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Assorted links
1. Megan Non-McArdle is blogging again, at rhubarbpie. Here is her post on which are the lovable women.
2. Markets in everything: a restaurant with a menu for dogs (but how can they afford it?)
3. Star Wars according to a three year old, a short YouTube video via Yana
Posted by Tyler Cowen on July 15, 2008 at 01:54 PM in Web/Tech | Permalink
Comments
David Zetland's essay on the California water situation is interesting, but stupid in two particular ways:
- he proposes giving away some water, then charging rates (higher than current) for water after that. As a kind of welfare program that guarantees everyone some water, this makes some sense - but almost no one is so poor that they would need the free water, and anyway it's more efficient to just give people the money and charge for the water at a fixed rate.
- more important, he focuses on the residential consumer when it's well understood that the most grotesque underpricing and overuse in the California market is in agriculture. California farmers pay something like $70 per acre-foot of water, which is something like two orders of magnitude less than residential consumers. And that might be OK if they somehow only accounted for a small fraction of the water used, but that's not the case either. Address the elephant in the room before talking about tweaks to the residential pricing.
Posted by: bbartlog at Jul 15, 2008 3:10:01 PM
I've long felt that water prices for all consumers in a given water district should be equal to 95% of replacement costs assuming the replacement is a desalination facility (with pipeline).
Then you take operating costs, subtract them from the actual cost to consumer, and then distribute those dollars as dividends on an equal weighted basis to all men, women and children who are legally domiciled (as opposed to someone with a house here, a house there...) in that district.
As the cost for building such a desalination facility falls, then the 0.95x price of water also falls. As the energy cost of operating such a hypothetical facility rises, the 0.95x price of water rises.
Prices could be adjusted quarterly or yearly or any other reasonable interval, as well as the dividend payout timetable.
This is pretty close to a pure libertarian ideal where it is priced at monopoly prices just like it would be in the absence of government meddling. The only real flaw I see is that water tables might rise "too high".
Posted by: happyjuggler0 at Jul 15, 2008 5:24:07 PM
Sounds like cryptopuritanical nonsense. Let's *not* take into account that water falls from the freaking sky, and instead price it as if we had to build imaginary facilities instead. First hint - in order for the price system to work, you need to actually buy the item, build the facility, or what have you. If you just make up numbers you don't get the actual price information.
Even as a purely theoretical exercise in libertarian pricing of the commons, it falls apart because the oceans themselves (which the imaginary desalination plant would use) are themselves a common and finite resource.
Posted by: bbartlog at Jul 15, 2008 5:57:35 PM
@bbartlog
You are so right. That silly article from Forbes ignores the elephant completely.
Posted by: Dave Barnes at Jul 15, 2008 7:01:53 PM
As usual, Megan's post, and the response she linked, are all about being lonely and self-pitying for not finding love by trying to be someone else.
She needs to learn that love is for her, not for her to find. She needs to be more selfish.
Posted by: liberty at Jul 15, 2008 9:10:29 PM
liberty,
Agree. MM misses the point yet again. TC's recent post on Sebastian Flyte gets dating right: there are thousands of status hierarchies and thousands of interesting datability features. Rating yourself on a couple of 19th century scales (pretty and witty) and wondering why high status males don't flock to you is a bit delusional.
Here are a few tips for interacting high-status males:
1. Be an expert at something, and able to explain your field. I hang out with witty, 1600 SAT people all day: tell me something I don't know.
2. Be willing to try new things. I've got interests you haven't considered, try them and give feedback.
3. Show me new things. I might like them, and if not, will still value the exerience.
4. Be smart and competent, not witty. I get witty on DVDs, I hate listening to long tales about how you wasted hours of your life.
5. Put out on the first date or end the relationship (at least in NYC.) Time is at a premium, and the prospect pool is large.
6. Make decisions. Pick a restaurant and make a reservation. Book that hotel. I want a yes/no choice, not a ten hour roundtable discussion. Money is cheap, decision making requires research.
Posted by: a jerk at Jul 15, 2008 11:56:31 PM
bbartlog,
I'm sorry I didn't connect all the dots.
