26 Mar 2017

Nine years of aguanomics!

Foz do Iguacu (Aug 2016)
So here we are again, another anniversary of blogging, another year of same-same but different (last year's edition).

I still love it and for the same reasons: I like contemplating and sharing ideas. I like learning from others. I don't care if anybody pays attention in this "attention starved" world, but I love it when readers learn something, email suggestions or questions, and recommend aguanomics :)

From numbers to community

Every year I look at the number of visitors, how long they stay, where they come from, and so on. Google analytics tracks these variables (and many more), but I don't try to manipulate or anticipate them. I'm not sure if these statistics [pdf] reflect actual people or bots (why does this post still get about 1,000 views per day? Maybe I should advertise viagra?), but the annual count of unique visitors has stayed about 50,000 for several years now.

People visit for reasons unlikely to show up in statistics, but visits rise when water is in the news. My ask-me-anything on reddit got over 5,000 upvotes when "drought" was news, but a later one I did on adaptation to climate change only got 48 upvotes. I don't mind this "market test" on my ideas' importance, but I worry when the public (i.e., people unlike you) ignore the climate or water issues affecting their communities. Perhaps those topics can be left to the experts, but I am pretty sure that such delegation is (a) failing where we see so many problems and (b) not resolving an urgent need for  citizens to understand what's going on, what needs to change, and how change might occur.

That's why I'm blogging a lot more about politics and community. In some ways that reflects the greater importance of politics when populists are promising everything (while lacking the capability or even a concern about delivering anything) and communities are under increasing threats from climate, migration pressures, economic uncertainty, and so on. The success of homo sapiens rests on our ability to work together (homo neanderthal had a larger brain and was probably more clever than us, individually). We risk greater suffering and despair when we fail to cooperate or fight with each other.

Besides blogging more on those topics, I also started two projects in the past year that each aim to  help communities help themselves. With the Life Plus 2 Meters project, I have asked authors to offer their visions of a world in which climate change impacts are visible (sea levels are "2 meters higher") and people are adapting -- or not -- to these changes. That project resulted in a fantastic book (free to download or buy paperback/kindle at cost) with "visions" from 27 authors. I plan to ask for donations to support prizes for the best contributions to a second volume in that series next month, so (a) read the book, (b) think of whether or not you have a story to tell (the deadline will be in June) and (c) think about donating to the campaign when it comes. If you want to stay updated on this project, then subscribe to its newsletter.

The second project concerns local communities today. The City Water Project "aims to improve people’s access to clean drinking water by promoting consumption where water is already clean and improving quality where it is not." I am engaged in this project with help from (a changing list of) LUC students. We have made slow but steady progress at understanding public perceptions of water quality and working with local organizers in communities affected by (perceived) water quality problems. This work has taught me how hard it is to get traction with utilities as well as with people "who should care." After a pilot in Den Haag (The Hague), we are launching campaigns in Galway (Ireland), Flint (Michigan), and Toledo (Ohio) -- each one dependent on the abilities and determination of our local partners. If you want to stay updated on this project, then subscribe to its newsletter.

Blogging, teaching and further research

I reversed course 6-months ago from a decision to "blog less, tweet more" as I found that clickbait ecosystem to be ineffective (indeed, it seems to me that Facebook is losing people's attention for its force-feed, ad-driven, hyperfluid spew of "updates"). Although some people may like to get their "news" in tiny bites, I find it easier to communicate in a format that allows as many words as needed (no more!) as well as archives, links, discussion, etc. Although I do not have as much time to blog as I did 7-8 years ago (100+ posts per month!), I still enjoy writing posts that help me (and maybe you) think more clearly.

Although I love blogging, I still have my obligations of teaching and research -- let alone enjoying all that Amsterdam and the Dutch have to offer. I often blog about bits and pieces of those activities, but I cannot (and shouldn't) write about everything. Even so, I hope that you enjoy those occasional updates here (for more, subscribe to my general newsletter). The one thing that I can see "trending" in my life is less of a worry about engaging with every topic or rushing to put out more material. I'm sure that nobody ever "runs out of stuff" at aguanomics, just as I am sure that other people out there are capable of thinking about their own solutions to topics -- especially when those topics are local to them. (Hear that Californians?) That said, I absolutely love learning about new topics, places or ideas, so please do email me when you've got something interesting to share!

Bottom Line: We will always have something to talk about on aguanomics!

