Is "Sustainable Growth" an oxymoron?

WEH sent this opinion:

In economics you can certainly put “growth” and “development” in the same sentence. However, growth and development have recently acquired a partner term: sustainability.

"Sustainability" is about as fuzzy defined as the term “fair” (more on "fair"). Sustainable and sustainability sure seem like political words and not so much economics. Even BP was called sustainable.

A couple items come to mind:

1. growth first and development coming second seems to be the regular route,
   
   
2. occasionally you see growth and development together,
   
   
3. rare is development put first and growth comes second.

Growth can run a muck and development gets side tracked and sometimes growth can occur and no development occurs. However, it really boils down to having the money first (growth) so you can finance the development.

Enter sustainable and sustainability. Its not long term growth or long term development, rather its “sustainable” or “sustainability”. Sustainable and sustainability being based on the notion of some centrally planned management makes the subject at hand sustainable.

The terms sustainable and sustainability seem to morph (political) into the base subjects of growth and development. That is, sustainable and sustainability suddenly trump growth and development. Or, alternatively, sustainable and sustainability becomes the study and growth and development become the sub-topics.

The use of the terms sustainable and sustainability, as overarching terms to explain the organization of a current economic system’s growth and development characteristics, although “fuzzy” in its meaning and deployment, appears to come with the implicit assumption of nonviable and/or sectors within an economic system are not viable. The implicit assumption is that viability/sustainability is only possible with central planned management.

However, is viability/sustainability better explained by Schumpeter's "creative destruction"? That it's not so much viability or sustainability as it is: what comes next. That what is viable/sustainable today gets replaced by a more viable item/idea/model/firm, etc. Were oil lamps viable? Was Woolworth viable? Were stagecoaches viable?

Where does this implicit assumption, of nonviable or unsustainable without centrally planned management, come from? What makes those using the term “sustainable” also rely on central planning to make the item/subject “sustainable”? Likely it comes from the failure to see free people making free decisions in a free market place. Free people making free decisions, generally based on self interest, looks like chaos to the casual outside observer. However, the chaos is really efficiency when organized around an economy based on price. Price allows the self interested decisions to exchange at price when all parties believe that exchange should occur as all parties see a benefit. The seeming chaos of the free market makes the casual outside observer nervous. Chaos needs managed. That chaos needs organized and planned. However, the chaos is really self interested decisions that become highly organized around “price”.

Hence the main features of “sustainable” is the replacement of the free market phenomena of growth and development with the centrally planned management of growth and development. That, for instance, a resource can not be sustainable without central planning or else the resource becomes unsustainable very quickly. That the price of the resource will sky rocket and the supply will run out quickly with out central planning. Of course the question then arises that exactly who has the “special knowledge” to centrally plan? That some special knowledge exists that can replace the zillions of self interest-self directed mundane knowledge decisions occurring in the market each day?

Moreover, the idea that special knowledge exists, that can create central planning, that reduces price and extends supply makes no sense given the following:

1. sustainable gets used in a way that means the low hanging fruit of a particular resource has been plucked and hence the remaining resource gets more difficult to find and more expensive to produce.
   
   
2. however, for example, oil that was easily accessible in the 1930's-1950's,
   
   
3. extraction costs of the low hanging fruit was actually more expensive, in real terms, then the current extraction costs today when deposits are no longer considered low hanging fruit (cost per unit has fallen even though deposit are more difficult to extract than 1930-1950). Meanwhile supply has expanded at lower real costs,
   
   
4. the same is true with natural gas, coal, and many other resources. Technology, driving Schumpeter's "creative destruction", has outpaced more difficult extractions situations and real costs of extraction have fallen. Viability and sustainability increased at a lower real cost yet no centrally planned management system was deployed.

If people demand and value an item it will be supplied. That the current particular supply may well end up experiencing Schumpeter's creative destruction. That costs will be driven down. That supply will cost less and less until the supply is replaced by a more viable supply through market forces. That is, peat bogs, wood burning, oil lamps, and candles were all viable but where eventually replaced or reduced as other items became viable and available at which time the replacement supply became demanded for its value.

