Archive for August, 2006|Monthly archive page

Water, Water, Everywhere???

While energy problems have generated much attention, I am convinced that water represents an even more difficult threat for the future. Here are some notes from Lester Brown’s Plan B 2.0

43-4: “Falling water tables are already adversely affecting harvests in some countries, including China, the world’s largest grain producer. A groundwater survey released in Beijing in August 2001 revealed that the water table under the North China Plain, which produces over half of that country’s wheat and a third of its corn, is falling faster than earlier reported. Overpumping has largely depleted the shallow aquifer, forcing well drillers to turn to the region’s deep fossil aquifer, which is not replenishable.” Ma, Michael. 2001. “Northern Cities Sinking as Water Table Falls.” South China Morning Post (11 August); share of China’s grain harvest from the North China Plain based on Hong Yang and Zehnder, Alexander. 2001. “China’s Regional Water Scarcity and Implications for Grain Supply and Trade,” Environment and Planning A, vol. 33; and USDA, Production, Supply, & Distribution, electronic database,, updated (13 September 2005).

44: “The survey, conducted by the Geological Environmental Monitoring Institute (GEMI) in Beijing, reported that under Hebei Province in the heart of the North China Plain, the average level of the deep aquifer was dropping nearly 3 meters (10 feet) per year. Around some cities in the province, it was falling twice as fast. He Qingcheng, head of the GEMI groundwater monitoring team, notes that as the deep aquifer is depleted, the region is losing its last water reserve-its only safety cushion.” Ma, op. cit.

44: “His concerns are mirrored in a World Bank report: “Anecdotal evidence suggests that deep wells [drilled] around Beijing now have to reach 1,000 meters [more than half a mile] to tap fresh water, adding dramatically to the cost of supply.” In unusually strong language for a Bank report, it foresees “catastrophic consequences for future generations” unless water use and supply can quickly be brought back into balance.” World Bank, China: Agenda for Water Sector Strategy for North China (Washington, DC: April 2001): pp. vii, xi

44: “The U.S. embassy in Beijing reports that wheat farmers in some areas are now pumping from a depth of 300 meters, or nearly 1,000 feet. Pumping water from this far down raises pumping costs so high that farmers are often forced to abandon irrigation and return to less productive dryland farming.” John Wade, Adam Branson, and Xiang Qing, China Grain and Feed Annual Report 2002 (Beijing: USDA, 21 February 2002).

44: “Falling water tables, the conversion of cropland to nonfarm uses, and the loss of farm labor in provinces that are rapidly industrializing are combining to shrink China’s grain harvest. The wheat crop, grown mostly in semiarid northern China, is particularly vulnerable to water shortages. After peaking at 123 million tons in 1997, the harvest has fallen in five of the last eight years, coming in at 95 million tons in 2005, a drop of 23 percent.” Grain production from USDA.

44: “The U.S. embassy also reports that the recent decline in rice production is partly a result of water shortages. After peaking at 140 million tons in 1997, the harvest dropped in four of the following eight years, falling to an estimated 127 million tons in 2005. Only corn, China’s third major grain, has thus far avoided a decline. This is because corn prices are favorable and because the crop is not as irrigation-dependent as wheat and rice are.” Wade, Branson, and Xiang; grain production from USDA, op. cit.

44-5: “Overall, China’s grain production has fallen from its historical peak of 392 million tons in 1998 to an estimated 358 million tons in 2005. For perspective, this drop of 34 million tons exceeds

45: “the annual Canadian wheat harvest. China largely covered the drop-off in production by drawing down its once vast stocks until 2004, at which point it imported 7 million tons of grain.” Grain production from USDA.

45: “A World Bank study indicates that China is overpumping three river basins in the north-the Hai, which flows through Beijing and Tianjin; the Yellow; and the Huai, the next river south of the Yellow. Since it takes 1,000 tons of water to produce one ton of grain, the shortfall in the Hai basin of nearly 40 billion tons of water per year (1 ton equals 1 cubic meter) means that when the aquifer is depleted, the grain harvest will drop by 40 million tons-enough to feed 120 million Chinese.” World Bank, p. viii; calculations by Earth Policy Institute based on 1,000 tons of water to produce 1 ton of grain in U.N. Food and Agriculture Organization (FAO), Yield Response to Water (Rome: 1979).

