There is no “peak water” crisis

Summary:  the scarcity of potable water is a big story in the news.  The actual problem does not resemble what we see in the stories.  Rather, in much of the world water is under-priced, and underpriced goods are usually scarce.  This is the first post in this series; the second considers the real scarcities — now and in the near future — of water (e.g., Saudi Arabia from population growth, everywhere extracting ground water faster than it recharges).

Water — the world’s most critical resource, growing scarcer by the day.  This is a hot meme among the “save the world” folks. 

Millennium Development Goals:  Water

Target: halve, by 2015, the proportion of people without sustainable access to safe drinking water.  The world’s thirst for water is likely to become one of the most pressing resource issues of the 21st Century. Global water consumption rose sixfold between 1900 and 1995 — more than double the rate of population growth — and continues to grow rapidly as agricultural, industrial, and domestic demand increases.

Is water becoming ‘the new oil’?“, Christian Science Monitor (29 May 2008) — “Population, pollution, and climate put the squeeze on potable supplies – and private companies smell a profit. Others ask: Should water be a human right?”  Excerpt:

Water, Dow Chemical Chairman Andrew Liveris told the World Economic Forum in February, “is the oil of this century.” Developed nations have taken cheap, abundant fresh water largely for granted. Now global population growth, pollution, and climate change are shaping a new view of water as “blue gold.”

Water’s hot-commodity status has snared the attention of big equipment suppliers like General Electric as well as big private water companies that buy or manage municipal supplies – notably France-based Suez and Aqua America, the largest US-based private water company.

Global water markets, including drinking water distribution, management, waste treatment, and agriculture are a nearly $500 billion market and growing fast, says a 2007 global investment report.

All these are commendable efforts to alert us to this problem, and guide us to solutions.  How unfortunate that, like most resource issues today, these discussions are confused by ignorance of the basic economics.  In  overly simply terms, the world has three forms of  water crises today.

1. In the emerging and un-emerging (e.g., Africa) nations, increased population and mismanagement (e.g., pollution, desertification) have created water shortages. There are no easy or fast solutions. High technology is not the cure, as few of these nations have the money required (China is one of the exceptions).  Poor governance, corruption, and wars are the key causes — all resistant to the technocratic nostrums peddled by many advisers.

2. In the developed world water is often under-priced — usually as a matter of public policy.  Underpriced goods are scarce; in fact, that is a good definition of underpriced. For example California has plenty of water. But it is underpriced, and so used to grow water-intensive crops in the desert. Providing more water to California (e.g., water desalination) will not help, as the demand for underpriced goods usually exceeds supply.

3.  Regions with true water problems, beyond those fixable by pricing and improved social organization.  Australia and Saudi Arabia are examples, with no easy answers.

Mixing these two very different issues makes for powerful scary stories, usually ignoring the harsh fact that the first two are essentially political problems. 

The need to price essential goods — such as  food, water, and freedom — is an unpleasant fact of life. The Dire Straits‘ song “Money For Nothing” has pretty lyrics…

Now look at them yo-yo’s that’s the way you do it
You play the guitar on the MTV
That ain’t workin’ that’s the way you do it
Money for nothin’ and chicks for free

…but it is a poor guide for public policy.


The comments raise some powerful points.  The discussion went straight to what as intended as the conclusion to this series — but should have been mentioned up front.  Resource issues are among the most complex facing our society.  They require analysis of economic and ecological factors, as well as social/political needs (sharing resources across regions). 

One of the large themes of this site is that America today so often handles important issues — such as defense policy, finance, resources, demography — without utilizing our intellectual resources.  Most notably across a wide range of issues the relevant experts are underfunded and ignored.  Rock lyrics, sappy emotionalism, and crass politics will not get America through the challenges ahead in the 21st century.