Speed blogging

• Internal messy politics and corruption bad judgment at a water agency.
  
  
• The Pacific Institute – what a bunch of posers! (Funny and VERY perceptive)
  
  
• A tale of overregulation, wasted time and woe in San Diego. After 6,000 water wasting complaints, one person is fined $100, and it goes downhill from there...
  
  
• Evian spring water is NOT named for Naive spelled backwards.
  
  
• Lloyd Carter and Aquadoc on shipping California's "virtual water" overseas. Speaking of that, a rant on Westlands' continuing theft of water from California's wild North Coast.
  
  
• Texans use 58% more water in summer (lawns!). Btw, Dallas residents use 240 gallons/capita/day (gcd). Other cities are better: Austin (170 gcd), Houston (140 gcd) and San Antonio (120 gcd). Compare those numbers to San Francisco*, the Peninsula south of San Francisco [pdf] (85 gcd), and Las Vegas (260 gcd). (According to DWR, California coastal cities use about 100 gcd, inland areas use about 175 gcd, Imperial Valley residents use about 250 gcd.) Read more about water use in Texas -- and how pricing and conservation can affect them -- here.

Hattips to JH and PR

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* WTF? I cannot find residential gcd for San Francisco! Just lots of pages on toilet rebates. Any help?

I'm off to Burning Man

Burning Man is an experimental community (this year's theme is "metropolis") in the desert with lots of art, music, drugs and sex -- but NOT water. It's also a place where only gifting, not exchange, is allowed. Although most people prepare to be self-reliant (Burning Man is NOT sustainable), gifting adds a wonderful spin to everyday interactions.

The main exceptions to this are the sales of ice and coffee, which upsets some people. This essay by Larry Harvey (founder of Burning Man) gives an interesting perspective on coffee sales:

Some critics of the Burning Man Project insist that by allowing coffee sales in our city’s Center Camp Cafe we violate a tenet of our non-commercial ideology... My reply is that we’ve never espoused a non-commercial ideology. To be against commerce is to oppose the very existence of civilized life. Even hunter-gatherers engage in trade in order to survive.

When most people say that any thing or act is too commercial or has been commercialized, very few of them mean to say that the practice of commerce is necessarily bad. Instead, they are expressing the feeling that something essential -- something that should never be bought and sold -- has been commodified. This is why we have always been careful to use the words commodify and decommodify.

Our annual event in the desert is meant to provide an example what can happen in a community when social interactions cease to be mediated by a marketplace. Until quite recently, all societies have provided many different kinds of rites and rituals – set apart from daily life – that rehearse and reaffirm certain core spiritual experiences that are held to possess an unconditional value.

[Keep reading]

I'll be back in a week, but the blog -- like any good zombie -- will keep posting

Photo Contest -- The Photos

We had some great entries. There are 7 photos below the fold.

Vote for the one you prefer on the right sidebar.

Voting ends in 2 weeks, and you only get to vote once!

The photographers wrote the captions. I wrote some of the titles.

Note that you can see a bigger version of the photo by clicking on it.

Read more....

Poll Results -- Tradeoffs

The next poll is for the photo contest; see the post above...

I like government-run parks, and I am willing to fund (choose 1+) of these programs to keep them.
roads	38 votes
defence	16 votes
postal service	36 votes
agricultural programs	13 votes
oil and minerals exploration	7 votes

This poll was motivated by a memory of a conversation I had with a PhD economist a few years back. He said "I'm willing to pay for roads because I get parks as part of the package."

Let's take a look at the cost-benefit of that calculation using actual 2009 federal spending [1]:

National Park Service (Dept of Interior): $2.6 billion.

Roads (Dept of Transportation): $50 billion = 20x NPS.

Depts of Defense/Homeland Security: $688 billion = 265x NPS [2].

Postal Service: $3.8 billion = 1.5x NPS [3].

Agricultural Programs: $43 billion = 16.5x NPS [4].

Oil and Minerals Exploration Dept of Energy = $24 billion = 9x NPS [5].

From these examples, you may see the "opportunity cost" of your NPS.