25 Mar 2017

Flashback to March 2010

These posts are still relevant after 7 years!
  1. Aging infrastructure and beauty contests. Bigly true. Related: The fascist two-step (Venezuela gets a mention!)
  2. Farm Water Success Stories and Free water and Father Christmas
  3. Economic oxymorons -- you're not forced to work... unless you want to consume. Related: Does a latte cost a few trees? and Minimizing individual water consumption
  4. Collective action at home -- this seems to be the start of what's turned into a paper on "teaching the commons". Also read Self-interest and community
  5. Who are beggars? They are not who you think they are. Related: Poll Results -- Love your neighbors
  6. Carbon additionality is stupid
  7. Water and human rights -- overview -- this topic is STILL badly understood or abused (Politicians extending their monopoly)
  8. Feinstein's special special interests -- when she cared about farmer subsidies (does she still?). Related: Speaking of Other People's MoneyBill to Stop Farmers from Selling Water and Water is money is politics
  9. Speed blogging -- drought edition -- same old stuff: dams farmers can't pay for, "emergency aid" and Australia as an inspiration (listen to Water chat with Adam LochWater chat with Tom Rooney and Water chat with Mike Young)
  10. Humans have things to learn from dogs and Who is responsible? A moral question

24 Mar 2017

Friday party

Some people seem to be losing their ability to pay attention to the people and issues in the world around them. This video should help you understand the problem.

How can you make a difference? Read this post (by a friend of mine) of how she "gave a voice" to a Vietnam Vet facing poverty and eviction in Pittsburgh -- and how people stepped up to help him out [link to come!]

23 Mar 2017

History never repeats but it rhymes

Foreign Affairs (1930):
Hitler's adversaries are right in charging that such an audience can easily be misused. Hitler's utterances on the subject of propaganda, both from the platform and in print, show in fact that he is willing to use any means which he judges serviceable in winning adherents to his cause. He fans the flames of hatred just as unscrupulously as he arouses the most exaggerated hopes.

However, let us keep to his audiences. What is it that stirs them? What keys can Hitler strike with such effect that he can drag millions of people whithersoever he chooses?

Fundamentally it is a question of the hard times which have settled over Germany ever since the war. Great fortunes have come into being, though they are probably more apparent than real. Meantime, statistics show that as regards the middle classes, which used to be Germany's backbone, the standard of living is far below the pre-war level. Since 1929 it has sunk to unprecedented depths. Hitler turns his guns against those people who have increased their fortunes disproportionately to the general average of wealth accumulation in Germany, and especially against the anonymous wealth of the trusts — "coupon slavery."
Read the whole article [pdf]

22 Mar 2017

Links of interest

  1. "The contemporary shadow of the Scramble for Africa", i.e., colonialism has enduring, negative impacts
  2. Competition! "From April most businesses and organisations in England will be able to choose which company will supply their retail water services"
  3. What Do Economists Actually Know?, few useful details but many promising ideas
  4. "In one generation, the Internet went from opening up new free markets to creating a series of Fake Markets that exploit society, without most media or politicians even noticing."
  5. Using serious games to manage water in Kenya
  6. "The US has a lot of money, but it does not look like a developed country." These data don't lie.
  7. Dams were a bad idea when overbuilt. Now we have to deal with their collapse.
  8. A really interesting conversation with Malcolm Gladwell
  9. A Dutch couple sold all their possessions and jumped into a VW van to see the world
  10. UC Berkeley will remove 20,000 lectures from public access due to a complaint that they violated the rights of deaf people because they lacked subtitles as it was cheaper to remove them than add subtitles (curiously, it seems that computer generated subtitles may be banned by new video standards). Luckily, a start up has copied the archive with a promise to host them for free. Even more luckily, my UC Berkeley lectures are still up -- and they have subtitles!
  11. An analysis of how the Clean Water Act failed Flint and will fail the rest of the US -- assuming Trump doesn't destroy the EPA!
  12. Bad regulation on water pollution is worse than none at all
  13. Join the International Summer School on Regulation of Local Public Services (Sep, Turin, Italy)
H/Ts to RM and MV

21 Mar 2017

A thought on bitcoin and the blockchain

Happy Spring!

Bitcoin (and other crypto-currencies) have the potential to replace gold as a store of value that cannot be debased by government interventions and replace dollars ("hard currencies") as a medium of exchange that cannot be regulated by governments.

