Saturday, August 23, 2008

The real price of drinking a glass of water

It is usual for most of us to get fresh water any time we need. A plain glass of water, seems to be most basic action at no monetary cost. We have not realized yet that such a simple need ,is also in danger of become very expensive. Would anyone imagine taking water pills?.
2500 scientist, politicians , and delegates from 140 countries ,are debating about the rational use of water. Rotarians ara also very active about this issue. Despite the fact that society is becoming a knowledge society, it lacks basic understanding about the proper use of water resources. 97,5% of the water available in the whole planet ,is too salty to be suitable for human consumption, and only 0,26% of water for human consumption is accessible for such a purpose ,because the rest of it, either it is on the poles, or deep underneath the earth.250 rivers ,some of them trans frontiers, cover 40 % of world water demand. Thus , It seems feasible and not far away the chance that water might become a source of conflict, just as it has become oil.-
On the other side, 1200 million people, 20% of world population ,lacks sufficient water supply.200 million get diseases close related to shortage of good quality water ,and 3 to 4 million people die because of that. Besides, 6000 children (part of world human capital)die because of the same reason .All of this means a very high social cost for wasteful water consumption, so high in comparison with private cost( almost zero),that a feasible alternative to improve the rationality of our daily water consumption pattern, might turn out to be a proportional tax: the more water people consume the higher the tax, to induce more efficiency in the use of this increasingly scarce resource. It is a paradox, that a tax ,supposedly inefficient, would comes out to solve an inefficiency. Of course ,It all depend about the purpose and the expected outcome.
Although I do not like too much taxes, this one can be unavoidable, because it is the way to solve what otherwise would imply very transaction cost ,given the fact that there is not clearly defined property right ,on the current sources of water. Therefore, as a matter of fact nobody (scientific asides),cares about the over consumption!.
In Latin America, 125 million people live without proper water networks which affects the quality of life couple with health and sanitary conditions. It follows ,that those people who lacks water, get diseases which are a kind of avoidable ones. These diseases, competes with other normal diseases arising among the population, pressing and increasing the demand for public health, to such extent that it fails to cope with the expectations in terms of quality and scope. Some people do not get public health attention. There is some research available, whose results are very clear: for every (1)euro spent on better water facilities, it is possible to save cost up to 34 euro, because of lower demand for public health .-
On average , consumers use up to 125 lts daily of water , but we are not paying the real cost of such consumption, which become higher for those who get higher levels of water consumption . So , what is it the real cost of a glass of water?. Guessing hardly less, than 35 euro!.

Saturday, August 09, 2008

Doha Trade negotiations talks

The evaluation of the recent Doha Free Trade talks outcomes , the winners are: Governments, farmers, Protectionism policies support. Among the losers are: agricultural exporting countries, less developed countries, industry, services, and cotton producers. Thus, at first glance it seemed that the chances for account that the cost of failure(more losers) was higher than its benefits(less winners). Maybe a lot of the expectation about the Doha talk, has been driven by such cost- benefit failure analysis, measured by those directly involved in the issue. In other words, key sector of global economies, and key emerging economies trying to get over their differences about trade, with good chances for getting an agreement.
However, the real measure for evaluating this 2008 Doha Round incentives, should be the impact on global economy as a whole. On that regard, a positive result of this last round ,implied annual windfall of U$$50 billion to the global economy, plus U$$ 100 billion(over a ten year period),because of tariff reduction. What is the meaning of these numbers? .Actually, World economy GDP is about U$$ 50 trillion. Therefore, the global economic benefits of any accord,(roughly around 1% of global GDP in a span of ten years),was not higher enough over its cost, which it was to keep things the way they are, with global trade (tariffs for poor country exports are 3%),and resources mobility, giving opportunities to all, although to a less extent agricultural product . Thus, there was not strong economic incentives to go further on with negotiations , based on deeper mutual concessions.
On the other side, it is the relevant issue stated by public choice theorist, which emphasizes the lower transaction cost of small homogeneous groups to join themselves around common goals(the previously defined as the winners), related with the higher transaction cost facing the larger heterogeneous groups (previously defined as the losers),which it made a lot more complex the process of negotiations ,because of the election time in USA ,and opinion polls tracking Government performance both in Europe and USA, in time of economic slowdown. Thus, the timing was not free of political pressure, for critical points. The implications are both: a.-Future negotiations would be better based on small groups, sharing common interest dealing with problem of high impact on their own economies. b.- The political background with more big players on the negotiation table, suggest a tougher path ahead ,for agreements at a global scale.