The elephant is great and powerful, but prefers to be blind.
David Halberstam, The Best and the Brightest   (1972)

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

Posts about good news for America

  1. Good news: The Singularity is coming (again)  (8 December 2007) — History tends to look better over longer time horizons.
  2. Some good news (one of the more important posts on this blog)  (21 December 2007)
  3. A crisis at the beginning of the American experiment  (27 December 2008) — Looking at the problems looming before us, it is easy to forget those of equal or greater danger that we have surmounted in the past.  
  4. An important thing to remember as we start a New Year  (29 December 2007) — As we start a New Year I find it useful to review my core beliefs. It is easy to lose sight of those amidst the clatter of daily events. Here is my list…
  5. Is America’s decline inevitable? No.  (21 January 2008)
  6. Let us light a candle while we walk, lest we fear what lies ahead  (10 February 2008) — Need we fear the future?
  7. A happy ending to the current economic recession  (12 February 2008)
  8. Fears of flying into the future  (25 February 2008)
  9. Experts, with wrinkled brows, warn about the future  (2 May 2008) — Experts often see the future with alarm, seeing the dangers but not benefits. That gets attention, from both the media and an increasinly fearful public. Both sides feed this process. It need not be so, as most trends contain the seeds of good and bad futures. This post considers two examples.
  10. Peak Oil Doomsters debunked, end of civilization called off  (8 May 2008)
  11. Good news about the 21st century, a counterbalance to the doomsters  (9 May 2008)
  12. An effective way to support our Troops: help the Blue Star Mothers of America (8 June 2008) — There are ways to support our troops, actions more effective than a bumper sticker on your car.
  13. There is no “peak water” crisis  (19 June 2008)
  14. Support the USO – more help to our troops than is a bumper sticker   (5 July 2008)

Click here for all posts discussing good news about America’s future.

23 thoughts on “There is no “peak water” crisis”

  1. “Underpriced goods are scarce; in fact, that is good a definition of underpriced.”
    That’s the best line in the whole article. Also, you should swap the positions of “good” and “a.”

    I have resisted studying economics because I notice that economists cannot agree among themselves. Some say Friedman is right, others say Galbraith, others say Keynes, others say Mises. The only things they seem to agree on are accounting protocols – e.g. the differences between an audit, a review, and a compilation.
    Fabius Maximus replies: Thank you for the correction. I can write at this pace (2/day plus answering most comments) only by ignoring grammer and spelling.

    As for Econ … There is broad agreement on a wide range of public policy questions. As usual with life, there is little agreement on questions beginning with “why”. The really interesting questions concern lie on the fault lines of modern economic theory:

    (1) the relationship between growth, inflation, wages, and (less well known but IMO more important,

    (2) the significance of aggregate debt levels.

    I believe these are better seen as the edges of the envelope of modern theory, where the ruline paradigm (per Thomas Kuhn) breaks down. The next phase in economics, following a revolution in economic theory, will provide answers to one or both of these questions.

  2. Your readers mostly care about your big-picture perspective, Fabius, not your proofreading. I only offer corrections in a spirit of helpfulness.

    By the way, here’s what I mean when I say economists don’t agree: “Re-thinking That ‘70’s Inflation Show“, Thomas I Palley, at his blog (16 June 2008) — Excerpt:

    “In the 1980s, Friedman’s natural rate of unemployment theory became the mainstay of economics textbooks. However, if the union price-wage spiral story of inflation is correct, it is time to rewrite those textbooks. Today’s students deserve a theory that explains both the inflation of the 1970s and why the Fed is right in downplaying current inflation fears. “

    It’s an interesting controversy. I don’t know whom to distrust more — Palley or Friedman. But the discipline can argue about whether all of its freshmen have received improper instruction since the 1980’s! How do I pick a good economics teacher if the pros can’t agree on what’s fundamental?
    Fabius Maximus replies: Yes, a nice illustration of #1 in my comment above. However, these disagreements should not overshadow the broad and deep consensus of the Neo-keynesian paradigm. They agree on far more than they disagree.

    This is similar to the technique used by Christian fundamentalists. They find areas of disagreement in phystics or biology, on the fringes of current theory, and say “See, they don’t agree, so why listen to them.” The essence of science is disagreement on the boundaries of current theory.

  3. Sorry, but saying that CA is nothing but a desert is just silly. South of the Grape Vine along I-5, sure, but the San Juaqin valley? The Sacremento Delta (some of the best rice growing land in the world)?

    Um, sorry Fabius, I know you’re really commenting on the megalopolises like LA and Orange County, but that’s just being a little too careless. And even Orange County wasn’t that bad befor 1960 (it was all orange fields and strawberry fields with plenty of water to sustain it, that is until they dammed up the Santa Ana river). YOur major point may be correct, de-salination doesn’t save LA because the problem there is the silly need for green lawns, but the particulars are a bit off.
    cheers, ry
    Fabius Maximus replies: Where did I say that “CA is nothing but a desert”? I said California “grows water-intensive crops in the desert.” That is just fact, using “desert” in the dictionary sense of “a region receiving little rain”.

