Results for “water”

1034 found

Rortybomb has long argued there is no significant effect.  I’ve never had a horse in this race, in any case here are new results from Plamen Nenov, on the job market from MIT:

The present paper studies the impact of a housing bust on regional labor reallocation and the labor market. I document a novel empirical fact, which suggests that, by increasing the fraction of households with negative housing equity, a housing bust hinders interregional mobility. I then study a multi-region economy with local labor and housing markets and worker reallocation. The model can account for the positive co-movement of relative house prices and unemployment with gross out-migration and negative co-movement with in-migration observed in the cross section of states. A housing bust creates debt overhang for some workers, which distorts their migration decisions and increases aggregate unemployment in the economy. This adverse effect is amplified when regional slumps are particularly deep as in the recent U.S. recession. In a calibrated version of the model, I find that the regional reallocation effect of the housing bust can account for between 0.2 and 0.5 percentage points of aggregate unemployment and 0.4 and 1.2 percentage points of unemployment in metropolitan areas experiencing deep local recessions in 2010. Finally, I study the labor market effects of two policies proposed for addressing the U.S. mortgage crisis.

I’m still not taking sides here, just fyi.

Here is my piece for Forbes.com on the privatization of residential water supply in the Third World.  Excerpt:

And no, I don’t mean a water
concession with a price regulated by the government, I mean true
laissez faire in water supply. No price regulation, no rate of return
regulation, no government ownership of assets, no political pressure to
keep prices low. Water companies should be allowed to maximize their
profits, and because supplying water is nearly always a monopoly, they
should be allowed to make monopoly profits. I know the idea sounds
crazy–to an economist, water supply is a classic "natural"
monopoly–but on closer inspection the other alternatives might be
worse.

And more:

If complete deregulation
is too radical for you, consider the interesting compromise proposed by
the economist Jeffrey Sachs, currently heading the Earth Institute at Columbia University.
He suggests that the private company be allowed to charge high prices,
but only under the condition that it allocates a minimum amount of
water for everyone, either for free or at a much lower price. Basic
water needs would be met, and the company still might make a profit.

That said, I’m less worried about high prices than Sachs. Let’s say
the new water prices were so high as to capture all the benefits that
buyers would receive from the new supply of water. We can expect much
lower rates of diarrhea and other diseases, if only because the water
supplier can charge more for cleaner and safer water. The resulting
decline in disease means that children will die less frequently and
adults will be healthier and more energetic. Those long-term social
benefits are of enormous help to poor communities, even if high prices
take away many of the initial, upfront benefits of the new water
supply. In other words, we should consider radical privatization
precisely because water is a public good and because clean water is so
important for long-run economic growth.

Read the whole thing.

Chapter five of Common Wealth is called "Securing Our Water Needs," an important topic but one neglected by most economists.  One lesson is that climate change will put a big stress on water supplies.  So far, so good, but the recommendations start with greater international cooperation:

A first step, at least, would be to focus on the hardest-hit lands, specifically the world’s drylands.  Fortunately, these are covered by the UN Convention to Combat Desertification, which has 191 member governments as signatories.  Unfortunately, the treaty as it now stands is little known and has little clout and financial backing.  Rather than reinvent the treaty, however, it would be better to reinvigorate it.

I would say it needs invigoration, not reinvigoration.  It is no accident that the Convention has little clout and little financial backing.  Many such Conventions are toothless objects, designed to appeal to a least common denominator within the process of the Convention itself (recall, it has 191 signatories).  No one is opposed to "international cooperation" but it is no accident that truly international bodies have to either find a way to make profit (e.g., the World Bank lends to China) or they are usually very strapped for funds.  That’s just not where the political rents are and that isn’t going to change.

Since Sachs calls this a "first step," his position is in some sense invulnerable.  Whatever you really think should be done can be called the next step.  Sachs writes, however, that the next step is more finance if I understand him correctly he wants to increase funding by more than a factor of 100).  I would prefer finance from national governments, or even from the states or provinces, than finance at the level of international organizations.  Most of the 191 signatories just aren’t that good at R&D, funds accountability, or even technology adoption.

I might add that national governments are the ones that subsidize the price of water to ridiculously low levels, most of all for agriculture.  My first step is to remove all these water subsidies, allow water prices to rise, institute more water trading, and then see which innovations the private sector decides to finance (hmm…those are my first four steps).  One role for government would be to ensure that patent law does not hinder international transfer of worthwhile innovations, a point which Sachs makes in other contexts.  That sounds less glamorous than a big international plan, but I think it has a better chance of succeeding.

Presented in one long, excellent blog post (do read it), here is a partial response.  I’ll note that water policy has long been an area where libertarian insights are hardest to apply.  Property rights in water (to the molecules?  to a flow?  to water of a certain quality?  what is the natural unit?  …and don’t even get me started on water tables) are more of a fiction than, say, property rights to your toothbrush.  That makes administrative law more important, more valuable, and more of a balancing effect for water than for most other sectors of the economy.

If you wish to purge yourself of all libertarian tendencies, just study water law for a few months.

If you wish to increase your libertarian tendencies, study farm policy, corporate welfare, teachers’ unions, or anti-marijuana laws.  A stroll by the HUD building isn’t a bad refresher course either.