Aguanomics

Water by day or water by night?

dzetland@gmail.com (David Zetland) — Sun, 08 Nov 2009 21:22:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Gilberto Villicana says:

Why is it better to water your lawn early in the morning or at night versus doing it in the middle of the day? I have always walked around campus and asked myself when do all the plants and lawns get watered. I have to go to work at seven in the morning at times and find the grass wet, but I always used to think that it was due to mist or fog. Not knowing when the lawns were watered made me believe that it was done at night.

The reason that it is done at night is because there is no sun to dry up the water. What that does is allow the water to penetrate farther into the dirt reaching the roots of the grass better. This allows the grass to absorb more water, which makes it look better by being nice and green. It also has to do with the amount of water that would be used.

If we were to water the lawns in the middle of the day, the sun would dry up some of the water and not allow it to penetrate the dirt as much. Due to the sun, it would be more costly to water during the day because a lot more water would be needed in order to get the same results as if we were to water the lawns at night. There are also social benefits to watering the lawns at night because people actually go read or eat on the lawns. If the sprinklers were on during the day, people would not be able to sit on the grass because it would be wet.

Bottom line: It is less costly to water lawns at night and also allows people to sit outside and enjoy the nice weather.

Worldwide Decline in Fisheries

dzetland@gmail.com (David Zetland) — Sun, 08 Nov 2009 18:07:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Ben Rego says:

Recently in the San Francisco chronicle I read a story about how more and more dead seals were turning up on beaches around the bay. The article went on to say how the seals are starving because of the decline in fisheries around the Bay Area. The decline in fisheries has been talked about for some time now. The largest catch on record was 86 million tons in 1989 but since then it has been two long decades of declining catch yields.

Scientists in Nature magazine estimate that over 90% of the worlds predatory fish are gone and that the sea will crash by 2048 assuming no change in practices. In the United States alone one quarter of the fisheries are overfished with another quarter experiencing overfishing. The impending collapse of domestic fisheries would have a devastating effect on our economy and economies worldwide. In the early 1990s New England's cod fishery collapsed which caused 20,000 jobs to be lost. In 1992 a Canadian fishery collapsed causing 40,000 people to lose their jobs and destroying the marine ecosystem in that region.

This problem is fixable though. With minimal regulations on catching only the maximum sustainable yield we will be able to fish what we need and since fishermen maintain high profits despite lower stock abundance no jobs will be lost by catching less.

Bottom Line: Fishery collapse is very real and if better regulations aren’t set up to prevent them from collapsing then thousands will lose their jobs not to mention a major food source will disappear.

If you want to know more about the decline of fisheries worldwide here is an interesting pdf to read that gives a good overview. It’s a little dense though.
DZ's Note: The Economist on governments paying for over-fishing.

Emily Green's Week That Was....

dzetland@gmail.com (David Zetland) — Sun, 08 Nov 2009 18:03:00 +0000

...demonstrates the NON-achievement in California's Legislature.

Read it.

People really like flying

dzetland@gmail.com (David Zetland) — Sun, 08 Nov 2009 11:55:00 +0000

via FCRN:

Research carried out at Loughborough University that found most people would rather try to cut energy use in their homes than give up air travel. In fact, less than one in five people are prepared to fly less to reduce their carbon footprint and that people are flying further and more frequently than ever... The research also found that increasing the cost of flying by a small margin is not enough to deter people from flying. It would take a 50% increase in the cost of a ticket to discourage most people. However, a greater number of people than ever before do believe that there should be some increase in air fares to compensate for the impact of aviation on the environment.

Read more on the project or this news report.

Bottom Line: We will only lower our carbon footprint by lowering our standard of living. (If we could do it "for free," we would have done already.)

The opportunity costs of cash-for-clunkers

dzetland@gmail.com (David Zetland) — Sat, 07 Nov 2009 21:42:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Hui Gao says:

“Clunker for Cash” was one of the government programs to stimulate the down turn economy recently. The incentive of this program was to stimulate the auto industry and people’s purchasing power in order to push up the economy. Apparently there was a big impact on the auto industry because of the people’s strong responding to this program. It showed that August was the best selling month in the past three years, for the demand of new cars were crazily increased.

However, in my point of view, the stimulation was only benefit on certain people, such as those people who have extra money to pay for the down payment after 4,500 dollars rebate; who will have extra money to pay for the two ways insurance for the new car; who have a qualify car, etc. If we are only focusing on the auto industry, it was unquestionable that there was huge increase in the auto outstanding accomplishment.

