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Comment by nshepperd | Hacker News Reader

> Still, in many cases there’s little incentive for farmers to save water. Agriculture uses 62 percent of China’s water, but crops have a relatively low marginal value. So the government bans the sale of agricultural water to industry, which pays 10 times the price, to ensure food supply.

This discount on water is effectively a cash subsidy for agriculture that increases with the amount of water wasted instead of useful goods sold.

Seems like every country everywhere has the same issue: they don't want to sell water at the price it is actually worth, so it gets wasted and people complain about water security issues. (Then if it's a city residential area, they introduce rules like "no watering your lawn" in the hope that it will reduce waste, instead of canceling the 90% off all-year-round water sale.)

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Did it ever occur to you that pricing hundreds of millions of poor Chinese farmers out of their ability to grow food to eat, so that much richer exporting industries can have more water, while being a "market solution", might not be an acceptable - even a humane - solution?

Did it ever occur to you that a cash subsidy might be a lot more acceptable and humane answer that the current water subsidy?

You're framing this as a question of "should we give these peasants free water, OR just let them starve?" That's not what's being debated, and is disingenuous at best.

This is what I understood was being debated: industry requires a lot of water, and they can pay it 10 times what the peasants pay for it. But, currently, they aren't allowed to buy the water that is needed for farming, which is the same as giving a subsidy to peasants. Instead, we should let the market decide, ie, let industry buy the water and leave the peasants without it. What will the peasants do then? Why, they are free to move to the cities and become industry workers; perfect market solution.

Did I get it wrong?

> which is the same as giving a subsidy to peasants.

Correct. It is a large subsidy to the peasants.

> Instead, we should let the market decide, ie, let industry buy the water and leave the peasants without it.

Yes, but with the money, which as earlier discussed is worth several times more than its value in subsistence agriculture. The person you were originally replying to was complaining that a 90% discount on the sale of water was essentially an extremely inefficient cash subsidy; the obvious solution is replacing it with an efficient cash subsidy. That's hardly humane.

> What will the peasants do then? Why, they are free to move to the cities and become industry workers

If that was a practical solution at the required scale, they'd have already done it. Hence why a subsidy is needed.

> Did I get it wrong?

It does look that way, yes.

Depends on the implication. If you supplied the same water in the same way then allowed resale farmers would strictly be better off. (Ignoring graft.)

The water shortage will not take hundreds of millions of farmers to equalize. Price rises by 0.01 cents per gallon and many farmers will will become more water efficient while selling freed up water on the open market. This, assuming some water vs trade off, would also raise food prices giving more money to farmers who do nothing differently.

The poor and everyone else would get higher food prices, but access to more reliable sources of water.

Did it ever occur to you that by not pricing out poor, upstream farmers that hundreds of millions of poor Chinese workers will die of thirst?

I think its perfectly reasonable to value a scare resource at a market rate. If the rate is too high to be tolerable then the government has an incentive to invest in water infrastructure. And people have an incentive to move where resources are under less strain.

Or we could just rape the environment for short term gain. It seems to be everyone's solution on every side.

Yeah, I think some people forget what "farmer" means in China - are we talking about big agribusiness farms or subsistence-farming peasants who haven't made it into China's industrial revolution yet?

An appallingly minuscule tax (eg: $0.01/1000L) would encourage appropriate (nay, mandatory) rate monitoring as well as provide a modicum of oversight.

Keyword: rate monitoring, not rate limiting

If richer exporting industries are richer than hundreds of millions farmers, doesn't it mean that they are more effective, and may be a large industrial farm would be more effective than individual farmers, too?

It does, and it would, but what are you going to do with those 100 million farmers? Their children are rushing to the cities faster than you can possibly imagine. But it takes at least a generation or two to change a country of poor farmers into an industrial, educated, urbanized society. And until then, you have this problem.

In a capitalist, free market economy, we don't have to do anything with people. They're doing anything they want instead.

China might not be there yet, but thankfully, they're already got rid of the central planning.