The Blockchain (and other crypto-registries) has the potential to replace banks and other registries as a means of confirming ownership and method for transferring ownership. Just 10 days ago, the SEC declined to certify a bitcoin-based ETF, which sounded like bad news to some but not to others:

I have some money in bitcoin (market data), and I think they will only grow in value and importance in the coming years. With so many examples of poor economic governance, there is sure to be a huge demand from people in developing countries who are looking to secure their wealth from corruption and incompetence.

(I also say these things because some people are losing long-term perspective over short-term concerns over various programming choices. I think these will be resolved because $billions will be lost by failure to agree on fixes to known issues.)

20 Mar 2017

Monday funnies

Trevor Noah nails the Dutch elections (i.e., Wilders isn't #1 but he's #2...)

If you're feeling better about the retreat from stupid in the Netherlands, then don't forget that it's full steam ahead on stupid (evil?) in the US, with the proposed replacement of #Obamacare (helps people!) with #Trumpcare (fuck those people!)

NB: If you agree that journalism provides a valuable service, then subscribe or donate to make sure they have the $$ they need to get the job done! Public Radio International is one such outlet (I've also donated to EFF, ALCU, and Propublica), but choose anyone. In these days of #MakeAmericaFailAgain, we need reporting and analysis of Trump's idiotic short-sighted policies.

18 Mar 2017

Flashback to March 2009

These posts are still relevant after 8 years!

16 Mar 2017

Don't be a sucker

First watch this 1947 film on the American Way (aka, not the Trump way)

Then watch this video on the technology (data from social media and other databases) Trump's campaign used to find and target manipulate people's fears and votes

The watch this video of how Trump's spokesperson (Kellyanne Conway) lies and deceives

Bottom Line: Don't be a sucker.

14 Mar 2017

Dutch elections are tomorrow

Dutch politics are complicated due to institutions that (a) allow people to vote for any party in a national "jurisdiction", (b) the ease at which small (one member) parties can enter the popular chamber (de Tweede Kamer), and (c) the near-certainty that several parties must join into a "ruling coalition" to collect enough seats to support a prime minister (Minister President).

I cannot vote in the election tomorrow since I am not a Dutch citizen, but I am very hopeful that Geert Wilders's (populist, nationalist, racist) Freedom Party will (despite receiving donations from American conservatives) have weak results.

To help you learn more about the election, I recommend this video by LUC students. If you want to see the connections between Wilders and Trump, then watch this:

To learn what's at stake for young Dutch citizens, I recommend this one:

13 Mar 2017

Monday funnies

Read this more-scary-than-funny "Short History of the Trump Family" (featuring mafia, disco sex and an overwrought id) after you watch this video on how Trump actually makes ruins foreign policy. Sad!

11 Mar 2017

Flashback to March 2008

These posts are still relevant after 9 years!
  1. Local Heat -- climate change is coming! much closer!
  2. Posner on Water -- he gets it wrong
  3. Crushing the Galapagos (via tourism and excess migration)
  4. Burning Money to Save Water in San Diego
  5. How Many Bottles? Too many. Put a deposit on plastic bottles!
  6. Water and Public Trust -- legal battles have prevented reform in California
  7. Virtual Water -- how to do it right (here's my chat with Allen)
  8. Robbing Peter to Pay Paul, i.e., government lobbying
  9. Dean Kamen's Water Machine did indeed fail due to high costs
  10. Arctic Meltdown will be bad... yes.
  11. The Economist Has No Clothes (= missing economics of the environment)
  12. Dirty Food Can the market protect you better than the regulator?
  13. China and Resources -- they are SLOWLY dialing back from waste
  14. You Want Lox wit Dat? The Feds must reconcile fishing and farming claims on water
  15. Water Prices up 14% but not enough
  16. Fighting for Labels of Nothing -- Monsanto's deception
  17. Conversation with My Dad (part one), i.e., "peak humanity" may be near
  18. Water Wisdom from Kenneth Boulding
  19. Drugs in Water won't help you
  20. Your Stuff -- and Terrorism -- and we're still not out of Iraq! :(
  21. Lease a Forest, Save a Tree -- gotta pay to protect!
  22. Developers Drive SD off a Cliff (and San Diego is still growing!)
  23. The Farm Bill Must Die -- one of my favorite posts ever
  24. China Exports Dams = not good for the environment or locals
I'd write these posts differently today:
  1. Ethanol Solution is a Lie -- Renewables became competitive very quickly!
  2. The Long Emergency Energy is not the issue, but climate change
  3. Vegas versus Imperial -- I thought that Imperial ID would have sold (some of) its water to Vegas long ago, but I underestimate the stopping power of lawyers and power-hunger of politicians standing in the way of mutually beneficial trades.
  4. Six cheap ways to save the Earth -- I'd add go vegan, no kids and carbon taxes!
  5. NorCal Called -- Wants Its Water Back -- well, that didn't work!
  6. Bush the Genius -- $4/gallon gas was bad for the people, but Obama lowered it to $2?