  4. You’re still employing an oversimplification. So. Cal and stuff in the extremem east counts as desert, but the rest does not. The Redwood Forest, Yosemite, the Sacramento river delta, these are all fertile regions that recieve plenty of rain(heck, Davis CA turns into a mudfield from November to the end of April). Geography counts. The Central Valley is one of the most productive ag regions, and is far from a ‘desert’ or ‘region recieving little rain’—except for that whole drought thing.

    You’re ignoring that CA can be cut into three distinct geographic types(NOrth which is a lot like Oregon, Central which is a lot like Iowa, and South which is like Nevada) only of which one even remotely comes close to what you describe(So. Cal) and each have very different rain patterns.

    OC had lots of water from the Santa Ana River that fed its ag from before CA was part of the Union. Snow pack along with decent amount of rain(the mountains to the east of OC trap alot of that oceanic moisture and, hence, rain. They also trap smog, which sucks.). Desert it is not. Get east of those mountians, out into areas like Riverside or east of the 57, and, yeah, it’d be fair to call it like you have.

    Too broad a brush, homey, and not “factual” much at all. Just sayin’ that you might want to adjust your statements to reflect the reality of it: not all of CA fits your ‘area of little rainfall’ description and much of the agricultural areas(like Kern county) also do not fit that. Ag in So. Cal (parts of the state south of Paso Robles) absolutely fits that but projecting that pattern to the rest is wrong.
    Fabius Maximus replies: I do not understand why you find this grammer so difficult to understand. I do not say that all of California is desert, but that water-intensive crops are grown in desert areas of California. I could substitute “America” or “Western Hemisphere” for California; the grammer works equally well.

  5. ” I do not understand why you find this grammer so difficult to understand. ”

    I think I do.

    Real-life dialogues are ballasted with a tremendous weight of social capital. I can walk in on a university professor that I know and ask any question he will allow — but there are all kinds of limits to the questions he will allow, and I have to get to know him well before I can really talk with him. If I want to talk seriously with him, I don’t try to negotiate his social status. It will help if I have studied in this professor’s courses.

    On the internet, by contrast, anyone can wander in, regardless of whether he knows your writings, and try to re-negotiate *your* social status. There are definitely limits to what sort of questions you will take seriously, but your readers don’t quite know what those limits are. Further, most of us don’t have your educational background and don’t know where to begin if we want to reproduce your thought process. You haven’t lectured to us and tested us for comprehension. Thus we can’t converse with you as readily as I can converse with a familiar professor.
    Fabius Maximus replies: That’s brilliant!

    I am still at an early stage of learning to communicate via the Internet. Fortunately I did the first stages at other sites, leaving my mistakes elsewhere before DNI opened this site. It’s a complex, subtle medium — and we do not have the advantage of starting at age 4.

  6. Not status being discussed here. There’s been employment of a very broad brush. I’ve followed Fab from his days before he had his own site (I even rember the post where Fab declared that he didn’t have to reveal who he was because he had an outstanding track record). DAn Abbot of TDAXP turned me onto him about two years ago. Fab’s facts are somewhat wrong here is all. As writen it is not entirely correct. He was not very precise. That’s it. Not an issue of status. I’ve done the same to profs and supervisors I’ve worked for. When I know a particulat they’re using is wrong I say something but when I only think it is wrong I keep my mouth shut since when i’m only guessing I know they actually know more than I and so I’d be acting silly. That’s not the case here. I do the same every site I go to whether it be John Donovan’s Castle Argghhh!, Dan’s place, or J Sigger’s ArmchairGeneralist. It’s not about status or ego for me. In this one instance (several years of reading) I’ve said something on one point I know is wrong. It’s about facts, not ego.
    Fabius Maximus replies: Your comment has several interesting facets.

    (1) I would be interested in this if you would respond to my repeated replies. This is a not complex question, nor do I see your correction as anything other than misreading my grammar.

    (2) “I even rember the post where Fab declared that he didn’t have to reveal who he was because he had an outstanding track record.”

