protects affordability, cuts overall water bills and protects the financial health of water agencies."
In response, I wrote (and now expand those comments):
  1. Although I agree with some of your suggestions, I'll add that water markets will work much better if farmers are able to profit (as they do in Australia). The government can buy or "grab" water necessary for environmental flows, under public trust powers. It should not expect farmers to cut use or change crops without a profit motive.
  2. Farmers do not need more subsidies (or subsidies at all) when it comes to water efficiency. They will "get efficient" when it pays, as they have in Australia, where they can sell excess water on markets.
  3. Yes!
  4. There's no need to inform users. Raise prices. People will figure out how to save water, whether it's through shorter showers, smaller lawns or low-consumption appliances.
  5. Your recommendation ("New management practices are needed to price water so that it encourages efficiency and conservation, protects affordability, cuts overall water bills and protects the financial health of water agencies") is an oxymoron. Higher prices are unlikely to cut overall water bills, but they will induce conservation. They can be implemented in a way that "protects affordability" using the system of rebates that I describe here.
Bottom Line: Californians (and people other places experiencing "water stress") need to (a) realize that they are living in a "new normal" where water is no longer abundant and (b) implement policy changes that recognize that fact and reward efficiency (punish inefficiency). Market and price signals are the best means of doing that for "economic" water uses (irrigation; water for homes and businesses); social water uses (for the environment) are another matter, but I describe all of these systems and interactions in my free book.

H/T to DS