“Of the leading grain producers, only China has thus far experienced a substantial decline in production. Even with a worldwide grain crunch and climbing grain prices providing an incentive to boost production, it will be difficult for China to regain earlier grain production levels, given the loss of irrigation water.” Irrigated area from FAO, FAOSTAT Statistics Database, at, updated 4 April 2005; grain harvest from USDA,

Brown, Lester R. 2006. Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble (Washington, D.C.: Earth Policy Institute). <;

Why Exxon Loves Global Warming

Today’s Sacramento Bee publishes a story from the Kansas City Star that reports that consumers in the United States are spending about $2.3 billion more for gasoline and diesel because of higher temperatures. In other words, a warm gallon of gasoline contains less fuel than a cold gallon of gasoline — perhaps giving new meaning to the term inflation.

So Exxon and the other oil giants have good reason to welcome global warming since it helps to boost their already hugely profitable returns.

The industry is aware of the problem and is willing to make adjustments when cold weather costs it money:

“While the industry generally shies away from discussing the idea in this country, it has embraced temperature adjustment in Canada. The reason is simple. While hot fuel makes more money for the industry in the United States, cold fuel once cost the industry money in Canada. The industry put a stop to its Canadian cold-fuel problem beginning in 1990. That’s when a Canadian law supported by oil companies and other gasoline marketers went into effect that permitted retailers to temperature-adjust on a voluntary basis. Supporters said the change, which meant Canadian consumers would stop catching a break on cold fuel, brought fairness to the marketplace.”


The News Stinks

The New York Times is hiring a reporter to cover to cover perfume. The subject is very pertinent considering the terrible state of the news — both the news subject and the subsequent reporting.

Here we go preparing ourselves for another round of fictional analysis about the impending threat from Iran. The same people who brought us Saddam’s arsenal of weapons of mass distraction may now find that they have secretly been moved to Iran. Just what we need — another war.

But don’t worry. Cleverly concocted perfumes may be intended to cover up the stench of recycled reporting by Judith Miller, but with an intrepid perfume reporter the public could be alerted to the ruse.

Alas, we all know that the New York Times would never hire dare to such a perfume reporter. Instead, the reporter will provide information about chemicals that are supposed to fool our olfactory glands rather than the wretched stuff that destroys our intelligence.

Radio Interview regarding my book Railroading Economics

I did an interview with a Madison, Wisconsin radio station a few days ago.  You can listen to the interview at

I also hope to begin posting interviews with other economists.

Disposable Workers Consuming Disposables

A couple of years ago, the business press began talking about “disposable workers.” I guess that the language was too revealing. Now comes Northwest Airlines, which takes this one step further — disposable workers are advised to consume disposable trash.

Anon. 2006. “Northwest Advised Workers to See Treasure in Trash.” Reuters (15 August).

“Bankrupt Northwest Airlines Corp. advised workers to fish in the trash for things they like or take their dates for a walk in the woods in a move to help workers facing the ax to save money. The No. 5 U.S. carrier, which has slashed most employees’ pay and is looking to cut jobs as it prepares to exit bankruptcy, put the tips in a booklet handed out to about 50 workers and posted for a time on its employee Web site.”

“The section, entitled “101 ways to save money”, does not feature in new versions of the booklet or the Web site. Northwest spokesman Roman Blahoski said some employees who received the handbook had taken issue with a couple of the items. “We agree that some of these suggestions and tips … were a bit insensitive,” Blahoski told Reuters.”

“The four-page booklet, “Preparing for a Financial Setback” contained suggestions such as shopping in thrift stores, taking “a date for a walk along the beach or in the woods” and not being “shy about pulling something you like out of the trash”.”