    If convenient, please provide a link to this. It is possible that I said this — a bad thing about the Internet is that preserves every dumb thing we type. More likely you have misstated my long-standing tag line:

    “A work of intellectual analysis stands on its own logic, supported only by the author’s track record.”

    In other words, this site attempts to avoid appeals to authority and work with just the logic, faith, and facts of the arguments. (I say “attempts” because doing so is not always practical.)

    (3) “When I know a particulat they’re using is wrong I say something”

    That is a good thing. No need to feel bashful about it. At least not on this site. Here we travel on the edge of theory and knowledge. We can only speculate about these things, and criticisms are what keeps these discussions on track. On the other hand, your comments are equally subject to criticism.

  7. “Not status being discussed here. There’s been employment of a very broad brush. … He was not very precise. That’s it. Not an issue of status. I’ve done the same to profs and supervisors I’ve worked for.”

    Ry, several points:

    1) First off, these criticisms have introduced some useful info that I didn’t know before, e.g. about the three regions of California. (Thank you for the information, by the way.) Dialectical argument is supposed to work like that, so the system is working.

    2) I did not intend to suggest that the primarily issue was hierarchy. I was trying to shed some light on the social capital required to make dialectic work. There needs to be some amount of trust and community so that dialectical arguments don’t degenerate into verbal quarrels.

    3) It’s *hard* to stay lucid on the Internet. It’s *hard* to explain one’s thought clearly and succinctly to a very diverse audience. It’s *hard* to stay patient with people who haven’t been trained to work on one’s preferred lines. It’s *easy* to get ticked off, it’s *easy* to honestly misunderstand.

    4) If you’ve got a lot of expert info that other sites don’t take the time to examine, I encourage you to sign up for a free WordPress site. You can post corrections to other folks’ work on your own site and link back to it. It’s a handy notebook for your own thoughts, and it will altruistically help folks like me.
    Fabius Maximus replies: Perhaps. Or perhaps this is just nonsense, a misunderstanding of simple grammer in order to ignore the key point being made. See my comment below.

  8. There are hundreds, perhaps thousands, of articles written over the past few decades about California’s mis-use of water, growing water-intensive crops in arid or even desert ecologies. This is the relevant point. This is under-pricing of resources, which tends to create scarcity. For example, growing rice — the most water-intensive of the major crops.

    Note the dates on these, showing for how long these problems have been understood, yet little done to address them.

    My favorite example is from the “Research can help desert growers in an era of water constraints” in the May-June 1997 issue of “California Agriculture”, U of California, “peer-reviewed research and news from the Division of Agriculture and Natural Resources”:

    Less than a century ago, only the most drought tolerant plants survived in the desert valleys of southeastern California. Annual rainfall of three inches or less supported only such denizens as creosote, mesquite, screw bean and saltbush. But diversion of Colorado River water beginning in the early 1900s transformed the landscape. A 1927 Imperial County brochure described the region as “America’s winter garden.”

    Today these valleys, along with the contiguous growing area in Arizona, make a unique contribution to the nation’s dinner tables – producing virtually the entire winter supply of head and leaf lettuces, broccoli and cauliflower.

    … Many believe desert agriculture is on the brink of economic expansion, as domestic and international markets for food and fiber grow, and prime farmland in other parts of the state succumbs to development.

    … Within California, desert growers have first priority for use of Colorado River water for agricultural purposes.

    Then there is the inevitable hand-wringing from the NY Times: “Cast as Villains in Drought, Rice Farmers Defend Water Rights” (7 April 1991).

    For more about this, see Marc Reisner’s books: Cadillac Desert: The American West and Its Disappearing Water (1986), Overtapped Oasis: Reform Or Revolution For Western Water (1990), and A Dangerous Place: California’s Unsettling Fate (2003). One indication of Reisner’s understanding about these issues: he does not demonize anyone, and appreciates the compexity of ecological and economic issues. Note this quote:

    “Irrigating pasture in California is a lot more crazy than rice,” said Reisner, a consultant for the Nature Conservancy, who now thinks limited rice growing is good for Northern California. Little else can grow well in the Sacramento Valley clay, Reisner said, and farmers made a persuasive case to him that the rice fields are good for the dwindling Central Valley winter bird migrations. “They convinced me the crop is important for water fowl,” Reisner said.

