Saturday, March 22, 2014

World water day.To reflect about the uses of a key resource

Today is the so called “world water day”, which means a world wide call for caring about what we do with water. Some Celebrities and institutions (Rotary International), have made a commitment to improve the understanding about the key role, a better use of water has for mankind. They are right about it, so we should support them. The United Nations set in 1993 this day, precisely to reflect about it. Because of population increase, the demand for water has actually increased by a factor of three, while the supply remains the same, barely 1% of all water available in the planet, which have more than 95% of it, as a salty water. Whether the demand is higher than supply, there is a problem which market would solve with prices mechanism. But for prices to do its job, it requires to solve the property right issue. Water is the kind of common property good: it belong to all and none of us, would voluntarily pay a price for water, unless some claim their property right on it. Once again, markets needs an institutional framework to work properly. Thus, to allocate property right is the first step to set a price. Because its “shadow Price“ is so high, a lot of people would be interested to get such a property right because it would allow its owner to sell water, mainly for agricultural activities by far the most water intensive activity (77%), next come industry (12%),mining (6%),and at last, it is human consumption with the remaining 5%.(Data for Chilean’s economy) However, in this situation human consumption,(the least important of all alternatives of water uses), would have to pay a huge price. Besides, Markets do not take into account the ability to pay the prices it set. The State may complement markets to allow the access to all of clean water, throughout the production of public water at lower prices, just like it does with other services. The alternative option, would be to transform salty water of the sea, into the input mining activities needs, or water recycling for agricultural and industries requirements. In this two cases prices would also be lower, because supply of water for human consumption would be higher. Even so, the challenge to improve the rationality of water uses still remains on. Demand is still moving upward, at a faster pace than supply.

Monday, March 03, 2014

Productivity gains

It is usual to know reports about productivity perfomance, but it is not that much usual to understand the relevance of improving productivity.- The latest report says that Luxemburg workers are the most productive of the world.This outcome come out of the total product divided by the employed labor force in there.It is not a reliable indicator for the "true " productivity, but it says something about the standard of labor force perfomance.However, as any average it hides the details, and somehow misslead what really is the productivity level. The "true productivity " which counts is the marginal one. This is the last worker contribution to output.Inside the firm,It depends on humnan capital, specific skills,management models and policies. Outside the firm, it depends on macroeconomic and microeconmic policies, and the institutional framework which reduces transaction cost (low corruption practices, law enforcement, property rights protection,efficient public administration management). High productivity imply a lot of benefits, such as higher wages, better and more efficient access to business opportunities, better share of global output value added ,and higher per capita income.In other words better living conditions.- Besides, Countries with high productivity levels , become more competitive.Productivity becomes a source of competitiveness . The key question is why with such benefits , there are countries which seems not to care about it?.Well a proposal is that productivity is a long term goal.It is linked to education system, cultural values, and business practices and its management models.-