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The political economy of water David Zetland an economist at aguanomics

Bridging Knowledge Gaps in Water Management Washington DC âˆź 27 Oct 2010

David Zetland

aguanonomics.com

1/12


Overview Bottom Line: The values of water allocated by individuals in monopolies are unknown. Outdated institutions for scarcity lead to knowledge gaps What’s a knowledge gap? Quantity, quality and value? Do we need more knowledge or new institutions? 1. About us 2. Political Economy 3. The End of Abundance 4. Food and water 5. Energy and water 6. Solutions

David Zetland

aguanonomics.com

2/12


About me

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UC Davis (aggie) and UC Berkeley (Wantrup fellow)

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Six years, 80 countries: black/missing markets (gaps!)

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The End of Abundance (UCP, 2011)

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Looking for a job that rewards outreach, not P&P

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Speak truth to power does not help job security

David Zetland

aguanonomics.com

3/12


About you

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Years in/out of government? Retirement?

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Government vs academic economists

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Public Choice facing politicians

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The Knowledge Problem facing regulators

David Zetland

aguanonomics.com

4/12


The tangled nature of water issues

David Zetland

aguanonomics.com

5/12


Political economy

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Wantrup’s layers: constitution, laws, behavior

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Politics describes how to split the pie (laws)

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Economics describes how the pie grows (behavior)

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Political-economy: divide pie (collective goods) instead of making it bigger

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Should we use votes or prices for subjective values (e.g., environment)?

David Zetland

aguanonomics.com

6/12


How we got to the End of Abundance

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Abundant water and cost recovery; “environmental waste�

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Most water used in energy (DoE) and ag (DoA)

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But 41% and 37% (diversions) or 20% and 18% (enviro flows)

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Rise in demand (people, environment) leads to shortage

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PSP prices, untraded water rights, etc.

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Nature makes a drought, man makes a shortage

David Zetland

aguanonomics.com

7/12


Food policies do no harm?

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Food security (CnC targets for program crops) increases risk

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Sugar ($2 bil to farmers, $6 from me) subsidizes mistakes

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Cotton. . . ”The government has decided in their wisdom to encourage production of crops the market doesn’t want,” Bowles said. ”It must make political sense because it certainly doesn’t make economic sense.” — Bowles Farming Co. was California’s second-largest recipient of federal subsidies ($1.27 million)

David Zetland

aguanonomics.com

8/12


Energy policies do no harm?

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Ethanol (g/w and fertilizers)

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Thermoelectric pollution

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Tailings externalities (TVA spill)

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Cheap Hoover power creates an “opportunity cost subsidy�

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Water-energy nexus versus coffee-donut nexus

David Zetland

aguanonomics.com

9/12


A framework for water scarcity and knowledge gaps

Water issues are local (value vs. transport cost) I

Management must be local

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Information can be global (gov’t PG)

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Trade products (food, desal), not water

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One-size-fits all does not work with scarcity (CA’s Delta)

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Unintended consequences from assumed abundance (Vegas)

David Zetland

aguanonomics.com

10/12


Solutions

We need to ration on value I

Some for free, pay for more

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Auctions for rights

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End subsidies (OPM)

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Groundwater: monitor/tax/allocate

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Local water abused by federal policies (OPM, BC-skew)

David Zetland

aguanonomics.com

11/12


Questions?

Email me! dzetland@gmail.com

. . . and read aguanomics.com

David Zetland

aguanonomics.com

12/12


The political economy of water