9 Mar 2017

What can I, as a young graduate, do about water scarcity?

C writes:
Hey David,
I really enjoyed your AMA on water shortages in California and the problems with our water management system in the US. I am recently out of college, studied mechanical engineering, and am finding the water scarcity issue (in the western US & the rest of the world) a scary, but inspiring issue to get involved in. I am currently in the middle of reading Cadillac Desert, which led me to searching reddit and finding your AMA.

My question is: From your expertise, how can I as someone motivated and new in the work force get involved in and help make a difference in these issues? I am not fixed on staying with careers directly linked to my college major. I would appreciate any advice you are willing to part with.
Thank you,

Dear C,

You've made the first step, admitting that WE have a problem :)

As for the next steps, I think there are two ways to go.

The first way is to "address the symptoms," i.e., using your skills [engineering for you; other things for others] to help increase supplies or reduce demand for water -- and thus try to reduce scarcity.

The second way is to "address the disease," i.e., get involved in the organisations responsible for making policies that drive water scarcity. There are many potential organisations to choose from, from the local drinking water utility, to a state board on water resources, to a chamber of commerce interested in protecting its members water reliability.

I gave my first book the title of End of Abundance to highlight the need for us to change the ways we manage water in a new world where abundance cannot be taken for granted. That book (as well as Living with Water Scarcity) suggest new ways to think about water, and YOU can play a useful role in helping people understand that the situation is neither inevitable nor hopeless. The good news is that water scarcity is a local issue that's solvable by local, concerned citizens.

Bottom Line: Everyone can reduce water scarcity (and the risks it brings) by doing their part. It's not that complicated, but it takes time and community interest.

7 Mar 2017

Airbnb is harming Amsterdam's communities

Originally published on the Waag Society's blog [English] and [Dutch], but they don't allow comments -- so comment here!

Update: The city of Amsterdam has fined homeowners and "concierge" businesses over €500,000 for breaking the short-stay rental rules that Airbnb has just started to follow (see below).

Airbnb is a popular service for connecting tourists who want a cheaper place to stay in a city with "hosts" willing to give them a room or a flat to stay in.

Oh, did I say "give"? Sorry, I meant "rent." Like Facebook with its claims of helping you communicate with "friends," Airbnb uses "share" in a way that replaces a child's use of that word with an alt-truth definition that means "rent." That distortion of reality is not a bug but a feature: Airbnb co-founder (and billionaire) Nathan Blecharczyk made his first millions spamming people's inboxes while claiming "there were frankly no rules around it" in 2002.

I don't know about you, but I knew that spam was a plague well before 2002, and I'm going to spend the rest of this post talking about how Airbnb's founders need to stop spamming and start helping the cities that are making them rich.

By the way, let me clarify that I love Airbnb's service, which I am happy to use as a host and guest. What I am not happy about is how Airbnb seems to be taking the greedy route towards doing business by focussing more on short-stays than strong (and attractive) communities.

I say this as someone who studies communities and how their "common spaces" are built on an intangible web of relations among neighbors more than a common postal code.

I'm from San Francisco (where Airbnb is based), but I live in Amsterdam, which may be Airbnb's most popular city. According to this Dutch source, 2-3 percent of all Amsterdam residences (and perhaps 7 percent in popular neighborhoods) are listed on Airbnb. In many cases, Airbnb is driving a trend to replace affordable housing with illegal hotels owned by investors.

In most of Amsterdam's neighborhoods, residents share common stairways, garbage bins and personal space. It's not unusual to hear each other through floors and walls as we go about our business. In many cases, these noises are comforting because they represent the "metabolism" of the building's inhabitants, some of whom have shared stories, assistance and common challenges for decades.

AirBnB's site and philosophy say very little about the neighbors (the "community page" is for hosts to swap tips). Their focus on making deals may be appropriate for San Francisco but not for Amsterdam, a city that has worked for centuries to balance the needs of art and commerce, private and public, rich and poor.