Does it mean that there is a ripple effect on this stimulation? However, when we see the economy as a whole, there is an opportunity cost in this stimulation, which means that one person must sacrifice one thing to get another thing. For example, Mr. Chen was planed to remodel his house using about 15,000; because of the “Clunker for Cash” program, he decided to use the 15,000 to trade in his old car to a new car with the 4,500 rebate. The opportunity cost of this decision was to live in the same house without remodeling, but with a new fuel efficiency car. Apparently it seems both Mr. Chen and the auto industry are benefit from this program. On the other hand, most people tend to forget there is a third party involved in this transaction, which are the stores that Mr. Chen was planed to spend the money on the material for remodeling his house. Those stores lost the business from Mr. Chen. This is the similar example as the one "The Broken Window" in the "Economics in One Lesson".

Bottom line: We should see the economy as a whole, not only individual. Don’t only focus on what is immediately visible to the eye.I believe the best way to stimulate the economy nowadays is to increase every people's purchasing power, but this is also the hardest mission ever.

Why is organic produce more expensive than non-organic produce?

dzetland@gmail.com (David Zetland) — Sat, 07 Nov 2009 18:28:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Sabine Johnson says:

Why is organic produce more expensive than regular (i.e. non-organic) produce? For example, at Safeway a pound of regular Fiji Apples costs $1.99, while a pound of organic Fiji Apples costs $2.39, a pound of regular Bananas costs $0.48, compared to a pound of organic Bananas for $0.99 per pound. The price difference at other supermarkets, such as Whole Foods, tends to be even bigger.

But shouldn’t the price difference be the other way around? In order to grow regular produce, farmers use lots of expensive chemical fertilizers, pesticides and herbicides. Furthermore, in many cases they buy expensive genetically modified seeds (e.g. Monsanto’s Roundup Ready Corn). On the other hand, organic produce is supposedly grown without chemical fertilizers and pesticides, and many organic farmers say they cultivate their own seeds. Therefore the production cost of regular farmers should be higher than the production cost of organic farmers, and organic produce consequently be cheaper. Why is this not the case?

I think there are two reasons for the price difference. First, regular farmers (due to the use of fertilizers, etc.) have higher yields per acre, which translates into a lower average fixed cost, and more than makes up for the cost of fertilizers and pesticides.

Second, non-organic farming methods create a lot of externalities, for which the farmer does not have to pay. These externalities range from environmental damage such as water pollution, topsoil erosion, poisoning of insects and insect eating animals to the health risks for the consumer.

Non-organic produce is cheap due to the lack of full cost pricing: the price of regular produce does not reflect the entire cost of production as externalities are not taken into account. In contrast, the organic produce farmer does not use chemicals, therefore creates no (or few) externalities, but has lower yields per acre. Therefore the real question we should ask is: why is regular produce so cheap?

Bottom line: Lower average fixed cost combined with the lack of full cost pricing allows farmers of regular produce to sell their products for less than organic farmers.

Flashback: 1 -- 6 Nov 2008

dzetland@gmail.com (David Zetland) — Sat, 07 Nov 2009 15:52:00 +0000

These posts are still relevant. Please comment!

BEST: California Water Transfers -- some interesting details of the State Water Resources Board, an agency that many consider toothless and/or useless.

Water and Business -- Cities that subsidize water to attract businesses are making several mistakes, and Corporate Footprinting is BS.

Politics, Development and Corruption in San Diego (a continuing series...)

CAFO Crap 2 -- animal operations produce lots of shit and pollute lots of water...

BEST: IPCC on Climate Change and Water -- the ones causing climate change are different from the ones dying from it:

Saving Forests -- through REDD (reduced deforestation and destruction) is a good idea!

Water Sustainability -- 40 dimensions to think about!

Marketing Bottled Water -- first thing is to remove the water fountains...

Solar Power at Home

dzetland@gmail.com (David Zetland) — Fri, 06 Nov 2009 21:40:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Alessandro Ku says:

Nowadays, we can adopt solar power at home by installing solar panels on the rooftop or on the ground. It is environmental friendly that the solar power can be converted into electricity for daily use. But in an economic point of view, is it efficient or relevant that we can now use this method nationwide?