“The booklet was part of a 150-page packet to ground workers, such as baggage handlers, whose jobs will likely be cut after their union agreed to allow the airline to outsource some of their work, Blahoski said.”

“Prepared with the help of an outside company, the booklet encourages employees to manage their money better and prepare for financial emergencies. “If you have saved some money, pat yourself on the back — you deserve it,” the booklet reads. “Take out only what you need and spend prudently”.”

Economic Catfights

I am convinced that U.S. economists are more prone to catfights than any other academics.  We cannot seem to disagree about intellectual matters without taking it personally.  Here is a perfect example.  It is too rich to try to give an overview.  Click and enjoy.


The Costs of Terrorism Hysteria

Regarding the question about the cost of terrorism, it is incalculable. First of all, the right wing pushes the idea that the public overestimates the risk of harm from corporate causes. The Mueller article that I posted applies the same reasoning to the war on terror.


But the costs, as I said, are incalculable.  Experienced travelers try to carry as much with them as possible because of the frequency of lost baggage.  How can you put a price on lost baggage unless you have a market for reliable luggage delivery?  What about the loss of personnel whose employment is derailed because of some security foul up?

What about perhaps the greatest cost — that fearful people are more likely to reelect the idiots who manufacture the fear?  How do you think the Iraqis would calculate the costs of Bush?


Finally, here’s a brief section from my book, Manufacturing Discontent about cost-benefit analysis and terrorism:

The War on Terror and Statistical Murder

To his credit, John Graham did issue a call for experts to attempt to quantify the indirect costs of inconvenience and loss of privacy associated with tighter domestic security. In Graham’s words, “People are willing to accept some burdens, some intrusion on their privacy and some inconvenience” (Andrews 2003). Apparently, he merely wanted to learn how much people were willing to sacrifice rather than to evaluate the costs and benefits of the domestic security regulations.

Two of Graham’s colleagues from Harvard, Kip Viscusi and Richard Zeckhauser, seem to have done the sort of study that he had in mind — at least the New York Times article that drew attention to Graham’s call for a study of the costs and benefits of policies to prevent terrorism seemed to suggest as much (Andrews 2003).

This linkage between Graham and the researchers made eminent sense. The first of these two authors, Kip Viscusi, has a long career of advocacy for tort reform. Between 1987 and 2002, he had earned over $600,000 as an expert witness in liability cases for the tobacco industry. He had estimated that the states actually enjoyed a budgetary windfall from tobacco sales because people died more quickly as a result of smoking (Glenn 2002). Viscusi and his co-author, Richard Zeckhauser, were both important figures in developing the “Aging Initiative.” To his credit, Zeckhauser was one of the authors of the earlier-discussed 1975 report that indicated that employers faced the equivalent of a risk of only 52 cents for violating safety and health regulations.

How did Viscusi and Richard Zeckhauser go about applying cost-benefit analysis to the War on Terror? They asked some typical Americans — students enrolled at Harvard Law School — if they would support racial profiling at airports if that practice would prevent a 60 minute delay for all other air passengers, assuming that they themselves would not be singled out as suspicious travelers. They found that 73.9 percent favored profiling others to save 60 minutes so long as they would not be singled out for profiling. The number fell to 56.3 percent if the students could be singled out — a less than likely experience for most Harvard law students (Viscusi and Zeckhauser 2003).

This study calls out for two comments. First, just imagine how industry would howl if the Environmental Protection Agency were to consider the results of a survey that asked individuals who believed themselves to be affected by dangerous pollutants from a corporate chemical plant, if they would accept an exhaustive government regulatory audit of the management of all properties in the neighborhood that seriously affected human health. Just as these law students would not mind racial profiling of others, the people near the chemical plant would probably not mind the audit of the management of properties owned by fictitious corporate individuals.