In 2014, Amsterdam and Airbnb signed a memorandum of understanding [pdf] in which Airbnb agreed to "notify hosts in a powerful manner that they are obliged to offer homes for rent in compliance with applicable rules." This MOU mentioned 60-day limits on hosting, encouraged hosts to "download the notice card for neighbors," and clarified that the municipality was responsible for reinforcing its own rules. Not included in the MOU, but mentioned, was an agreement for Airbnb to collect and pay the city's 5 percent tourist tax, which amounted to €5.5 million in 2015. That amount implied that Airbnb guests paid over €100 million to hosts, of which about 3 percent (€3 million) went to Airbnb.

Late last year, the city and Airbnb updated their agreement to provide a "more powerful" reminder of the 60-day hosting limit. Now, hosts are notified of their total remaining days and told that they will not be allowed to use Airbnb after the 60-day limit is reached. But that update has omitted two major factors that are undermining Airbnb's benefit to Amsterdam.

First, Airbnb is not reporting host income to the city (or government), data that it possesses and already reports to American authorities for "high volume hosts." If Amsterdam hosts are billing over €100 million in charges, then the tax authorities should be making around €40 million (based on the 42 percent marginal tax rate that many homeowners would face for renting their own place for less than 60 days). That money would come in handy for a city forced to cut €25 million in spending on garbage collection, public spaces, youth programs, and so on.

Second, Airbnb is not doing very much to help the neighborhoods that make its service so popular. Hosts and visitors give each other ratings and feedback, but the neighbors are the ones who must deal with banging bags, morning departures, and strangers who contribute nothing to the neighborhood. Airbnb can address this problem by allowing neighbors to leave feedback on guests. Although this system might take a little white to set up, it's obvious that Airbnb's very clever staff could help Amsterdam's city staff with notifying neighbors and ensuring that strangers would, in the words of Airbnb, "belong."

Bottom Line: Airbnb's license to operate in Amsterdam depends on whether it helps or harms the city. Airbnb can help Amsterdam collect its fair share of taxes and guests fit into the community, but it can also resist and damage Amsterdam's quality of life. Let's hope that Airbnb invests in Amsterdam for the long run.

I thank Kim Zwitserloot and Joes Natris for their help on earlier drafts of this post.

6 Mar 2017

How does the Farm Bureau affect my city water?

KT emails:
I live in California but my all family in [STATE] are huge Trump supporters because they are farmers. They are against every single environmental regulation. They love that Trump repealed EPA's WOTUS rule. They believe that "they know better than Washington" how to keep their land non-toxic because their families live on it. Their children will inherit it. If you have a take on what's happening with WOTUS and the Farm Bureau, I would love to read about it. My cousin is posting Facebook photos of Trump with Farm Bureau leaders. I haven't seen a single non-white person in a photo on their website or Facebook page which really concerns me. My mom escaped the [STATE] farm life as soon as she could because, still to this day, women are expected to cook, clean, and raise their husband's children. Kids aren't encouraged to go to college but to take over the farm to keep alive the farming lifestyle which is "threatened".
Well KT, there are a few different things to say in response to your concerns. First, farmers are known for being both conservative when it comes to change and prickly regarding outside perspectives and interventions. Those feelings can make sense when you consider how "radical" ideas can lead to crop failure, hunger and economic damages. On the other hand, they are hardly consistent with farmers' continued willingness to accept various subsidies, protections and favors (the Farm Bill favors industrial ag at the expense of food quality, the environment, and rural livelihoods).

Trump's support for rolling back the EPA and WOTUS (Waters of the US) regulations are consistent with his pro-pollution, pro-big business attitudes, which are myopic and probably bad for the majority of Americans. The most obvious problem arises via pollutants flowing off land into rivers (or under it to aquifers) because "those who know better" are unlikely to monitor or detect damages. Going further, they are unlikely to act to reduce damages if those damages fall on others, but that logic won't work for very long before you have a "polluting Peter who's damaged by his neighbor Paul." Take a look at this figure from the [not yet unfunded] USGS:

The red areas are inhabited by republicans farmers poisoning their groundwater

Bottom Line Farmers released from environmental regulations will celebrate their "freedom to make America great" in the short run, but their families and communities will be poisoned in the long run (ignoring that many are already suffering from environmental toxins).

Monday funnies


3 Mar 2017

Friday party!

Playing with toys

hold Danny MacAskill's redbull.

The impact of livestock on climate change

Nada writes*

Climate change is a rising concern today. Among the different factors contributing to global warming, studies have shown that raising livestock and animal agriculture contributes with a significant share. With a rising increase in the world’s population, and thus a rising need to increase meat production, we find this issue only increasing in size. According to the Food and Agriculture Organization of the United Nations [pdf], producing livestock contributes significantly to several major environmental issues, among which are deforestation, “global warming, land degradation, air and water pollution, and loss of biodiversity”. This post focuses on how livestock production directly links to deforestation, and its consequences.