The electricity generated by this kind of solar insert can generally cover up to one-third of electric bill of a normal family. But for the installation fee, it is roughly $20,000 which still doesn’t include any further maintenance fee. So, the saving on the electricity generally cannot cover the high fixed cost.

There is no economic benefit using these solar panels at home. However, there are social benefits that by using more renewable energy and resources and producing less pollutant would improve our environment. Because of these social benefits, some European countries are providing subsidies for the installation of solar panels.

Back to the United States, should we also subsidize the installation of solar panels? To me, I don’t think it is a perfect solution. It is true that providing subsidies will shift out the supply curve causing a higher quantity demanded at a lower price. But on the other hand, the subsidies will become one more additional heavy load for our government still suffering in the economic recession. I think we should wait because the time for the solar power is not yet mature. As technology improves, the cost will decrease that also lead to an out shift of the supply curve. We are looking forward to the day when the economic benefits and the environmental aspects can finally meet at the optimum equilibrium providing us the best outcome of all-time.

Bottom Line: Solar Power is not yet one of our efficient energy option, but with no doubt it is a good start.

Note from DZ: This post explains that solar plants (NOT home installations) costs 4-6x the cost of a traditional plant (with carbon capture) and 18x the cost of a natural gas-fired plant.

Why are the Chinese intent on damming the Mekong?

dzetland@gmail.com (David Zetland) — Fri, 06 Nov 2009 18:33:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Kim Thai says:

Simple. The answer to any economics question is that they want to profit. The Chinese, who already have political and economic power over Southeast Asian countries of the ASEAN, are ensuing new development projects in the Mekong River. They are hoping to lessen the power of rapid waterfalls of the Mekong through building dams so that they could better transport their goods by water to countries such as Laos, Thailand, and Vietnam. This would then improve the Chinese's transportation of goods and hence increase their export of produced goods. They already have plans to build eight dams along the Mekong (in parts of the river that are not in China). In 2008, they have made agreements with countries like Lao PDR and Vietnam to build dams along the Mekong that are situated in those respective countries. This would open up more trade between China and Southeast Asian countries, supposedly benefiting Laos most since Laos has historically been the most underdeveloped, landlocked nation of Southeast Asia.

Additionally, building more dams along the Mekong River could create more hydro-electric power, a resource that Vietnam, Thailand, and China need. Potentially, creating these dams could economically be very beneficial, especially since China has been on the radar to be "greener".

However, given that these dams would block off some of the largest waterfalls of the Mekong, offsetting the ecological balance of the Mekong, economic costs are inevitable: Laos' biggest industry is the fisheries – bigger than their rice paddies, and with the waterfalls dammed, fish that seasonally swim upstream to estuaries will no longer continue this routine, causing the fisheries to decline and preventing the people of Laos from feeding their families.

Another factor to consider along with this cost is also the fact that with the waterfalls dammed, the water level downstream will rise, flooding the crops of Laos, therefore destroying their second option of food for survival as well. However, the Chinese must have taken into account the slight chance that Laos and the other Southeast Asian countries are slowly moving towards tourism as their means of economic development and away from subsistence living.

Bottom line: While building dams along the Mekong River may seem economically beneficial to China and Southeast Asian countries in the short run, there are larger economic costs to the Southeast Asian countries in the long run that make this development project unsustainable.

Note from DZ: This update on Three Gorges explains how the Chinese have screwed up their own back yard.

Bringing Dynamism to Bureaucracy

dzetland@gmail.com (David Zetland) — Fri, 06 Nov 2009 11:27:00 +0000

The Economist discusses the status and dynamics of public service, making the point that it's hard to get people hired and that new hires want exciting, challenging jobs.

This reminded me of one of my pet ideas (oh no, not again!): term limits for bureaucrats.

[Note that a bureaucrat is an administrator -- not an academic or researcher.]

That means limiting one's total government service (at all levels -- city, state, national) to 20 years.

Here are the (intended) consequences of this policy:

Employees would know that they would have to work in the private sector at some point. This knowledge would encourage them to maintain and build skills.
Higher turn-over and an absence of "time servers" would force bureaucracies to simplify and clarify so that new employees could understand how things work. Customers (citizens) would benefit from this.
Private sector ideas and culture would reach the public sector -- and vice versa! Such cross-pollination would aid mutual comprehension and reduce antagonism.
Employees on each side of the line would have a better (working) idea of comparative advantage, which would make it easier to reduce both government and market failure.

