Water is Free, Isn’t It?

“If people can’t trade water, then they just keep doing the same things that they’ve been doing.” – Reed Watson, executive director of the Property Environment Research Center (PERC)

I live in California. You may have heard that it is in a major drought. At the end of the winter in 2015, the snowpack which usually builds up during the winter and then melts during the spring and summer, replenishing streams and rivers, was virtually non-existent. California’s Governor, Jerry Brown, called for a 25% reduction in (domestic) water use (his name isn’t Brown for nothing).

This affected water companies, large, small, and tiny. I am part of a homeowner’s association that incorporated in the late 1930s to pool its resources, one of which is water.

The corporation, of twenty-six homes, runs its own water company, which pulls water from Clear lake (1). It also has a community dock and a beach for recreation. Our tiny water company must meet state and federal requirements of the Surface Water Treatment Rules of the Safe Drinking Water Act. We filter and filter again until it is clearer than the mandated maximum turbidity allowance (the clearer the water the less chance of organisms in it) and then the water is chlorinated (to disinfect it) and stored for use by our community. We test our chlorination levels daily and send out samples to an independent lab to check our product for microorganisms.

The point is that water that flows from our (and presumably all community taps) takes money. The raw water is pumped in, filtered, disinfected, stored, and distributed to our neighbors’ taps.

Even if the labor to run, maintain, and monitor our water system were free (and it’s not); our water filtration plant and distribution system need to meet state and federal standards, needs stuff such as filters, pumps, pipes, storage tanks, power; and lots more to keep it operating. Our tiny corporation operates like a non-profit (it was incorporated before non-profits existed, and the State of California is loathe to change its status), so charges its customers (us and our neighbors) operating costs plus 5% for an equipment replacement fund. Even so, some of our neighbors refuse to pay their full bill, instead paying what they think is “fair.” This, as you might imagine, leaves us a bit short on funds.

Water is a resource; drinking water is a product.

We are mandated to conserve our product because the state owns the resource.

Many have recommended that markets rather than mandates could accomplish the governor’s goal better (see Ronald Bailey’s and Tim Wortall’s posts). Rather than telling people they can water their lawn for only ten minutes once a week, the water company would just charge more for using more than a minimal allotment. In other words, tiered pricing. If something costs more, people tend to find ways to use less of it or find substitutes (obviously there is no substitute for water, but it’s source and production, e.g., the ocean and desalination, can all be considered).  This could be done by private water companies only; Proposition 218 passed in 1996 by California voters says that government cannot charge more for a service than the cost of producing it.

I found a nice article on tier pricing for water allocation by Tim Worstall and tweeted it.

Someone calling him or herself “Auntie Dote” (presumably a her, so I’ll use that), took issue with the use of markets for water:

I pointed out that the poor can receive assistance. The desire is to make the water wasters pay and not penalize the truly poor.

Did I have a view on whether this system will work!?!

This is true for any product. I am not in the market for a Lamborghini, for example. I realize that we are talking about water, an essential chemical that our bodies require, but governments (or companies) can help by making sure the needs of the poor are met. In our case we don’t shut off water to our neighbors when they are tight on funds and can’t pay.

“The general view among economists is that the best way of allocating any scarce resource is through the market. That is, through allowing prices to vary so that those who value the resource most get to use it by offering the highest price for it….Those activities that do not cover the cost of water will not be done. That frees up water to do the things that add more value than the cost of the water. And that’s it, that’s all that needs to be done.” – Tim Worstall

I was not and am not keen on government setting prices and allocating.

“Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.”– Adam Smith

My guess is she did not want to read the links I gave her and wanted to argue.

I’m sure she thought she was engaged in a form of Socratic questioning and eventually I would see the error of my ways.

So an evil Koch brother or worse, a corporation like ours will hoard the water and not let anyone water crops or landscaping or have a drink? Really? Wealth is created by providing goods and services that people want so much they are willing to provide a good or service to someone else; they are then paid in kind or with money to use to purchase something they want.

Free markets may not be the best system for allocating resources, but markets operate better than the alternatives, at least, so far.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages” ? Adam Smith, An Inquiry into the Nature & Causes of the Wealth of Nations, Vol 1

Footnotes:

  1. Clear Lake is misnomer if ever there was one. According to Pete Richerson and Scott Richerson, ‘Livingston Stone, a government fish culturist who attempted to establish Great Lakes whitefish in the lake in 1872-3, described the turbidity and “swamp-water” taste of the lake, complaining that “it is a singular fact, illustrating the inaptness with which names are often given to natural objects, that the water of Clear Lake is never clear.”‘ (Richerson and Richerson,

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The Bet

 

The Malthusian catastrophe simplistically illu...