National Geographic stated that “intensive livestock production requires large quantities of harvested feed. The growing of cereals for feed in turn requires substantial areas of land”. Thus, farmers proceed to cut trees in forests in order to provide the additional required land for feeding the animals. And with the increasing world’s population, estimated to grow from 7.2 billion today, to 9.6 billion in 2050 [pdf], the percentage of deforestation does not seem to be decreasing anytime soon. As a matter of fact, the Wageningen University and Research Centre estimated that agriculture is the main cause of approximately 80 percent of deforestation around the world. For instance, agriculture accounts for 91 percent of Amazon destruction, the biggest rainforest in the world. More specifically, with Brazil being the biggest beef exporter in the world, almost 70% of Brazilian amazon deforestation is attributed to “cattle ranching”. It should be noted that Brazil “has the largest commercial cattle herd of approximately 180 – 190 million head.”

Efforts were made in Brazil to reduce deforestation caused by raising animals. For instance, “In 2013, 26 Brazilian beef producers faced fines of nearly $300 million from government prosecutors for buying cattle raised illegally on deforested Amazon rainforest land.” Moreover, well-known brands agreed not to buy products of uncertified cattle, or cattle raised on deforested land. Several NGO’s also tried to increase awareness about the matter, and create incentives for producers ‘to maintain their forest reserves’. On a more global scale, several campaigns were initiated to raise awareness to meat eaters about their effect on the environment. The most recent awareness tool is the 90-minute documentary, Cowspiracy. Alternating people’s diets and reducing meat consumption is one of the main claims for awareness campaigns, although debates still exist about whether humans can get sufficient nutrients without consuming animal products.

Bottom Line Livestock production is among the major causes of deforestation and GHG emissions. It is a major contributor to climate change and, with the increasing population, meat production is increasing significantly. Fines for buying illegally raised cattle and boycotting products from cattle raised on deforested lands are examples of ways to limit the issue, as well as awareness campaigns. However, the debate remains on whether meat production should be completely banned.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

2 Mar 2017

How free trade won Trump the White House

Onno writes*

Now that Trump has passed executive orders on his most controversial campaign promises, we can no longer cling to the idea that his time in office will not turn out to be a disaster for the United States. With elections coming up in many Europeans countries, and right-wing parties leading the polls in most, it is of vital importance that we understand how Trump won, and how we can prevent similar populists from winning on this side of the ocean.

By now it is obvious that Trump secured his victory in the traditionally Democratic Rust Belt states. The analysis that they voted for him because of cultural reasons seems to fall short simply because these states are traditionally Democratic. Rather, we should look for an explanation in socioeconomic factors.

Hillary Clinton is a staunch supporter of free trade, and one could argue, rightfully so. The benefits of free trade are not denied by many, so it’s easy to dismiss those who do as crazy. However, this would be making a mistake. Yes, aggregately speaking free trade is economically beneficial. However, in the game of free trade, there are inevitable losers. This is important to realize when defending free trade; when the losers are not compensated, they will hate the game. In other words, if redistribution of wealth is not occurring, backlash is almost guaranteed to happen; those who do not get the profits of free trade but do feel the losses will pull the political brakes. This is exactly what happened in the Rust Belt states: they were losing the free trade game, were not compensated, and pulled the political brakes by voting for Trump.

Of course, redistributing income is incredibly difficult, especially in a country in which special interests largely dictate the political process. Income, once distributed, becomes ownership, and ownership means vested interests that are defended. But the Democratic party should at least have acknowledged the losers of free trade, instead of repeating that free trade is economically beneficial on an aggregate level.

What is true for free trade, is equally true for automatization. Again, we benefit aggregately. Again, there are many losers. And again, if those put out of a job are not be compensated in some way or another, they are likely to pull the political breaks. We can only hope that those who own the means of production have enough foresight to allow for redistribution before this happens.

Not only do we need a new vision for those put out of a job, – perhaps providing a basic income – we need to fundamentally rethink the way that we approach the economy, and in extent protest votes. We cannot simply look at the bottom line, because the disenfranchised will pull the political breaks before we ever reach our desired goals. Rather, we should compensate those who are losing, even if that means giving up some aggregate benefits.