Can you think of unintended consequences?

Bottom Line: We learn from every job we do, and we can improve the quality of our bureaucracy by requiring that employees do more than one job.

The Problem of Boundaries

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 22:42:00 +0000

Fleck observes that aggregate storage levels in Lake Mead and Lake Powell are about the same over the past few years. As Mead has fallen, Powell has risen.

He makes the excellent point that these ~~lakes~~ reservoirs are managed by two different branches of BurRec (Lower and Upper Colorado Basin, respectively), which makes it hard to see the system as a whole. So, Pat Mulroy's Las Vegas is getting hammered because it's in the Lower Basin.

I wonder how long it will be before Mulroy moves to merge districts (and then take over both!)?

Bottom Line: Some of our water mismanagement results from using the wrong scale. Look to Nature for a clue of how things really fit together.

Your fees are going up, like my salary

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 21:26:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

William Choi says:

With the recession affecting many American institutions, it is not surprising that universities, specifically UC universities, have begun to adopt measures in an attempt to reduce their costs and close a budget gap of more than $750 million dollars.

From what was seen last week during the UC Berkeley campus walkout, it is apparent that students and faculty members are angry at the decisions the UC Regents have approved. For starters, fewer courses are being offered by the school in order to cover the increased costs of running the university. Additionally, professors and non-union workers are now subject to staff lay-offs and unpaid furloughs. Furthermore, tuition for all UC students next year will be increased by a huge 45% of their current tuition fees.

From an economic point of view, if the price and quantity of a UC Berkeley education was graphed on a supply/demand chart, the supply curve would shift to the left (external factors such as increased costs and decreased funds from state) while the demand stays the same. This shift causes less quantity (course cutbacks) and a higher price (increased tuition). One could argue that the school is simply applying basic economics. However, this would only apply correctly in a perfectly competitive environment.

From a different point of view, one could technically consider UC Berkeley more of a monopoly over its students. A student’s demand for an education is pretty inelastic and he or she cannot simply choose to leave on a whim and go get an education somewhere else. It is a possibility that the UC Regents may be overcharging students for an education that may not even be of the same caliber of previous years due to a loss of courses and staff. Furthermore, UC regents have also approved 12% and 27% increases to the incomes of two new incoming chancellors to six figure salaries reaching close to half a million dollars each.

The UC Regents should reconsider how to utilize their funds for the needs of the students and not for those who already have extravagant incomes despite how impressive their resumes might be. There is the argument made by Mark Yudof that the recently approved Blue and Gold Program will “guarantee that no student with a family income of $60,000” will pay any fees. Currently there are few details about the program so it is unknown how the program will really be implemented. In any case, the policies that the UC Regents have proposed should be revised to those that will ensure the prestige of the education that students will pay for.

It is expected that costs will rise for everyone involved and sacrifices must be made by all parties; however, the current policies seem to affect students and faculty much more negatively than they do high administrative officials.

Bottom line: Those in charge of the UC Campuses with high salaries should be more willing to forego more on the administrative end in order to give students and workers more of a financial cushion in the midst of the recession.

DZ's Note: President Yudof sounds pretty uninterested in students in this interview.

Subsidies and poverty go together

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 21:21:00 +0000

Here's a PDF of Lloyd Carter's law review article showing the link between industrialized subsidized farming in the San Joaquin Valley and perpetual poverty in the Valley. Previously mentioned here.

Why Chino Failed -- This time I am right :)

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 20:58:00 +0000

Given my recent mistake in understanding, I was pleased to see the Chino guys confirm my explanation for the failure of their auction (via SK):

“We had enough applications from bidders,” Watermaster CEO Ken Manning explained, “but we had a number of people who were coming to us and voicing their concern about the strategy for recovering the water.” Investors were worried that the local water agencies who could transport water to customers on their behalf might demand an unreasonably large proportion of the value of the water for the service. “They [the potential bidders] wanted to have more certainty as to what the cost would be and not just to have a sample agreement, but specific agreements with agencies.”

Bottom Line: Nobody will buy your stuff if they can't take it home.

Do USPS employees care?