  9. Sadly, your comment thread has been hijacked to discuss something other than your main point. Speaking of water, California, the future, and debating, ahem, grammer, I would just offer, “Forget it Jake Fabius, it’s Chinatown.”

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  11. The Imperial Valley in southeast California receives less than three inches of rain a year and is, by any definition, a desert. It’s also one of the most productive agricultural regions of the world, producing by one-seventh of the nation’s vegetable supply. All of the irrigation comes from nearby Colorado River.

    When people casually talk about planting crops in the desert in California, this is the place they’re thinking about.
    Fabius Maximus replies: As per the articles cited above, the Imperial Valley is one such area. To say it is fed by the “nearby Colorado River” is a bit too simple. It is fed by the All-American Canal system, which Wikipedia says is the largest in the world. “The main canal is 82 miles (132 km) long, has a total drop of 175 feet (53 m), a width of 150 to 700 feet (210 m) and a depth of 7 to 50 feet (15 m).”

    Also part of the Southern Calf ecology, since the farmers get the water from the A-A Canal, the cities rely on water lifted through the mountains by the Colorado River Aqueduct (powered, I believe, by Hoover Dam).

  12. Fifty cents a ton, delivered to your home, day or night, guarenteed free of germs or pollutants. That’s what most municipal water supplies charge.

    Put it that way and you are quite right, water is underpriced.

    I was involved in city politics in a small California Central Coast town (San Luis Obispo). We wanted to raise our dam on the headwaters of the Salinas River by about 6 feet to have a bit more reserve for droughts. The farmers downstream of the dam came out in force, arguing that, even though we had a pre-existing legal right to the water, we shouldn’t raise the dam.

    Their argument was that they needed to continue to grow alfafa and the pumping costs for irrigation were going up because the water table was shrinking. Alfafa? With irrigated water? I had to ask, was that the best economic return on a scarce public resource?
    Fabius Maximus replies: I suspect your first line was intended as sarcasm. If so, it was a bit misplaced. When folks speak of underpricing water, they usually mean heavily subsidized water for agriculture or unmetered urban water.

  13. The main sea change is driven by the interplay between water and energy intrinsic costs. It takes energy to build big water capital projects, and to move water through these systems, like the California central canal. Rising energy costs are increasing the value of our installed base of capital assets like dams, viaducts, and so on. Those with access to water allocation by rights receive a windfall in the form of below market rents on these assets. Water is cheap in Bakersfield, Ca. but you can’t have any. It’s 100% allocated. What would it cost to build a second central valley canal? What rate for water would fund it’s construction? You don’t want to think about it.

  14. “Speaking of water, California, the future, and debating, ahem, grammer, I would just offer, “Forget it Fabius, it’s Chinatown.””

    In Red China, the Chinese have been telling each other to disregard water supply problems, and as a result the dust is so thick in Beijing that the residents can scarcely breathe.

    Therefore, saying, “Forget it, it’s Chinatown” is a strictly short-term solution guaranteed to produce bigger long-term problems.

    Also, I’ll take responsibility for the thread-jacking, but the issues of — (1) how to properly debate on this site and (2) which generalizations are overly broad — will have to be hammered out one way or another.

    When Fabius says, “News reporter X is ignorant of basic economics” he is effectively hanging out a shingle and offering free courses in basic economics. Most of his readers have different ideas of how to behave in class.
    Fabius Maximus replies: I do not consider you to have hijacked this thread, nor to have said anything inappropriate. On this site folks post comments, and everyone makes up their own mind. There is no judge, no jury, since most of these discussions take place on the edge of known data and theory.

    All I ask is the comments be brief, on topic, and courteous.

  15. Pingback: Fortinbras :: There is no “peak water” crisis « Fabius Maximus :: June :: 2008

  16. “…unmetered urban water.”

    Depends where. In Sacramento, we’re at the confluence of two rivers. The city was sited here because of that fact. In the city charter, non-metering was enshrined. We pull from the river, the outflow returns to the river, minus used water (people and plants). Then So.Cal weenies whine that during droughts, they don’t have enough water (build some of you own empoundments, ya f’in a-holes, and quit trying to build over/golfscape every square inch). Funny, SoCal pools stay full and SoCal lawns appear green. Politic of envy, yet again. So now, at considerable cost, we’re getting meters. How f’in wonderful. California est in tres partes, and the southern partes suck-a-roos.
    Fabius Maximus replies: Great point! These issues are complex, esp. allocating resources across regions. Water, being reusable (as you note), requires extreme care in the analysis. Which was the original point of the post, lost somewhat (as so often the case) in the comments.

