What does the drought cost?

I got to wondering whether the drought will necessarily cost us money.  The numbers for ag are clear:

Richard Howitt, professor of resource economics at UC Davis, last week offered sobering numbers to the state Board of Food and Agriculture.

Using computer economic models and DWR water data, Howitt estimates 40,000 jobs will be lost, along with $1.15 billion in income.

But this is just the first splash of trouble, because Howitt’s estimate applies only to areas of the Central Valley south of the Delta, and only in the farm sector.

They get quoted all the time, but I can tell you for sure that the reason they get cited so much is that his study is quite literally the only study we have. People want to quantify the effects of the drought, so they give the only numerical data we have. That’s understandable, although people confuse “the only thing we know” with “the whole story”.

However, this drought has also been a huge spur for urban conservation. If the premise behind conservation is true, that measures like fixing leaks and lawn removal and fixture replacement are pure efficiency gains, then presumably most of the urban drought measures will have some payback rate. Districts could have gotten those returns at any point, but it took a drought and someone else’s money to get them moving. I’m also seeing stuff like this, where the drought has brought enough pressure to get institutional realignments. I don’t know anything about that one in particular, but presumably the participants think there are gains from it. If so, and if the infrastructure and behavior changes stick around after the drought, racheting down inefficiencies in urban use could plausibly have a positive payback within a few years.

I don’t know that to be the case, and I don’t know how it will compare to ag losses. But it that is the kind of contrarianism that drives traffic to blogs and gets an econ grad student big press. So I’m hoping that some econ grad student takes it up. I’m sure Howitt’s study is fine for what it is, but I’d like to see more of the picture.

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1 Comment

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One response to “What does the drought cost?

  1. Don

    How much of “someone else’s money” has gone into Westlands?