First off, the earth's water is effectively a closed system. We won't run out of it. It is just a question of where it is and in what form. Even if that weren't true, the water in our oceans dwarfs what we have for fresh water (i.e. unsalted water).
Second, the price rule doesn't stop working when prices are set by fiat. Set monopoly prices higher, then all else equal there will be less demand. Set monopoly prices lower and else equal there will be more demand. The problem with fiat pricing (which is what we have now in water anyway) is that you might get too much supply or too much demand, which market pricing regulates naturally. However, like I said we already have this problem, hence the shortage at the current low price. At a high enough price there won't be a shortage.
It seems pretty evident that regardless of price, we will run out of "enough" naturally occurring fresh water in more and more places as time goes by. My system was intentended to artificially set the price "too high" so as to efficiently conserve water.
By setting the price very close to the cost of the most effective supply replacement, it will be much easier to adjust to the actual expensive cost of manufactured "fresh" water when that seemingly inevitable day comes around.
Additionally, it obviates the need for invasive command and control crap like telling people when and how they are and aren't allowed to use water. The system is fair, those who use more water pay more, those who use less pay less. The difference between cost and price is rebated to the people equally, so what happens is that those consumers who conserve more will also effectively gain from the system.
Eventually water starts to run low enough in a particular water table or reservoir, and then the desalination plant gets built, and it will only cost about 5% more than it did when we used completely naturally occurring water.
Of course the actual cost of building and operating a desalination plant can only be estimated, but they are actually pretty plentiful these days so one ought to be able to come up with a reasonable guess of actual cost.
I see only two real problems with the system. First, when the desalination plant and pipeline eventually gets built, the "shareholders (i.e. the local citizens) stop getting dividends since there is no longer a surplus between cost and price. Second, I wasn't kidding when I said there might be "too much" water under the system since the price might be too high.
Posted by: happyjuggler0 at Jul 16, 2008 12:20:29 AM
@bbartlog and Dave Barnes -- the article was about URBAN water, not ALL water. The reason that I propose some free, more for big $$ is because that's politically feasible. Economists' dreams of pay for everything are DOA. Re: ag water, here's the comment I wrote to someone who also failed to grasp the scope of my piece:
"This piece is about urban water use. My "solution" to ALL water is that those who have rights (mostly farmers) be allowed/required to sell those rights. Farmers that wanted to keep their water could buy it back, but some farmers would prefer to take the money."
Also note that politicians will NOT be interested in ag-urban transfers until urbans are maximizing their water efficiency. I invite you to read about these many topics at my blog, http://www.aguanomics.com/
@happyjuggler0 -- desal plants are VERY libertarian, but also VERY energy-intense. It's cheaper to use existing supplies more efficiently. BTW, cost-based pricing (your proposal) is certainly to cheap for exisiting supplies. I guess that you think such pricing is "just right" for desal -- since the water is "free" but there are problems with externalities (salt outflow and pollution from energy use) as well as the bigger issue of infrastructure and energy to move water.
My pricing proposal is to charge WAY more than cost to encourage conservation.
Bottom Line: We can get a lot more out of our water system with better pricing.
Posted by: David Zetland at Jul 16, 2008 8:58:59 AM
I bet Leona Helmsley's dogs could afford to eat there.
Posted by: Billy at Jul 16, 2008 10:22:10 AM
the article was about URBAN water, not ALL water
Um, yeah. We did notice that. I could write an essay about conserving the water in my bathtub while ignoring the larger world of water use outside my door, but as with your essay this would be artificially dividing the problem.
The reason that I propose some free, more for big $$ is because that's politically feasible
OK. Personally, I think that if you do analysis it's your job to shift the bounds of what's politically feasible by reminding people of the correct solution to problems. 'Politically feasible' is a dodge.
note that politicians will NOT be interested in ag-urban transfers until urbans are maximizing their water efficiency
Since when do politicians give a damn about urban water efficiency? There are two things they seem likely to care about: campaign donations from agricultural interests, and votes or loss thereof from people who are angry at high water bills (and especially people who are angry that they pay so much more than farmers). Right now I can only assume the campaign donations are winning. And they would continue to win (and block ag-urban transfers) even if city dwellers became more water efficient. I suppose a sufficiently large list of conservation efforts might change this, but it would change it by raising public awareness of water as an issue, and the net political effect would probably be the election of officials who agreed to scrap the less popular measures and reduce the farmers' water use instead.