Bottom Line: Government is not about trade-offs. The government should do some useful things without wasting our money on programs that can be done elsewhere or should not be done at all.

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[1] Yes, I left off State parks. Sorry.
[2] That doesn't include intelligence spending, which is secret.
[3] The USPS is supposedly self-sustaining. It lost this much in 2009; see page 71 of this PDF.
[4] Excluding food stamps.
[5] That was a silly choice for the poll. The Minerals Management Service and the Office of Surface Mining have a total budget of $320 million. The US coal industry produced 1,170 million short tons worth $31/ton in 2008; the domestic oil industry produced about 2 billion barrels in 2009, worth about $60/bbl. Total revenues (ignoring natural gas, which is about 10-20% of oil) were therefore in the range of $155 billion, or 485x the budgets of MMS and OSM.

Takings in the Central Valley

Central valley farmers (Wolfsen et al.) have sued the US government for taking their water and land for environmental restoration ("an inverse condemnation").

Here's the 27 page brief [pdf].

(The Fresno Bee has three paragraphs on the suit. Budget cuts in the editorial office?)

Under the Fifth Amendment, they are entitled to "fair" compensation if they win.

But what's fair? The value they claim, the amount they paid for water, or their property tax assessment?

And I wonder if they'd take the money in exchange for their land.

Monday funnies

via LC, we get this wisdom from an Arizona water attorney.* (I love VIII, of course, but VII is a close second!)

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[Note: I am a water attorney. Years ago I was asked to give a speech summarzing Western water law to a group of non-lawyers. This was the result....]

Introduction: It does not take a law degree to understand water law and policy in the western United States. Ten basic legal and historical principles govern the rights to and uses of water in the West. By understanding these ten Water Laws of the West anyone can then understand the current issues of water and its relationship to the future of the West.

I. The Law of Gravity: The First Water Law of the West is the Law of Gravity. Water runs down hill. The initial uses of water in the West involved the use of gravity to tap rivers and divert their flows into canals for delivery to farms and mines. This is also known as Newton’s Law.

II. The Law of Los Angeles: The Second Water Law of the West is the original law of Los Angeles. This L.A. Law states that “water runs uphill to money“. The development of energy technologies to lift water against the pull of gravity is the basis for modern Western civilization. Los Angeles pioneered the effort to defy gravity with money in the early 1900′s with its Owens Valley Aqueduct.** Southern California is now served with a network of pipelines and canals such as the Metropolitan Water District’s Colorado River Aqueduct. Phoenix, Tucson, San Francisco and Denver also utilize massive pumping and diversion systems to transport water from great distances in defiance of gravity to serve their growing urban populations.

III. The Law of Supply Creating Demand: The Third Water Law of the West, also invented by Los Angeles, is that “if you don’t have the water, you won’t need it.” This is sometimes stated as “he who brings the water brings the people”. Both are attributed to William Mulholland, a pioneer director of the Los Angeles Department of Water & Power (DWP). Los Angeles and other Western cities operate on the premise that in order to assure growth of their cities, water supplies for the future must be developed well in advance of that growth. This is in contrast to the general approach in Western cities of developing freeways and other public infrastructure long after the growth has actually happened.

IV. The Law of I Got It First: The Fourth Water Law of the West, embodied in the West’s surface water laws, is the doctrine of “prior appropriation” translated into “first in time is first in right”. First in time for most water uses in the West were farms and mines. Instead of “first in time is first in right”, we have seen the evolution of “we’ve got more votes than you in the state legislature” to decide who gets water.

V. The Law of Beneficial Use: The Fifth Water law of the West is that to have a right to water it must be “beneficially” or “reasonably” used on that appurtenant land. This is only understood in the context that water left flowing in a river maintaining the survival of fish in that river and vegetation growing along side that river was not originally defined as a “beneficial” use in Western water law, whereas drowning gophers or growing rice in deserts were deemed “beneficial” uses. In recent years, environmentalists have succeeded in gaining recognition of “instream” beneficial uses of water and a new category of water rights is beginning to emerge to preserve flows in rivers. However this process is emerging only after most rivers and streams in the West have been dammed and dried up by diversions of the flows to the previously established beneficial uses. To fully appreciate why this happened, it must be remembered that the fish in these streams only recently were able to obtain the services of water lawyers via various environmental and conservation organizations.