Second, this study made no effort to measure the potential benefits of racial profiling; instead, the study implicitly assumed that racial profiling would be an effective measure to prevent terrorism. Interestingly enough a little more than a decade earlier, Viscusi and Zeckhauser had written:

Often too much weight is placed on risks of low probability but high salience (such as those posed by trace carcinogens or terrorist action); risks of commission rather than omission; and risks, such as those associated with frontier technologies, whose magnitude is difficult to estimate. Too little effort is spent ameliorating voluntary risks, such as those involving automobiles and diet. [Viscusi and Zeckhauser 1990, p. 559]

In this earlier study, Viscusi and Zeckhauser brought together several threads of the statistics of risk: (1) People have difficulty evaluating risks; (2) they will tend to be susceptible to overreacting to the fears of terrorism; (3) the blame for many of the problems associated with risk lies with individual behavior rather than corporate malfeasance. Their first point is indisputable. Their third point reveals their own corporate-leaning bias. Their second point anticipated just how effective the war on terrorism would be in distracting people from their real interests.

So, sadly, neither John Graham, nor his colleagues, have do not the slightest interest in pursuing a take-no-hostages cost-benefit approach to domestic security measures comparable to the skeptical stance Graham and his coterie advocate for regulations that inconvenience business. As the New York Times article noted: “Mr. Graham, a passionate champion of cost-benefit analysis who taught at Harvard before joining the administration, stopped short of saying that government officials might somehow assign a price for costs like lost privacy or convenience” (Andrews 2003).

Indeed, when Graham’s office presented its annual report to Congress about the costs and benefits of government regulations, one of the four chapters related to 69 regulations associated with homeland security. The agency did not bother to assign benefits to any of these regulations. Its efforts to estimate costs were modest, to say the least, offering only crude estimates for a mere 13 of these regulations (Office of Management and Budget. Office of Information and Regulatory Affairs 2003). In the 2004 draft report, the agency restricted its discussion of the costs of homeland security regulations to rules imposed by the Coast Guard. This approach reduced the estimated cost of homeland security rules to one-tenth of one percent of all regulatory costs (Office of Management and Budget. Office of Information and Regulatory Affairs 2004a).

To my knowledge, nobody has applied a Graham-like methodology to evaluate government efforts to protect the public against the potential risks posed by enemies of this nation. The closest example that I have seen came in a brief mention of a calculation by the famous artificial intelligence expert, Marvin Minsky, that the probable cost per life saved from increased airline security was $100 million and that other uses for the money could save far more lives (Begley 2002).

Similarly, Jeffrey Reiman observed that in 1973, the federal government employed 1500 marshals to guard airliners against hijackers, compared to 500 inspectors for the Occupational Safety and Health Administration (Reiman 1996, p. 70). As mentioned earlier, OSHA inspectors are fairly effective; the problem is that they are understaffed and enforcement, once they uncover safety violations, is inadequate to say the least. Considering that almost 70,000 people per year die from occupational injuries and diseases, increasing the number of OSHA inspectors makes good sense. Nobody to date — certainly not John Graham — has accused the government of statistical murder on this account.

One government program, associated with the war on terrorism threatens to create statistical murders far less hypothetical than those identified by the John Graham school of cost-benefit analysis. In mid-2003, the Bush administration proposed to divert $145 million from infectious disease funding in order to develop an anthrax vaccine (Friedman 2003). The Centers for Disease Control report that as of December 2001, 42 million people are estimated to be living with just one infectious disease — HIV/AIDS. In contrast, five people died from the anthrax attacks. Similarly, the government has embarked on an ambitious program to inoculate the American public against smallpox, a disease that currently affects nobody, with a vaccine that itself poses serious health risks.

While protection against smallpox and anthrax might deter a potential terrorist from launching an improbable attack with such weapons, programs to defend against these diseases would not be particularly effective in eliminating terrorism. The most likely response to such a strategy would be to cause any would-be bio-terrorist simply to shift to an alternative method. Certainly, anthrax and smallpox do not exhaust the lethal possibilities of bio-warfare. At the same time, restoring our deplorably underfunded public health system to a reasonable level would do far more to protect the public from present threats from infectious diseases, besides shoring up society against bioterrorism.



