by Tyler Cowen
on July 15, 2008 at 1:54 pm
in Web/Tech |
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
4. The water shortage myth
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.
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.
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.
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.
I bet Leona Helmsley’s dogs could afford to eat there.
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.
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.
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.
Star Wars according to a 3 year old, according to a 23 year old.
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.
But rate-setting meetings happen all the time and David Z. was welcome to start going to the meetings and advocating for his approach, or not?
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