The Malthusian catastrophe simplistically illustrated. For Malthus, as population increases exponentially while food production can only increase linearly, a point where food supply is inadequate will at some point be reached. (Photo credit: Wikipedia)

 

The United Nations World Commission on Environment and Development‘s Brundtland Report (1987), Our Common Future, defined sustainable development‘s path as

“development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

It sounds simple. But how do we judge “the ability of future generations to meet their own needs”?  In fact, the Bruntland Report drafters believed the present was robbing the future due to our consumption (largely due to our rising population). The idea that we are spoiling the earth with our numbers and the earth/mother nature responding harshly is anything but new.

In the third century, Tertullian wrote,

“Most convincing as evidence of populousness, we men have actually become a burden to the earth, the fruits of nature hardly suffice to sustain us, there is a general pressure of scarcity giving rise to complaints, since the earth can no longer support us. Need we be astonished that plague and famine, warfare and earthquake come to be regarded as remedies, serving, as it were to trim and prune the superfluity of population.”

In the 18th century Thomas Malthus wrote,

“The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction, and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague advance in terrific array, and sweep off their thousands and tens of thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.”


In the 20th century Paul R. Ehrlich wrote,

Image credit: Amazon


“[within a decade] the world will undergo famines — hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now.” – Ehrlich, 1968

 

In 2000, United Nations World Commission on Environment and Development codified a new charter to guide the transition to sustainable development. It stated:

The dominant patterns of production and consumption are causing environmental devastation, the depletion of resources, and a massive extinction of species. Communities are being undermined. The benefits of development are not shared equitably and the gap between rich and poor is widening. Injustice, poverty, ignorance, and violent conflict are widespread and the cause of great suffering. An unprecedented rise in human population has overburdened ecological and social systems. The foundations of global security are threatened. These trends are perilous—but not inevitable.
United Nations, Earth Charter, 1987

In 1980, the late Julian Simon, an economist, famously posed a bet to environmentalists that the price of any raw material would decline indefinitely. (The price of a material indicates its abundance, the more abundant it is the cheaper it is.) Ehrlich took the bet. Ronald Bailey wrote about it in his book EcoScam, “In October 1980, Ehrilch and Simon drew up a futures contract obligating Simon to sell Ehrlich the same quantities which could be purchased for $1,000 of five metals (copper, chrome, nickel, tin, and tungsten) ten years later as 1980 prices. If the combined prices rose above $1,000, Simon would pay the difference. If they fell below $1,000, Ehrlich would pay Simon. Ehrlich mailed Simon a check for $576.07 in October 1990.” The bet has now been documented in a book by Paul Sabin.

New York Times writer, John Tierney made his own bet on oil prices in 2005; “not because I knew much about Saudi oil production or the other ‘peak oil’ arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.” That rule was to have ‘skin in the game.’

As the leader of the Cornucopians, the optimists who believed there would always be abundant supplies of energy and other resources, Julian [Simon] figured that betting was the best way to make his argument. Optimism, he found, didn’t make for cover stories and front-page headlines. – John Tierny

Yes, our lives are sustainable. Despite the finite nature of everything we use. Stuff become resources when we (as a species) decide that the previous useless stuff now has value when used for energy, food, fertilizer, beauty, circuit boards, etc. And that realization occurs when we exchange ideas. Because we trade goods and services, the cross-fertilization of ideas happens as part of commerce.

As I have written before, it will be technological change (caused by trade) that makes the world more habitable for all its species, and not decisions to go without. Consider:

  • Land was freed up from agricultural production not by eating less meat, but by using machines for farming (since machines don’t need pasture).
  • It was the discovery of how to use coal, instead of wood, to power machines that saved forests, not from deciding to use less wood.
  • More land was freed up by making each acre more productive via synthetic fertilizers and pesticides, not by fasting once a week.
  • Whales were saved from extinction, not by lowering the amount of whale oil one bought, but by people buying the newer and more affordable kerosene (derived from coal) for lighting.
  • Even habitats can benefit from trade. According to Susan Hecht writing in the publication, Nature, El Salvador’s forests have increased, not shrunk, due to globalization, Salvadoreans working abroad send remittances to relatives so they no longer have to clear forests for subsistence farming.

In the 1970s, Ehrlich and Barry Commoner simply repackaged the classic Malthusian catastrophe into a formula to make it look sciency: I = P × A × T (where I = Environmental Impact, P = Population, A = Affluence, T = Technology).

Well two can play at that game: I = P × A/T.  There, it’s all sciency.

I recommend the post, “Peak Everything” by Ronald Bailey.

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“Hey, I care about the planet—can I go to Rio?”

English: Aerial view of Rio de Janeiro city ce...

My latest Green Chain column for the Lake County Record-Bee.