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 18:21:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Kyle Chuan says:

We’re all rather busy people with school, work, social obligations, et cetera keeping us out of our home for a good part of the day. For this reason (and also my inadequately sized mailbox and unnecessarily large packaging), I often find the “Sorry we missed you!” pink slip from the USPS in my mailbox asking me to trek down to the post office. Well this only leads to further frustrations, as I wait hours (an exaggeration, of course, but the ten to twenty minutes of waiting for my number to be called does seem to drag on forever) for a simple package pickup transaction that usually takes roughly a minute.

It’s not as if the post office is understaffed, the employees all seem to have something to do most of the times, and hiring an extra employee to take care of the USPS pink slip holders like me just isn’t economically sound; the benefit of the extra employee (marginal benefit) to take care of the small amount of package pick-uppers just doesn’t compensate for the extra wage (marginal cost) the USPS has to pay for.

What would make sense though, is to open up one of those unused counters and have the customers with quick transactions line up instead of taking a number. Why? Well quick transactions like picking up a package can be done concurrently with many of the other services provided.

Bottom Line: Having the optimal amount of employees (hiring at marginal benefit = marginal costs) does not necessarily equate to optimal output in real life; employee work ethics and allocation matters.

Note from DZ: The Economist on the dead hand of postal monopolies...

Misplaced Optimism on Water Bill

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 16:33:00 +0000

In my post yesterday (and on the radio!), I said that the new bill would have groundwater monitoring and penalties for excessive diversions. That was wrong. The bill that was passed has toothless versions of those regulations.

Instead of being pleased with this result, I am infuriated. What a crock of shit.

Bottom Line: California maintains its last place position with the worst water management in the country. (Yes, worse than Texas.) Pathetic.

Addendum: It gets worse. Here (via DW) are more details on the earmarks and PORK ("Projects of Regional Koncern," via JC) that included a $1 billion sop to LA that was awarded in exchange for gutting penalties on illegal diversions. More shit in the crock.

Al Gore's Green Investments

dzetland@gmail.com (David Zetland) — Thu, 05 Nov 2009 11:52:00 +0000

A few weeks ago, a WSJ op/ed [can't find a link] accused Al Gore of having conflicts of interest because he promotes green policies at the same time as he has (widely-disclosed) investments in "green" firms.

I don't know why the WSJ has their knickers in a knot. Gore's investments are public information, and he's not in the position to steer public money towards one company as opposed to another. (This NYT article says the same thing: he' putting his money where his mouth is, but he's making a killing. Although it makes sense to try to "shadow" Gore's investments, his inside access -- via venture capital firms -- makes it hard for ordinary investors to do that.)

If, for example, he had secret investments in certain companies and earmarked legislation to benefit those companies, THEN I would join them in condemning Gore for conflict of interest. (I am guessing that a non-trivial number of congressmen DO have these conflicts, but they are either undiscovered or "unimportant" to the WSJ.)

Am I missing something here, or is the WSJ just blowing hot air?

Bottom Line: It's not a problem to invest in something you believe in, it's a problem to ~~use~~ steal other people's money to make those investments more valuable.

Russ Roberts on Crony Capitalism

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 22:09:00 +0000

(via CC) Russ testifies [link goes to 3-4 minutes of video] in front of a congressional committee on executive compensation. Here's more:

In this Testimony, Prof. Roberts explains that the problem with executive compensation is that executives have not been subject to the profit and loss cosequences of the free-market system. Profits encourage risk-taking, and the losses encourage prudence. If the government would resist bailouts and allow these incentives to be fully operational, there will be better outcomes as large institutions will no longer be reliant on tax payer funds.

Bottom Line: "We don't have capitalism, we have crony capitalism." I totally agree.

Why do so many people suddenly have reusable metal water bottles?

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 21:23:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Corliss Livingston says:

The growing popularity and use of stainless steel water bottles, especially on the UC Berkeley campus, has always confused me for a couple reasons. Firstly, not being able to see what I am drinking makes me slightly uncomfortable. But more importantly, before these “eco-friendly” water bottles became popular, only people who were especially health conscious or active carried around bottles of water on a daily basis.

Let’s briefly discuss some water bottle history. First, bottling companies discovered that they could charge relatively large amounts of money by putting cheap tap water in bottles to provide a handy substitute to drinking fountains and water coolers. Then people started refilling those bottles with tap water, and some people even started buying Nalgene bottles, previously used almost exclusively by campers and backpackers. Recently, those reusable plastic bottles were found to start leaking carcinogens after use. The solution to this seemed to be steel. Steel bottles do not have the unhealthy BPA that plastics did. But even with this healthier material, it seems like more people have these reusable metal bottles than ever carried a reused Evian bottle or Nalgene. And the cost of a stainless steel water bottle can range from 10 to 30 dollars, not counting the special features and additions, which seems to be kind of expensive compared to water from the drinking fountain.

