Sunday, May 17, 2015

Not easy or simple

Central planning is hard work. This is why they usually get it wrong. This morning's NY Times includes "Brown's Arid California, Thanks Partly to Father ... Pat Brown Used Water For a Booming State. His Son's Era Is Far Different." Southern California "needed" lots of water and the elder Brown pushed through the costly California State Water Project to channel water from the north to the south. The south grew and now "needs" even more water. The younger Brown has responded with his own rationing-by-edict plan. No one said it would be simple.

Departing from its policy of never mentioning "price" and "water" in the same piece, the same NY Times also includes "How to Get People to Pitch In ... We cooperate because it makes us look good." Yes, to some extent, you can shame people into being ostentatious conservationists. Interesting, but I doubt that this alone will get the job done. Widespread conservation is surest if it responds to incentives. Incentives must respond to conditions. That would also be "cooperation."

The op-ed continues, "The 'Pigouvian' approach to encouraging cooperation ... Make water more expensive ... But Californians are stubbornly unresponsive to higher water prices. Estimates suggest that a 10 percent increase in price would result in reductions in water use of 2 to 4 percent."

Yes, pricing is also hard work. Trial-and-error discovery of the right price is widespread, essential, challenging and ongoing. We encounter proclamations of "sale" and the like a thousand times. These sellers are looking to discover a better price, not from econometric estimations but from hands-on experiments.  Water planners would have to do the same.  Not easy or simple.