VI. The Law of Worthless Land: The Sixth Water Law of the West is that without a water right or access to water, land is worthless. There is not enough water available to use all available land for all the potential beneficial uses. Thus lands with water rights or access to water have value for use, whereas land without water rights is known as the desert, with zero value except when being subjected to state and local property taxation. It is also a historic fact that farmers, ranchers and miners figured all this out about a hundred years before the average city council or environmental group, thus most Western water laws are heavily weighted in favor of using water for farming, ranching and mining. This law is also known as the “appurtenancy” rule meaning the rights to the use of water are tied to specific parcels of land, which are usually owned by farmers, ranchers or miners.

VII. The Law of Expropriation: The Seventh Water Law of the West focuses on how water (and other natural resources) are obtained for Western civilization. This Law depends on finding some fairly impoverished and unsophisticated water right holder (usually Indians, farmers, or rural communities) on the other side of the mountain a city can steal water rights from. Los Angeles pioneered this approach by buying up the Owens Valley on the east slope of the Sierra Nevada for water rights nearly 100 years ago. What we are now experiencing is not so much a water shortage, but a shortage of people on the other sides of the mountains who are willing to let their water resources be stolen from them by cities. “We didn’t run out of water,” said a city official, “we ran out of dummies we could steal water from”.

VIII. The Law of the Price is Right: The Eighth Water Law of the West is that there is no water shortage if the price is right. It is widely believed in city halls that the farmers will sell their water rights if the price is high enough so the farmers can go raise martinis in La Jolla instead of cotton in the Salt River Valley of Arizona, or the Imperial Valley in California. Thus when someone asks “is there enough water for Los Angeles or Phoenix or Tucson  to grow?” the answer is probably yes–if you don’t care about how much the water will cost.

IX. The Law of Water Monopoly: The Ninth Water Law of the West is that water management in an arid environment almost always results in the creation of a water monopoly. Thus (along with the discovery of fire and religion) the first steps towards civilization included the construction of irrigation ditches and the immediate creation of some sort of bureaucracy to run the system. Not surprisingly where irrigation water monopoly civilizations rose, they lasted for thousands of years. The Westlands Irrigation District in the Central Valley of California and the Salt River Project in Arizona are merely the modern counterparts of one of humankind’s most ancient of institutions–the water monopoly. Many western urban areas figured out the value of water monopoly and created enormously powerful regional agencies such as the Metropolitan Water District of Southern California and the Central Arizona Water Conservation District in Arizona, to do essentially the same thing–building vast networks of canals to bring water to their constituents.

X. The Law of Vanishing Civilizations: The Tenth (or Last) Water Law of the West should be called the Hohokam Law of Water and Gravity. Under this law, if there is no rain, there is no water to flow down hill. What went up–the buildings and the civilization–may crumble to dust if Mother Nature decides to hold a long drought. Lying beneath the streets of Phoenix and downtown Tucson are the ruins of ancient Hohokam Indian cities that vanished prior to 1400 AD. Phoenix is the second city to be built on the same site in reliance on the erratic flows of the Salt River. When there are curtailments of water deliveries to Los Angeles due to drought many Southern Californians had been heard to ask “what do you mean this used to be a desert?”

Conclusion: The principles that govern Western water law and policy have a long and somewhat distinguished history. It should also be noted that similar arid environment ditch-dependent civilizations ultimately collapsed under extreme environmental stresses, internal political conflict, and invasion by barbarian hordes. This is worth contemplating during a drought with various water interests fighting over who will get water in times of future shortages while the streets of Santa Monica or Scottsdale  or Tucson are filled with RVs with New Jersey license plates.

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* Who gave his permission for me to repost it in full. Always check with a lawyer :)
** This is not true, as the LAA flows downhill, generating power. That, ironically, led to the push for a Colorado River Aqueduct that would bring POWER -- not water -- to LA. See sections 3.1 and 3.2 of my dissertation on MWD of SoCal.