BTW, cost-based pricing (your proposal)
Interestingly, my first thought on reading juggler's proposal was that it would result in much higher water prices. Desalination is expensive. But on further research, I see that your intuition is correct and that it would actually *lower* residential water bills in most areas. This is quite a testament to the degree to which residential consumers are getting soaked, and subsidizing the agricultural interests.
Posted by: bbartlog at Jul 16, 2008 10:38:30 AM
My pricing proposal is to charge WAY more than cost to encourage conservation.
bbartlog is right. Who cares about urban conservation. The urban use of water is a high value use of water compared to the agricultural use.
Posted by: lemmy caution at Jul 16, 2008 12:09:05 PM
My proposal was indeed to have much higher prices. However if desalination is cheaper than what we have now, then by all means start building those desalination plants. I don't see the problem. Nuclear is emissions free.
Alternatively, if the location is right one could use some form of tidal power or a solar tower. I hear excuses, not reasons, to not build desalination plants. If nuclear, tidal or solar tower (or something else politically acceptable) is deemed too expensive, then my original calculus stands and natural fresh water prices go up in price.
If putting salt/other back into the ocean is deemed a negative externality, then disallow it. It of course would make things more expensive, but on the scale of things I'd say the cost was more incremental rather than prohibitive.
All I can say is that central planning of how households use water simply ought not to be an option on the table the way it is now. There is simply no reason for it.
Cleaning up a couple of loose ends.....
By all means anywhere there is a use it or loose it water quota for farmers it ought to become market pricing instead with farmers owning the water rights. I'm talking mainly about the royally screwed up Western states, but anywhere that that applies works for me.
I fully agree with the notion that water ought to be priced the same for all types of users, be they residential, farmer, or nonfarm business.
I also fully agree with the notion that economists first and foremost ought to state what makes most sense regardless of its assumed political acceptability. Once that is gotten out of the way, then the economist(s) in question can then spell out the tradeoffs involved in various proposals that are deemed more politically acceptable and let the politicians/public make their choices from there. Once the tradeoffs are spelled out to the public it is eminently possible that the realm of "politically possible" has shifted. Even if the shift doesn't happen immediately, it opens the door to it happening later as the reality sinks in over time.
Farmers may have more power than the rest of us combined in the US government (hence our absurdly expensive and inefficient farm policy, water notwithstanding), but at the state level? I'd say an informed public (on the disparity in water pricing) would credibly be a large enough of a concentrated voting block to overcome a farmer's lobby veto in state governments (outside of Iowa et al).
Posted by: happyjuggler0 at Jul 16, 2008 12:09:15 PM
My pricing proposal is to charge WAY more than cost to encourage conservation.
bbartlog is right. Who cares about urban conservation. The urban use of water is a high value use of water compared to the agricultural use.
Posted by: lemmy caution at Jul 16, 2008 12:10:22 PM
Are you sure Megan didn't start a new blog to get away from her old commenters? I couldn't find another reason.
Posted by: Noumenon at Jul 16, 2008 12:19:11 PM
However if desalination is cheaper than what we have now, then by all means start building those desalination plants.
But it isn't actually, of course. It's just cheaper than what we charge (most) residential consumers of water right now. It's still way more than what agricultural users get charged. For example, look at the price schedule for Pittsburgh (my hometown) here. Residential users get charged at $7.50 per thousand gallons (marginal), though since the first one or two thousand gallons are even more expensive the average is probably over $10 per thousand. Industrial users pay somewhat less, maybe as low as $6-7 per thousand gallons. So marginal costs and prices look sort of like this:
Pgh Residential consumer pays: $10 per kgal
Desalination cost: $3 to $12 per kgal (source)
CA Agricultural user pays: less than $1 per kgal
... an informed public (on the disparity in water pricing) would credibly be a large enough of a concentrated voting block to overcome a farmer's lobby veto
Well, yes. But the other factor I didn't mention is that the extra revenue from the water utilities is generally also something the government controls and doesn't want to give up.