But the costs, as I said, are incalculable. Experienced travelers try to carry as much with them as possible because of the frequency of lost baggage. How can you put a price on lost baggage unless you have a market for reliable luggage delivery? What about the loss of personnel whose employment is derailed because of some security foul up?

What about perhaps the greatest cost — that fearful people are more likely to reelect the idiots who manufacture the fear? How do you think the Iraqis would calculate the costs of Bush?

Hezbollah in New Orleans

I wonder if a fundamentalist Christian living in flight-ravaged New Orleans would prefer a fundamentalist Muslim Hezbollah government or a fundamentalist Christian Bush administration?


More than a year has passed and for many people in New Orleans the government has done little or nothing.  Only a couple days passed before Hezbollah moved in and began acting.  It may be that the US, fearing the ramifications of Hezbollah may actually move faster in Lebanon than in New Orleans.


Be Afraid, Very Afraid!

Mueller, John. 2004. “A False Sense of Insecurity?” Regulation (Fall): pp. 42-46.

John Mueller holds the humorously named Woody Hayes Chair of National Security Studies at the Mershon Center at Ohio State University. For those who don’t know football history, Google will tell you about the rise and fall of Woody Hayes.

42: “Until 2001, far fewer Americans were killed in any grouping of years by all forms of international terrorism than were killed by lightning, and almost none of those terrorist deaths occurred within the United States itself. Even with the September 11 attacks included in the count, the number of Americans killed by international terrorism since the late 1960s (which is when the State Department began counting) is about the same as the number of Americans killed over the same period by lightning, accident-causing deer, or severe allergic reaction to peanuts.”

43: He refers to “hyperbolic overreaction.”

44: ” University of Michigan transportation researchers Michael Sivak and Michael Flannagan, in an article last year in American Scientist, wrote that they determined there would have to be one set of September 11 crashes a month for the risks to balance out. More generally, they calculate that an American’s chance of being killed in one nonstop airline flight is about one in 13 million (even taking the September 11 crashes into account). To reach that same level of risk when driving on America’s safest roads — rural interstate highways — one would have to travel a mere 11.2 miles.”

New Frontiers in Lemon Socialism

Smith, Rebecca. 2006. “New Orleans Power Play Spurs Role Reversal: Entergy, in About-Face, Wants To Turn Over Electricity Assets to City as Repair Costs Loom.” Wall Street Journal (15 August): p. A 14.

“The perplexing issue of how to pay for expensive repairs to this city’s damaged electric system is forcing city leaders and officials at utility Entergy Corp. into strange new roles.  At issue: Entergy wants to hand over its assets in New Orleans to the city.  The brewing fight is an example of the extreme steps utilities can be forced to take as they look for ways to pay for damages from last year’s hurricanes — as well as prepare for the next big one — in a time of customer apprehension over how this will affect their electricity bills.”

“Nearly a year after Hurricane Katrina flooded the city, Entergy says the best way to bring its New Orleans unit out of bankruptcy-law protection is by handing ownership of utility assets over to the city.  The investor-owned utility argues such a move would enable the tiny unit to qualify for federal disaster-relief funds and regain solid financial footing, avoiding rate increases that threaten to more than double electricity rates in New Orleans.”

“One city-council member, Shelley Midura, says she has no intention of allowing Entergy to saddle the city with a partly rebuilt system and then “drop the keys on the table and say, ‘We’re out of here.’”  The dispute marks a turnabout from years past, when New Orleans officials agitated to create a municipally owned utility on several occasions — efforts that were opposed by Entergy.”

“Entergy wants the city to own the system of power lines and substations but sign a contract with Entergy so that its workers will continue to furnish the utility with electricity and make repairs.  Mr. Leonard [Entergy Chief Executive J. Wayne Leonard] says the city could set service-quality standards to ensure reliable service — something that has been criticized since the storm, since, even now, there are frequent local power outages.  “We’ll put it in a contract,” he says, adding that he believes rates might even fall 10% to 15% if the city owned the system, because of lower financing options available to customer-owned utilities such as exist in Los Angeles, Seattle and Austin, Texas.”


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