

Wall Street's thirst for water: a market for water will drive up food prices - ananyob
http://www.nature.com/nature/journal/v490/n7421/full/490469a.html

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tokenadult
Veteran HN participant jacques_chester already has the definitive comment
here,

<http://news.ycombinator.com/item?id=4701930>

but because his comment is not a top-level comment, I had better chime in with
agreement. The submitted article read like something out of the hard-left
1960s when I was growing up and a lot of people thought that countries with
centrally planned economies were doing better than countries with free
markets. They never have. Markets in water are crucial for figuring out how
different users of water really value water, and how to monetize improving the
quality and distribution of water. I live high upstream of most of the United
States (near a continental divide), in the well watered state of Minnesota
("the land of 10,000 lakes"). This year is a drought year (although it was
rainy the last two days), and even at that, we have adequate water. A
controversial issue here is sale of water from the upper Midwest to arid
places in the Great Plains or even the Southwest through pipelines. Banning
the sale of water across state lines is not going to stop the Mississippi
River or Red River (of the north) from flowing, and all the arid places in the
United States have elaborately developed legal systems (unlike the riparian
common law system in Minnesota and other states with abundant water) for
allocating water rights. If big interstate trade in water through unit trains
on railroads or through pipelines develops, the law will be able to keep up,
and water will be better used in the United States.

If similar trade develops internationally, or domestically in formerly poor
countries, again the crucial thing to do is to develop laws so that people can
trade according to their needs. When people trade, they all become richer.
Water is generally cleaner and more available today, serving a larger and
healthier world population, than it was in my childhood. That came about
BECAUSE of market economics, while the stifling poverty that resulted in
famine in China in the 1960s came about from anti-market policies. I'll stick
with the market when allocating important resources.

AFTER EDIT: The comments kindly made to my comment reminded me of life
experience from living in Taiwan when Taiwan was still part of the Third World
that I should relate here. For decades, the standards for water treatment of
municipal water supplies in Taiwan have been up to world standards for piped
water, ensuring that bacteria are reduced in the water before it leaves the
water treatment plant. But in the 1980s, the dictatorial government of Taiwan
at the time forced local governments to keep city water prices abnormally low,
so none of the cities could afford to maintain the network of pipes that
delivered water to homes. And that meant that the water flowing out of home
taps could NOT be assumed to be safe. Instead, everyone all over urban Taiwan
paid out of their own pockets to install filters (possibly ineffective against
bacterial or protozoan contamination) on public building drinking fountains,
and home dwellers paid for bottled propane gas to boil their home tap water
before drinking it. (Boiling water to let it stand and cool was a big chore in
those days. Some people bought special electric water-heating machines that
automated the process of heating and storing tap water for drinking safety.)
After three years in Taiwan, the first thing I did when I reached the home of
a relative in Los Angeles upon my return to America was drink a big glass of
tap water, a luxury I had been denied all that while. And my wife was
HORRIFIED to see me do that. She had never seen anyone drink a glass of tap
water straight out of the tap in her life.

As Taiwan democratized in the 1990s, the press began reporting on how
ridiculously low the price of tap water was in Taiwan, and it was proposed
simply to raise the price of city water, so that the city could maintain the
pipe network properly and ensure clean water stayed clean all the way to home
taps. I'm not sure how much progress has been made in this project to date in
what parts of Taiwan, but my wife (who has been back there more recently than
I have) reports that Taiwan in general is cleaner than ever, healthier than
ever, and generally thriving well under democracy and a free-market economy.
The bureaucrats in Taiwan were always mostly technocrats, rather smart people
even in the worst times of dictatorship, but using prices to allocate
resources makes more sense than using bureaucratic fiat to allocate resources.
Two heads are better than one.

~~~
Spooky23
Creating a system where a complex, active system is required to deliver
something as essential for life as water is by its nature a problem.

Also, China is the 60's was more than a failure of central planning economics,
it was Maoist political stuff as well.