Posted by: bbartlog at Jul 16, 2008 1:43:11 PM
Megan - stop competing, start trying to know people. Let your defenses down. Then let chemistry take over.
Posted by: jorod at Jul 16, 2008 2:56:00 PM
Staggering ignorance displayed as usual.
In California, urban water rates are set by people who are elected to office. (Even where the retail water provider is a corporate entity rather than a governmental one, rates then need to go through the Public Utilities Commission.) High / punitive rates get people recalled. As the median voter in most districts likely lives in a single family residence with land, the idea that the elected board will approve rates which result in a subsidy from this voter to lower-income voters seems ... unlikely.
But rate-setting meetings happen all the time and David Z. is welcome to start going to the meetings and advocating for his approach. I'd love to see what happens.
The pricing of ag. water is tremendously complex. Is the water coming from the Colorado River, the San Joaquin River or the Feather River? Is it through a federal facility (the Central Valley Project), a state facility (the State Water Project) or a local facility (the All-American Canal)? What is the water right pursuant to which the water is delivered?
Transferring ag. water to urban use is a pain also. What rights are junior? Who is downstream? What conveyance facilities exist to transfer the water from the farmer to the urban area that wants to buy it? Who owns that facility? What surplus capacity exists in that facility?
Desal. now runs about $2,000 per af, including both construction and O&M. Average household use is generally considered to be about 0.5 af/year in Southern California. That's $83 per month just for water at sea level, and doesn't include all the other costs of running a water department or lifting the water to where it's needed. It's not affordable.
Posted by: Francis at Jul 16, 2008 3:09:25 PM
Average household use is generally considered to be about 0.5 af/year in Southern California [...]That's $83 per month [...] It's not affordable.
Seems slightly high? 1 AF = 326,000 gallons, approximately. I see figures of 300 gallons per day per household, which is more like .34 AF/year. Anyway, at consumption levels of 100 gallons per person per day it's a safe bet that demand is still pretty elastic, so we certainly could afford desalination if we had to (I imagine that cutting back to 50 gallons per person per day would not be very difficult). It's just that for now we still have many easier ways of getting water.
Posted by: bbartlog at Jul 16, 2008 4:04:07 PM
http://www.youtube.com/watch?v=kG1hkBXh6lc&NR=1
Star Wars according to a 3 year old, according to a 23 year old.
Posted by: Dangermouse at Jul 16, 2008 6:42:05 PM
bbartlog: The calculation is used for municipalities. In addition to irrigating common spaces within large developments, they also irrigate parks, medians, schools, and related uses associated with residential development.
Posted by: Francis at Jul 16, 2008 7:11:35 PM
Francis -- what's up, man? You seem to be really stressed on this threads. (Maybe it's bbartlog? He does seem to be firing before aiming :)
I think that you're being too fast to dismiss what's possible -- in terms of rate setting, transfers and HH ability to pay. I'll be back in CA next week. Please invite me to the next committee meeting you attend in Sac or SF.
Posted by: David Zetland at Jul 17, 2008 3:08:06 PM
Secret water diverting. After Fresno Mayor Alan Autry’s Dept. of Public Works was caught conspiring with WGS, a former employee in one of the most heinous and barbaric operations in history, he had them issue a R.O. against me - committing perjury to discredit the city’s own sewer layout, which verifies EXACTLY what is taking place. Death threats followed if I continue to report this. What's new. Residents are being annihilated in order to carry this out. I was previously employed by WGS - for 25 yrs I heard him talk of secretly diverting the water supply for future development but until he and the Dept. of Public Works were caught in action, I did not believe it.
BELIEVE IT!
Posted by: MarlaLee at Jul 25, 2008 11:01:55 PM