 

Last month the United Nations Conference on Sustainable Development (UNCSD) marked its 20th anniversary of the “Earth Summit,” meeting once again in Rio de Janeiro. In 1992, Earth Summiteers envisioned the future they wanted, which included uplifting the “social and economic development” status of the world’s poorest people and protecting the environment all the while using sustainable development. And, much of what they then hoped for has begun: The numbers in heart-breaking poverty are down for the first time in history, the rate of hunger is down, infant mortality is down, illiteracy is down–the list of achievements continues. In short, we are healthier, wealthier and better educated now than in any time in our world’s history. Much work remains to be done, but the numbers show that the problems are not intractable.
After making progress on the social and economic front for the past 20 to 30 years many in the environmentalists worry that those achievements happened because we allowed evil corporations to unsustainably use our earth’s resources, and we must stop corporations from massively gouging, plowing, polluting, and consuming too much. We need to rein in our appetites and think smaller, dimmer, and slower.

Or, put another way, if you liked the ‘Great Recession’ you will love your ‘green’ future.

Your lifestyle is the problem, according to many greens, but the answer is easy, explained Ronald Bailey in an article on the 1992 Earth Summit. “Let the government divest you of your excess goods, such as your carbon-dioxide-emitting automobile; your alienating, too big house or apartment; and foods imported from outside your bioregion.” Wahoo! Haven’t you always wanted to live the life of a 12th century serf? Hello grinding poverty and dysentery!

So, last month some 50,000 people including world leaders, government functionaries, private sector people, non-Governmental Organizations (NGOs), and others converged on sybaritic and raucous Rio for a week in June to consider how to “reduce poverty, advance social equity and ensure environmental protection on an ever more crowded planet to get to the future we want.”**

The crowning achievement of this latest Earth Summit was, not surprisingly, a document: “The Future We Want.”

Obviously, the “future we want” must be done sustainably which means, according to the U.N. website, using resources to meet “the needs of the present without compromising the ability of future generations to meet their own needs.” Of course we know what those future resources will be, right?*

The final document displeased most of the NGOs, because, those charged with finalizing it did so by cutting any quantifiable commitments from any nations and not really defining “sustainable (but salting the word throughout the document).”***

“It is nothing less than a disaster for the planet,” said Nnimmo Bassey, chair of Friends of the Earth International, in their press release. “This is a hollow deal and a gift to corporate polluters that hold UN decision-making hostage to further their economic interests.”

The Greens need not worry. As Ronald Bailey notes, “The Future We Want” launches “a process to define a set of Sustainable Development Goals (SDGs)” with the “newly created Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES)” to list and define the SDGs. The IPBES will be similar to the Intergovernmental Panel on Climate Change (IPCC). It bears noting the IPCC started out cautious in its assessment of the state of knowledge of climate change and became increasingly strident when it learned that money flowed to it when its predictions became ever more catastrophic.

I fully expect the IPBES to follow the IPCC’s lead and make increasingly gloomier predictions periodically. I just wish they could have these meetings in some way that didn’t result in thousands of people flying thousands of miles to wring their hands about other people’s pollution. Minding other people’s business seems to be the only sustainable activity they can all agree on.


* Aren’t you glad our Neolithic-age ancestors saved rocks; otherwise we might have run out by now.

** It’s amazing how these conferences often happen in places with sun-soaked beaches (such as Rio and Cancun). I am sure that the UNCSD planners picked Rio de Janeiro because it showcases the economical use of resources, especially on the famous beaches. After all, as P.J. O’Rourke has noted, Rio’s beachgoers use “very few of the Earth’s precious resources on clothes.”

*** You can drive an oversized truck and trailer through the current definition–one research paper noted it could mean anything from “exploit as much as you wish as long as you do not infringe on the ability for people in the future to exploit as much as they wish” to use “as little as necessary to maintain a meaningful life.”


Sources:

Bailey, Ronald. What I Did on my Summer Vacation. Reason magazine, 1992. pp46-48  http://reason.com/assets/db/13396383287448.pdf

Bailey, Ronald. Sustainability Semantics. Reason magazine, July 2010.   http://reason.com/archives/2010/07/06/sustainability-semantics accessed 5 July 2012

Bailey, Ronald. Rio +20 Earth Summit: Greens Fail to Get The Future They Want. Reason.com. http://reason.com/archives/2012/06/21/rio-20-earth-summit-greens-fail-to-get-t accessed 2 July 2012

Rio+20 – United Nations Conference on Sustainable Development. http://www.uncsd2012.org/rio20/about.html accessed 4 July 2012

Friends of the Earth International. Rio+20 Declaration: A Gift to Corporate Polluters. http://www.foei.org/en/what-we-do/rio-20/blog-posts/rio-20-declaration-a-gift-to-corporate-polluters accessed 5 July 2012

Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015. Brookings Institute. http://www.brookings.edu/papers/2011/01_global_poverty_chandy.aspx accessed January 27, 2011

Opening Gambit: Best. Decade. Ever. Charles Kenny. Foreign Policy magazine. http://www.foreignpolicy.com/articles/2010/08/16/best_decade_ever?page=full accessed: January 13, 2011

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