    For more on this — analysis with little use of either economics or ecology — see “Capital gushes wasted water”, Sacramento Bee (19 June 2008) — “Metropolitan region’s per-capita use tops U.S. daily average as conservation pledges go unmet.” Great graphs.

  17. No sarcasm intended. Is there another commodity purchased and delivered at so low a cost?

    My example was in support of your argument – growing alfafa with irrigated water when residences, industry, education, and commerce have better uses strikes me as an economic absurdity.
    Fabius Maximus replies: Thanks! Those are both important things to remember.

  18. Fab, I didn’t speak to the major point much because I believed it correct. This is from my initial comment: “Your major point may be correct, de-salination doesn’t save LA because the problem there is the silly need for green lawns, but the particulars are a bit off.” What more can you want than this? Your major point is correct but some particulars are wrong?

    I agreed with your major point. From what I’ve seen you’re right. People who live in OC, LA, and San Diego regions live almost entirely on the Colorado/American river water piped in and what they do will not be improved by adding desalination to the mix. But, given how the American river would naturally flood along I-80 anyway (there’s a reason why the built The Levy with the freeway going over it) what’s the hassle over allowing it to anyway (well, the ranchers down the line get pissed because that means less for them to water their pastures with, but, hey, you see my point, no?).

    The Pat Brown (aka All American, since it uses water from both the American river, major place for watersports in the Sacto area, and rather a brown looking river, as well as stuff from the Colorado) Aquaduct runs parrallel to I-5 for much of its length. I know about it from my days hauling frieght before I went to UC Davis for my chem degrees. I’m not a climatologist. I’m just giving you stuff any chucklehead who actually traveled over the terrain can tell you from direct observation.

    Again, keep in mind that in my first comment I agreed with the major thrust but said some of the particulars were off. I wasn’t involved in a total tear down of the argument. Fab could’ve gone with the examples of Oklahoma and Texas blowing thru the ground water there to sustain ag in those regions as well. It’s just that Fab got some minor stuff wrong and I was bringing it to his attention. I never intended it as adversarial interaction nor an argument about grammer. I thought that having more accurate info could only improve the strength of the argument presented.

    And the “i don’t have to reveal myself’ was something back at DNI. I didn’t bring it up to mply arrogance or anything negative. Just bringing it up to show that, yes, I’ve read for a while. Just didn’t think what was offered as constructive crit would be so….contentious.

    @Harvard at Cal, right. Next time there’s a bubble up in the NoCAl economy don’t come crying to us SoCal folks for more tax dollars to help y’all out with unemployment benefits and stuff then, ‘kay? Sigh. I grew so tired of the NoCal/SoCal thing while at Davis. So silly, and useless. Yeah, the people in Irvine (and other gated communities) who have Olympic sized pools and enormousm manicured lawns are silly. So? They’re less than 10% of the pop in SoCal. That’s like saying that 5k people in jail on the diff between crack v powder cocain thing is busting the budget of the national penal system. It’s a problem, but not the main one. The main problem for So. Cal is population. Too many people live where there’s not enough water to handle them all (sorta like Vegas or Phoenix). But So. Cal is such a huge economic engine that nobody has dared, yet, to raise the cost of water there to what it should be since that’d cut on econ growth. Look at the amount of cargo that goes thru Long Beach and Los Angeles harbors, and realize that the workers for those harbors live in all those suburbs subsisting on subsidized water. Also, look at all the other economic activity. How’re you going to cut down on growth without causing the state econ to go tits up? Right, we’ll fund everything off of what’s made in Silicon Valley and Bio-tech Alley.

    Fab’s right on that the water there is a serious problem. Yet, there’s not a simple solution to the SoCal problem. His major point is 100% correct since undervaluing water across the nation means we aren’t paying true value for ag products. But carping on SoCal is something one would expect from the idjits from ‘The City’ isn’t it? (You know I’m kidding, right?)
    Fabius Maximus replies: You raise an interesting point — is urban water use heavily subsidized? Some captial projects were not funded by the users (e.g., Hoover Dam), which is a common public policy for infrastructure in the US. Other than that, I though that urban users in the US — even So. Calif — more or less paid their own way. And it was ag water use that received the big subsidies.