The choice to purchase a steel bottle can be explained economically in two ways.

Metal water bottles are a convenient way to carry one’s beverage. The opportunity cost of getting up from the library table or leaving class to get a drink must be higher than the cost of the water bottle for those who chose to purchase them. This, however, does not explain why they have chosen an aluminum Sigg over a somewhat less but still reusable plastic bottle of Dasani.
Having the stainless steel water bottle must have value besides its actual use. The stainless steel bottles are marketed with the idea that they are “eco-friendly” and reusable and do not use plastics. However, heavy marketing using these slogans by
companies such as Kleen Kanteen, especially among liberal and progressive college students, has only driven up demand for these products, leading to a higher quantity produced and supplied by the manufacturers, using up more of the earth’s precious, precious resources than if we had stuck to the drinking fountain or a glass from the kitchen. People buy these bottles because they give others the idea that one is environmentally friendly and “green”, part of a movement that is gaining momentum towards positive change. This issue makes me question how long it takes the metal bottle to become more environmentally friendly than using something else, and how many plastic bottles one metal one actually replaces.

Bottom line: The stainless steel water bottle is an accessory that says, “I am green!” and actually might not be the most “eco-friendly” choice.

More on Lobbying and Rent-Seeking

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 18:27:00 +0000

Many people have watched the video of all-pay auctions that I used to show students how political lobbying works. This post explains what's going on.

Here are two more comments:

All-pay-auctions do not recreate the dynamics of one-sided lobbying, where one special interest group (e.g., sugar producers, auto makers, wall street) bribes politicians to transfer taxpayer wealth to them. All-pay-auctions are more like the competition between groups to influence politicians, e.g., various groups trying to get "their" version of legislation affecting the Sacramento Delta or doctors, insurance companies and pharma trying to affect healthcare legislation.
In 2006, Russ Roberts and Mike Munger discussed all-pay-auctions, public choice, rent-seeking and lobbying. (They even get into Mancur Olson's Logic of Collective Action!) Listen to it.

Bottom Line: Politicians benefit from working on problems, not solving them.

Making school more affordable to vets

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 18:07:00 +0000

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.

Eric Kitcho says:

According to a study by the National Center for Education Statistics published by USA TODAY, around half of college graduates carry student loans, with the average loan debt being $10,000. The average cost of attending college has been increasing at roughly twice the rate of inflation and the College Board estimates that public school costs average about $13,000 a year while private schools average $28,000. If a student decides to seek even higher education (graduate, professional school, etc) these figures jump substantially, allowing debt amounts to quickly reach six figures.

Despite the rising costs associated with earning these degrees, college application rates have been soaring over the last few years, which were shown in a New York Times review where several schools boasted double digit increases in their application pools. When combined, these two phenomena pose a daunting dilemma: colleges are becoming increasing competitive while at the same time growing increasingly unaffordable to many families. To help mitigate these problems both the schools as well as state and federal governments propose and implement solutions which aid some while leaving others still unable to fulfill their desired goals.

One clear and efficient solution to solve both of these problems can be found in the government’s implementation of the Post 911 GI Bill. Since this is a fairly new and somewhat complicated policy, I will briefly describe and simplify it as much as possible.

If one serves in any branch of the Armed Forces for four years (and is thereafter discharged on honorable terms) they will have the full tuition paid at whatever school they attend (up to the highest public tuition rate for that school’s respective state) and will receive a monthly allowance for food and housing which is determined by cost of living calculations for the area in which the school is located. In addition to this they also receive a stipend each semester for books and other necessary school supplies. So, using the guidelines presented and taking into consideration factors such as tuition, allowances, and stipends, I am estimating that a Berkeley veteran would receive roughly $26,000 in benefits annually while attending the university.

In addition to this, it is difficult to estimate any other gains military service would provide such as intangible qualities developed, work experience, and other intrinsic forms of gratification one could obtain by serving their country, but I think it is important to at least make note that they do exist.