Privatization update

Novato (Marin Co, N. Cal) voters approved a contract with Veolia, with 50.6 percent in favor, and Indianapolis voted to privatize its water operations, in exchange for $1.9 billion. I predict more of these deals.

To wit, the City of San Jose is thinking of selling its water system. The obvious candidate is the San Jose Water Company, an investor owned utility (IOU) that operates next door. The deal hinges on price.

What about the bad companies? A student won an award for a paper [PDF] that uses stock market data to predict which IOUs will fail. It's good news is that they can fail; municipal water utilities can't, and their customers suffer. Why?

Here's one reason:

In Kenya, for example, there are 20 million mobile phone connections, but just 12 million Kenyans have access to piped water (and this access is delivered via fewer than 500,000 utility connections). Most strikingly, Kenyans spend on average 16.7% of their personal income on mobile telephony, compared to around 1% for water services.

There are other reasons for this discrepancy: the mobile phone companies have hungry capitalists behind them, whereas the water sector is ruled by politicians and NGOs.

But are there exceptions?

Parisians praise themselves for re-municipalizing their water supply from IOUs. Good news -- they can reinvest "wasted" profits. Bad news -- they are reinvesting them in "solidarity" projects with struggling water agencies in other parts of the world. I agree that the IOUs may have inflated costs by subcontracting to expensive sister companies, but I disagree that re-municipalization is the only solution for this practice. I'm MORE interested in the long-term performance of this system, where operators/regulator/owners pledge no price increases for five years (underinvestment, anyone?) and have lots of ways of investing "for the public."

Bottom Line: Privatization will advance when companies provide the same (or better) service at a lower cost.

Hattips to RB, JG and BP

Flashback: 23 -- 29 Aug

These were relevant a year ago -- and still are...

Anarchy! in Amsterdam! -- the Dutch piss off Bill O'Reilly with their goddam truth (Yes on Prop 19!).

BEST: First Lecture for EEP 100 -- that's the class I taught at UC Berkeley last fall. You can watch the entire series of lectures on Environmental Economics and Policy on YouTube. Start here. (BTW, my students loved my spontaneous style but hated my disorganization; I see that they've yet to master tradeoffs :)

DWR as a Fail Organization -- is it good that Lester Snow got bumped upstairs from DWR? Now he's in charge of ALL California resources!

Boldly (Wrong) Politicians -- glad to see that Poizner is out. Cogdill is still around.

Economic Laws of Scientific Research -- not all public goods need public funding, but then we also get The Backwardness of the Social Sciences.

Westlands Owns NASA -- or is it "WWD owns DiFi and DiFi owns NASA"?

BEST: A Few (More) Thoughts on Health Care -- the Congress shoulda listened to me instead of lobbyists.

Central American travel

As many of you know, Anne and I went to Central America for seven weeks during June and July.

Before we left, I asked you to vote on where we should spend our time. We managed to follow your recommendation for one country (Panama). The figure below compared suggested shares of time vs actual [awesome, very fun] days.

Of course, most of you don't care about how much time we spent. You want photos.

Here's a favorite from Granada, Nicaragua:

There are 400 more, so set aside time to enjoy Honduras, Nicaragua, Costa Rica and Panama.

This kinda BS stops water markets

In this paper [pdf] two academics claim that farmers cannot afford to use markets for water because the price required to balance supply and demand would be too high for the farmers to make money.

Besides the basic flaw in this logic (shortages are good for farmers?), there is the other flaw -- that prices would rise to the VALUE of water before quantity demanded fell to equal supply -- so that farmers "lose money."

This is just wrong.

All that's required is that prices rise high enough to choke demand. It's nearly certain that the price will be below value.

In fact, this figure from paper illustrates where price has to go, both to end shortage and cover system costs: somewhere above O&M costs and below value. Yes, the price is way above what they are paying, but that price is WAY too low.

How would they set the price to balance supply and demand? How about All-in-Auctions?

Bottom Line: All academics have biases; some have biases that defy common sense.