    The US is so large, there are probably special situations in many places. But is this generally correct?

  19. A couple of comments.

    First, in the water resources management and water economics literature the relationship between pricing and demand has long been acknowledged and identified as a key part of any effective solution to the water scarcity in many regions of the world. The underlying principles/arguments for using economic incentives and disincentives for managing water were laid out in the 60s and 70s by researchers such as Gilbert F. White in the US or Donald Tate in Canada. These conclusions were echoed in the work done by Bruce Mitchell, Steven Renzetti and others in the 1980s and 1990s. The sad part is that the issue keeps getting rediscovered every 5-10 years.

    Second, California in a number of instances, to be an innovator in the water resources field. For example, California was one of the first regions to implement a water markets. While the California market suffers from a number of structural issues, such as high transaction costs, it does represent an innovative response to scarcity. The markets were created as a mechanism to facilitate the transfer of water from Ag to higher-value urban uses. Agric, specifically, irrigation is the largest water user in the world, as well as being the largest in the US and, more specifically, California.

    Third, the common criticism used against pricing water is it will hurt the poor, which for many reasons is wrong! There are a host of tools available for protecting the poor. If you are looking for innovative uses of economic instruments in urban water use, Chile issues water coupons to families on social assistance. The coupon approach, allows the poor access to basic minimum needs, while providing the utility the option to charge for access on a cost-recovery basis.

    Fourth, I would challenge your comment that China may be rich enough to deal with its water scarcity challenges. It isn’t rich enough, especially given that their standard approach to the problem is to build more infrastructure to either divert/reclaim/mine its existing water resources base. I worked in China for 7 years on water resources issues, they don’t have the $$s nor the political will to fix the problem, hence the reason it gets worse. I use to visit Shanghai 4-5 times a year and with each passing year the tap water quality declined. This decline is occuring even in light of the billions of dollars that are being poured into the City’s water supply infrastructure by the Government, as well as the World Bank, Asian Development Bank, and the private sector.

    Building more infrastructure will not solve the problem, a far more painful, structural solution is needed which will include charging a full-cost price for water use. Full-cost in this instance means including costs associated with residents and industry using waterbodies to treat their waste.

    Enough of my ramblings…
    Fabius Maximus replies: I agree on all points. Note I was referring to the poplular media — not the expert literature on resources management.

    I do not see why you believe that China does not have the resources to build adequate water infrastructure. Ignoring their large domestic savings, their foreign exchange reserves total almost $2 trillion — compared with their annual GDP of roughly $3.5 trillion. Also, an economy growing at 10%/year with high savings rates generates cash flow sufficient to build immense amounts of infrastructure. {These numbers illustrate the extent of their resources, but are not like bank balances spendable tomorrow}

  20. The important thing is not to follow Australia, use us as an example of what NOT to do. S.E. Oz (where the majority of the population live) is marginal water wise, with very erratic drought/dry cycles. After 10 years of drought (longer in some parts) the major river system in the country, along which 40-50% of all our food is grown, through irrigation, is collapsing.

    There is enough water, just how it is used or misused. The problems, as usual, have taken decades to create, under pricing (more often free!), under investment, no monitoring (until very recently) of the total system, hence no managment. The river crosses State boundries so they bicker between themselves and the Federal Govt does nothing.

    Result, total misuse. Huge cotton farms, rice growing .. in the driest nation on Earth?

    Current result, the whole system is collapsing, fruit tree growers are bulldozing their trees as they now have no water allocations at all. Scientists warning that we, literally, have only 6 months to do something (headline news here a week ago).

    The issue is not water, it is as always, proper management of a (in our case) very scarce resource. Make something free and it will be misused. Price it properly and put in the right structure to manage the whole system and you have a continuing asset forever. The US and China have similar problems to us (and similar reasons), and we are just about to show you why you have to get your act together. You have time, it has just ran out for us.
    Fabius Maximus replies: Thanks for the view from down under. This is a great example of what I discussed in this post. Do you have recommendations for places to look for reports about this?