Now on the other side of the spectrum, there is the cost side of earning these benefits. Depending on a plethora of factors, the degree of difficulty and amount of sacrifice one must make to achieve these benefits is very hard to measure, and would vary greatly depending on each person’s circumstances. One must not only take into account the four years “lost” by serving, but also the hardships and possible adverse consequences one may encounter while serving during a time of increasingly controversial and deadly conflicts.

Bottom Line: With the costs of obtaining higher education increasing exponentially and financial aid trending downward, I think the military (more specifically the new GI Bill) will become increasing appealing to high school graduates seeking a college education, provided they weigh the costs and benefits and find that the opportunity cost associated with military service is well worth the future rewards.

California Water Legislation Moves Ahead

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 16:39:00 +0000

A few hours ago, the Legislature passed "a water package" that has two parts -- governance and money.

The first would:

Create "a new seven-member board to oversee the Delta. The board would consist of gubernatorial and legislative appointees, along with the head of an already existing Delta commission. The board could approve a controversial peripheral canal to channel water around the Sacramento-San Joaquin River Delta."
Reaffirm "a 20 percent conservation mandate for urban areas, with credits for cities that have made significant conservation efforts. Agricultural entities will have to follow best practices for water use."
Create "new regulations to monitor groundwater levels throughout the state."
Invoke "increased penalties for illegal water diversions, though the penalties and enforcement were significantly weakened from the original plan."

The second "approves a $11.14 billion bond to pay for the overhaul. Three billion would be set aside for new water storage, which could be reservoirs, along with more than $2 billion for restoration of the Delta ecosystem. Other monies would pay for water recycling, drought relief, conservation and watershed protection projects, among other uses. The bond requires voter approval."

We know that (1) will not work without the power to enforce its rulings, and that Council appears to NOT have that power.

(2) is old news; ag water use will not fall unless farmers can get paid for conservation ("best practices" will have to pass cost-benefit tests and there's no benefit if they cannot sell water).

(3) sounds good! Statewide monitoring -- and public reporting -- is a good start!

(4) is also good. SWRCB currently does nothing about penalties.

The bond has $3 billion for dams, which will be $3 billion into the toilet EXCEPT that cost-sharing (those dams will cost more than $3 billion) will probably require farmers to pay, and they won't, so nothing will happen.

Even more likely is that the voters will just vote against the bond. Stay tuned.

Bottom Line: I consider this progress, but very imperfect, and not even close to where we need to be in California. I think that (3) and (4) are the most useful things here. (1) may be a sad failure -- back to square one -- unless they get STRONG powers.

Poll Results -- Lawns in the Desert

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 11:54:00 +0000

Hey! There's a new poll (monitor groundwater?) on the sidebar --->

People who have lawns in the desert...
...are doing the wrong thing!	22%	34
...should pay a lot to have them!	53%	81
...are just fine!	12%	19
....enhance the landscape!	2%	3
...love their children!	10%	16
153 votes total

This poll set a record for the number of votes, but their pattern is clear: Voters think that it's either immoral or "costly" (to society) when people have lawns in the desert.

As you all know, I do not go for moral arguments, but I am happy to charge people more for "lifestyle" water that goes towards lawns. Anyone who wants a lawn can have one -- if they pay for it.

Bottom Line: A lawn in the desert is a luxury that should come with an appropriate price (say $100/month?)

Water and poop blog

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 11:45:00 +0000

This cool blog is run by a friend-of-a-friend. I love this post:

...because of this explanation:

the borehole in the foreground had just been drilled despite the fact that there is one <50 m away in the background (and neither one was dry or had water quality issues)…This is what happens when people stop using their brain and forget to talk to one another!

Bottom Line: "Wasteful duplication of effort" is common when people are trying to "help" you. It would be better if they asked you want you want first!

Monitor Groundwater or Die!

dzetland@gmail.com (David Zetland) — Wed, 04 Nov 2009 01:17:00 +0000

I just read (via DL) that the effort to require groundwater monitoring and reporting in California was derailed by agricultural groups and business interests.

This sad result is a disservice to Californians who are suffering from the current mismanagement of groundwater, and -- unfortunately -- it seems that the people who have mismanaged our groundwater are going to continue to mismanage it.

I'd love to tear into these folks for their pathetic, self-serving, short-sighted, paranoid irresponsibility, but I am busy with other things.

Bottom Line: California's tragedy of the commons will continue as long as the commons are not protected from those who have been abusing it all these years.