Bottom Line Free trade and automatization might benefit the bottom line of the United States, they do not benefit all individuals. We should push for redistribution if we want to prevent an European Trump.
* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Another unsustainable Dutch treasure found

Lee writes*

The Netherlands is well-known for various reasons, including the gas found in one of our northern provinces, the bad management of natural resources in the 1970's resulting in the phenomenon known as the Dutch Disease, the export of television programmes e.g. Big Brother and The Voice and of course our fantastic humour: "We understand America first, but can we just say The Netherlands second?" triggering a worldwide hype. All these themes affect our economy in one way or another, however this small country fosters another major commerce: the potato industry!

In 2014 the Dutch potato industry harvested 7 100 000 tonnes of potatoes and with that the Netherlands was the fourth largest potato producer of Europe. As we say in Dutch: "every advantage has its disadvantages," which is certainly true in this case. Next to the economic value the potato industry brings, this sector is also facing a number of problems, including environmental impacts such as water contamination caused by the use of chemical crop protection products and potato disease caused by Phytophthora infestans. The question remains, why is a transition to a sustainable production process so difficult?

Firstly the lack of demand for ecological potatoes (Smit et al., 2008), which can potentially be explained by the significantly higher price: the consumer pays 20 to 50% more for ecological potatoes. A second explanation could be the market structure: there are three types of selling structures, firstly free growing: the grower buys the potato seeds directly from the seller and decides on the way of growing (e.g. sustainable or not) (Smit et al., 2008). Growing through a cooperative organization: grower consults with the cooperation on the quantity and sells the potatoes to the cooperation. Being a member comes with rights and responsibilities (Smit et al., 2008). Growing under contract: contract between a grower and one other buying party. The way of producing has to be discussed with the buying party.

The transition to a sustainable production process can be seen as a collective action problem. The price of organic potatoes is not competitive enough (20 to 50% more expensive), therefore growers are more prone to the conventional way of growing. The producers who are not (willing to) making this transition can be seen as free-riders. Dolan argues that the free-rider problem can be solved if the rights or benefits are exclusive to free riders. This could be implemented by an organisation, which grants the benefits and or rights to members and makes sure that the collective interests are being secured (Dolan, 2011). Even though there are already existing organisations (e.g. NEDATO), which could potentially play a role in the transition to sustainability, in 2016 only 201 of the in total 9 548 potato companies in the Netherlands grow potatoes in a sustainable way. So this insignificant number, which accounts for only 2.1% of all companies illustrates that perhaps Dolan's solution is too simple or it perhaps shows that collective action problems are hard to solve.

Bottom Line The Dutch potato industry is sizeable, which is interesting in terms of economics. However, this industry is facing difficulties to transition to sustainable production due to (among other reasons) the lack of demand for organic potatoes and the current market structure. Lastly, the potato industry illustrates that collective action problems are difficult to solve.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

1 Mar 2017

Links of interest

  1. A Guatemalan community preserves its biosphere
  2. The rise of Europe was helped by competition among states in the presence of common information flows
  3. A law professor takes on "speeding cameras" and their weird (illegal) legal justifications
  4. The tracking data of your Fitbit (or mobile phone) may be used against you
  5. Cities may not deserve their "efficiency" label if they reflect, rather than make, elites, but Basic Income may do the most to help people live in smaller, better communities
  6. A loss of statistics may mean a loss for democracy
  7. The Washington Consensus actually makes a lot of sense (regulation to protect safety, limit banks, etc.) -- too bad people say it as a pejorative without knowing what it is.
  8. Containing Trump (by addressing the pains of his supporters) and thinking more about whether "liberalism" [I disagree on its use here] is to blame
  9. Forget empathy. Try sympathy
  10. Mixing politics and economics is like mixing alcohol and driving when it comes to the costs of health care, education, etc.

The cost of wind energy

Defne writes:*

Nowadays due to the increasing population our natural resources for energy are in danger. The energy sources that we are using today such as coal, gas and oil (fossil fuels) are finite and will be depleted someday. Furthermore, fossil fuels are very harmful for the environment as they release carbon dioxide and greenhouse gasses, which leads to problems such as global warming. Due to the environmental effects of fossil fuels it has become crucial to find alternative sources of energy. That is why renewable energy is becoming more and more important everyday. Even though some countries have renewable energy sources they still have problems and it does not seem like they will be able to replace fossil fuels with renewables in the near future. The Netherlands, for instance, is still relying on fossil energy for over 90% of its energy demand. One of the main obstacles that make it difficult to transform to renewable energies are the costs.