    Here is some background information:
    * Here is a 30 page superlative summary of Australia’s water resources and challenges:
    * Australian Water Resources 2005 is the baseline assessment of Australia ‘s water resources in 2004/2005 (the first year of the National Water Initiative), done by the National Water Commission of the Australian Government:
    * Key Findings
    * “Water use – 2004-05” — Note the charts on the bottom showing the use of irrigrated water by various crops.

  21. I agree that China does, based on a number of indicators, appear to have a lot of wealth. Those numbers are deceiving. For example, a recent reassessment of poverty alleviation in China by the World Bank concluded that there were still 80-100 million people living on less than $1 day, a number which more than doubles if you increase the poverty measure to $2 day to account for individuals and families that are at greatest risk to slipping back into poverty as a result of . Add to this, another recent publication, I believe by the World Bank, also suggested that the Gini Coefficient for China was close to, if not surpassing that of the U.S.

    Without shifting this conversation into an analysis of the very substantial challenges that the Chinese face (economic, social, environmental), they don’t have enough $$s to address many of the critical problems that presently confront the country. Within that context, the environmental/natural resources challenges that face the country, outside of securing sufficient inputs for domestic industry, typically rank at the bottom of the list of priorities when it comes to allocating capital (investment and political).

    China’s water resources management problem, which has a certain apocalyptic quality (e.g. the Yellow River does not reach the sea most years; and, the Hai River at its mouth is unfit for any type of consumption, hence the marine dead zone that surrounds Tianjin), will require a fundamental restructuring of water use. It isn’t just about China building more infrastructure, it is about a reallocation between sectors (agric. to urban) which would result in a traumatic and potentially dangerous (from the CPP’s perspective) dislocation of rural residents. In the Hai River Basin (which includes Beijing and Tianjin), reallocating water from agric to urban uses in any meaningful way will result in millions of farmers being forced off the land, further adding to an already unwieldly and potentially destabilizing urban migrant population.

  22. Update: Another article about the “water wars” myth

    The Water-War Myth“, Jack Shafer, Slate, 2 April 2009 — “Spike those stories about water disputes leading to armed combat.” Excerpt:

    Water scarcity in the region results in “conflict and tension,” Barnaby adds, but the Israeli and the Palestinian officials have successfully used a committee (controlled by the Israelis) to peacefully resolve problems. In other places where competition for water should theoretically escalate into violence, Barnaby finds similar resolution. Egypt has become more fluid in its relations with its water neighbors because it wants to improve the climate for trade. Similarly, India and Pakistan, which war with each other with the same frequency that other nations exchange sister cities, have so far used a World Bank-arbitrated treaty to make water peace.

    Barnaby wanted to revise the thesis for her water book, but her publisher pointed out that “predicting an absence of war over water would not sell” many copies. So she bagged the idea.

    Despite Barnaby’s findings, other writers sense water wars in the making.

    * The March 31 issue of The Nation includes a feature titled “Blue Gold: Have the Next Resource Wars Begun?” that cites a report (PDF) by the British nonprofit International Alert that names 46 countries “where water and climate stress could ignite violent conflict by 2025” and quotes U.N. Secretary-General Ban Ki-moon as saying, “The consequences for humanity are grave. Water scarcity threatens economic and social gains and is a potent fuel for wars and conflict.”

    * Last month, a new U.N. water study about water scarcity warning of “a global water crisis … leading to political insecurity at various levels” prompted ominous coverage around the world (the Independent, the Sydney Morning Herald, the Bangkok Post, Bloomberg News, AFP, and elsewhere).

    None of my skepticism should imply that I think everybody everywhere has all the clean, cheap water they need. Water, like all resources, is scarce, and I accept that scarcity can cause conflict. But before anyone starts frightening themselves about impending water wars, they might want to consider Barnaby’s observation that in the last five decades there have been no “formal declarations of war over water.”

    Although Israel has fought wars with Egypt and Jordan, Barnaby notes, it has never fought one over water, and “more ‘virtual’ water flows into the Middle East each year embedded in grain than flows down the Nile to Egyptian farmers.”

  23. Is war the only criterion that matters ?
    I’ve always wondered how deserts ever supported the cities of which the ruins remain. An ( Iranian ) pal at college years back told me the problem was the windspread of sand .
    And I read that in irrigated areas , such as Murray River area ,unexpected problems arising with mineral balance of the soil .

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