~~~
yock
Which is the standard human excuse for intervening in everything deemed
essential for life. It doesn't even begin to address the real possibility that
humans can't actually improve upon the market solution.

~~~
glesica
A market solution _is_ a human solution. People decide how to structure their
societies, of which economies are a part. They also decide how to structure
their markets, when they choose to create them.

I should point out that when I say "markets", I mean as they generally exist
in developed countries. There are plenty of markets in other parts of the
world that most of us view as undesirable. The Soviet Union, for instance had
a fully-functioning underground market economy that relied on smuggling and
moonlighting. _Most people_ prefer formalized markets, where participants have
some sort of official (read: government and its monopoly on violence) recourse
in cases of fraud and abuse.

The idea that markets are naturally occurring and "spring forth" out of a
vacuum really isn't well-supported. Russia certainly didn't end up with
anything even approaching a theoretical free market despite the best efforts
of American and European economists (laissez faire may apply to markets
themselves, but not to building them and training people to use them).

In reality, markets are constructed and managed by people (hence the
discussion around "creating" a market for water). Therefore, they can (and do)
possess all the flaws and failures that go along with humanity in general (not
speaking theoretically here, but practically).

The reality is that when you create an actual, existing market you introduce
all sorts of inefficiencies and problems. These problems are not theoretical
and their existence doesn't necessarily undermine the _theory_ of markets. The
problems are practical, in the same way that the problems associated with
representative democracy or even Marxism (which would work swimmingly if only
human psychology would cooperate) are practical.

I am comfortable with the theoretical performance of markets. I am extremely
_uncomfortable_ with many markets as they exist and are created and managed by
deeply flawed humans.

------
jivatmanx
As long as water is sold for far less than it's value, there is no incentive
to conserve and the future looks grim as our aquifers dry up and rivers run to
their maximum.

And no, your low-water appliances aren't helping much, as consumers only use
11% of water in the U.S.

As water prices are set by municipalities, there is little incentive to raise
prices, the politicians who control them don't have any interest beyond their
next election.

There is likely to develop a semblance of a "Market Price" for water in the
U.S. which will inevitably be higher.

As far as selling water rights, the biggest danger here is that the
governments that currently own them will sell them for less than they are
actually worth, primarily because there isn't yet a true "Market Price" for
water. Or, of course, corruption.

------
aristidb
Clearly markets are the problem and not wasteful government programs that e.g.
subsidise water given to farmers in desert areas.

------
Spooky23
I'm sure the Wall St types see a great opportunity here.

Thanks to horrific governance, you have water-rich places (like the Northeast
of the US) with local governments that operate on the brink of bankruptcy. At
the same time, you have fifty years of massive government-subsidized buildout
of suburban sprawl and industry in the South and in the desert.

So instead of treating water resources as a public commons, we'll let some
financiers borrow cheap money (courtesy of the Feds suppressing the interest
rate market), buy up munipical water companies and rape the public for all
time.

------
arethuza
Makes me glad that I live somewhere which has absolutely no shortage of clean
water and where water supply and sewer systems are handled by what appears to
be a reasonably efficient state owned company.

------
jcarreiro
Where exactly in that article does the author make any sort of argument that
would support his thesis?

------
rayiner
Market allocation of water has to be the dumbest idea since god knows what.
Doesn't it occur to any egg-head economists that a resource as necessary as
water is going to invoke market failure? It's the healthcare problem writ
large.

~~~
tgrass
Cities like Vegas, Tucson, and Phoenix were created because of federally
subsidized water. Allowing water prices to 'float' to the market value might
keep these areas from growing beyond their resources.

~~~
rayiner
Or we could just stop federally subsidizing water. The whole southwest was a
mistake to begin with--the government never should have irrigated it.

~~~
netfire
Seems a bit extreme. Other parts of the US have significant problems to deal
with as well. The west coast (earthquakes), midwest (tornados and drought),
south (hurricanes) and northeast (snow) all have problems which cost lots of
money (sometimes federal tax dollars) to deal with. You could call building in
any of these areas a "mistake", but that doesn't really help solve the
problem.

~~~
rayiner
Yeah sometime those places get disaster aid, but the southwest is really the
poster child of unintended consequences of government infrastructure spending.
Those places would not exist without Herculean irrigation efforts by the Army
Corps of Engineers in the 19th century. As the result of these efforts cities
rose up were they should not have, and when the water runs out those cities
will be reclaimed by the desert.

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brianbreslin
Does anyone know if this has any tangential relationship to the fact that
billionaires like t.boone pickens are buying up water rights across the
country?

~~~
chrisaycock
From the article:

    
    
      In 1996, [California] introduced an electronic bulletin board for
      farmers to buy and sell their rights to Westlands' water from their
      home computers.
    

This has had municipal support for 16 years now.

------
pmorici
Isn't this more or less the plot of the 2008 James Bond film "Quantum of
Solace"?