Wind energy is one of the most highly demanded sources of renewable energy. Nonetheless, the costs of infrastructure, maintenance, operation of a generating plant, noise, the threat for wild life, and the transmission of energy leads to problems and oppositions from the locals and investors. One key issue is the amount of energy the wind farm uses and the amount of energy that is sold back to public service. Due to the low energy prices, the wind turbines that are operating in the Netherlands are in danger. The maintenance cost of those turbines exceeds the energy that the turbine generates. This problem is caused due to the subsidies that are no longer cost efficient. Especially smaller wind turbines are in danger as the payback period of small turbines are longer. Furthermore, people who are living close to a wind farm are disturbed by the noise as well as the aesthetics. Additionally, the value of the surrounding properties are most likely driven down due to the presence of a wind energy facility. The decrease in the value of the properties leads to a loss of tax revenue. So the incentive of the local residents to pay a tax for wind energy decreases. Moreover, locals are more likely to oppose since they believe that wind farms spoils the countryside. Another obstacle is that there is not always wind and when there is no wind there has to be a backup power source. Furthermore, policies also make it difficult for investors, as there are many uncertainties. There is not much political and policy ambition for renewable energy, therefore the implementation of renewables is more difficult.

Investing in technological advances can diminish some of the costs of wind energy. Furthermore, with the support of the government it is also possible to overcome some of the policy uncertainties. For the sustainability of our planet we need renewable resources. Even though there are some costs, with long-term investments on wind technology, wind energy can become affordable.

Bottom line: it is important to make financial analysis before making investment. It is more difficult to make predictions about wind energy as wind fluctuates; however with investments in technology and appropriate policies it is possible to overcome some of the challenges.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

The failure of national flood insurance

Edward writes*

A specific exception in all homeowner’s insurance, generally noted in a bolded all-caps statement.


Flood insurance has historically been a tricky concept in the United States. Phased out after the 1927 Mississippi Floods by most private insurers, flood-related insurance sees atypical claims. Claims are inconsistent, and when they occur, they do so with high spatial correlation. This is different from most other forms of insurance, where risk is far more spread out.

For several decades, disaster relief was handled by Congress on a case-by-case basis, until under President Johnson, the National Flood Insurance Program (NFIP) was introduced in 1968. Heralded as a self-supporting solution, the NFIP has been suffering from inefficiencies since day one, being unable to reach a large part of the population, incapable of monitoring its regulations and -- since hurricane Katrina in 2004 -- in endless debt.

With climate change and rising sea levels in our future, the role of the NFIP becomes only more vital.

Despite this, it has seen a strong opposition from the Obama administration as well as congress in the past. Hurricanes Katrina and Sandy devastated the NFIP’s reserves, leaving it 23 billion in debt with the US Treasury. The interest on this loan equals 900 million a year, and with premiums totalling 3.7 billion, it is currently not feasible for the NFIP to pay back. As such, the Bigger-Waters Act of 2012 (BW-12) [pdf] was developed. It cracked down on premium rates as well as discounts, and removed grandfathering. These changes were considered too radical, and an exodus was feared. As such, the Consolidated Appropriations Act and Homeowner Flood Insurance Affordability Act, both of 2014 [pdf] were introduced to repeal parts of BW-12, lowering premium hikes and reintroducing grandfathering. Neither tackled one of the actual key issues with the NFIP however, where almost a third of its income is appropriated to the contracting of a middle man; local insurance providers that promote and provide flood insurance to the people for the NFIP, as well as handling claims. They do not run any actual risks, yet take a massive portion of the NFIP budget, without having to show proof of actual costs.

All in all, the NFIP is rough waters. Unless a serious stimulus is introduced, the programme cannot continue to exist in its current form. Participation is too low, and control is too lax. On top of this, the Trump administration is considering the promotion of privatized flood insurance, which would jeopardize what is left of the NFIP. Instead, a change to a full mandatory insurance for all dwellings within floodplains could be considered. An increase in reach of that magnitude could change the scale on which the NFIP operates. 39% of all Americans live on the coast, yet only 4% (a part of which does not even live near the coast) is insured through the NFIP. Right now, this is only mandatory for those living in houses financed through federally backed mortgages, but control is lax. A second problem suffered from lax control is the continued building and appropriation of land that should be left alone due to flood risk, as local governments are enchanted by the short term gains of development rights.

Bottom Line The current NFIP is beyond broke. A full reform is unavoidable, and I for one am very curious to see what will happen next.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.