That only works in a reasonably static society, where people can make informed decisions about what they want. If an elderly farmer had an opportunity to learn a trade or get an education, yes, he might be a welder, or a wine taster, or a writer - but it's a little late for that when he's 40 with a house and wife and kid, and everything he owns is in that farm, which was the best option he had as he steered himself down the path of his life.

And now the market is saturated with cheap, industrially farmed food, making his output worthless. It's hugely oversupplied with obsolete farmers. Yes, the market will even things out eventually - but that can have a steep, painful human cost.

They're doing anything they want and can afford, an important additional constraint.

Remember the old cliche, "America: the land of the free, terms and conditions apply"

Imagine if farmers were growing luxury vegetables like tomatoes, potatoes, beans, instead of growing several magnitudes more of cheap crappy grains that are then filtered through bodies of animals.

Of course issues exist, because inefficiency is subsidized.

For example, growing quinoa is a freaking gold mine yet there's still not enough competition.

Yet growing corn and wheat is a life living on the edge of bankruptcy yet it is heavily subsidized by the state everywhere.

There's no free market in farming, probably never will be because the ruling class is afraid of food shortages and set-in-stone food luxury standards.

Not to get off topic (but to support your point), I once read an op-ed that made an argument that the increase in obesity (in the USA) was due to farm subsidies. That is, cheap corn is used to make high-fructose corn syrup, and that low cost sweetener in turn ends up in everything.

And of course, as you mentioned, grains make cows, pigs, etc. cheaper. Again, not ideal for the human body and even less so for Mother Nature.

The free-market might lead to the same, but it certainly seems less likely.

There is also a national security issue to make sure a nation can feed itself. The government's responsibility is towards long term sustainable food supply for it's citizens.

Still, subsidies given do not really indicate long-term sustainable food supply. The most efficient way to guarantee food for the population is by growing plants directly.

If it turns out that the farmer that uses the water for his grain fed factory-farm animals, then the allocation of that money was useless.

There's much more protein/carbs/fiber calories per energy wasted in vegetables than it is in meat in the case of factory farmed meat.

To me it just looks as if luxury foods like meat have large industry players that have influenced the law and the politicians to get subsidies they need to keep their products as cheap as ordinary poor-man food (potatoes, beans, dark greens etc.).

Feed itself? Yes. The problem is Uncle Sam has overshot that and now the majority of adults are over-feeding themselves.

Note: I understand the rise of obesity is a more complicated than overeating. That said, you don't get obese by under-eating.

p.s. Ironic that obesity has been declared a threat to national security. That is, we're too fat to fight.

Your inclusion of a city residential area is problematic. Selling water at the price it is actually worth would increase the price of necessities for humans.

Differential billing by amount consumed is already a thing. Use restrictions are a stop-gap measure to conserve water when you wouldn't trigger the higher price due to high consumption.

Our water security solution should not stop us from growing food. Increasing the price of water used for drinking, washing, and bathing is the outcome we want here.

No, we want water efficiency. Agriculture has access to cheap water, thus no incentive (nor the economic ability to invest for equipment) to conserve it.

If they would get water at the normal price, their goods would all increase in price, but from a higher price with the same profit margin they'll be able to save for water saving technologies, which will allow them to increase their margin further (or offer lower prices - as eventually everyone will invest in water conservation methods).

And then cities will have more water and food will cost a bit more.

You subsidize one way or another.

Farmers are land rich and cash poor.

You can subsidize them for their water, or capital investments, or you can not get food.

Domestic food security is a national security issue.

The point is that subsidies should not be proportional to water use, but to food production. Otherwise there is little incentive to make more efficient use of water, and that leads to farmers planting crops that sell at a higher price but require disproportionally more water.

It's an extremely important point when you consider the water going to things like almonds in California, the majority of which are then exported. Their almond crop alone consumes enough water to supply Los Angeles and San Francisco combined. Only 20% of California water is for non-agricultural purposes.

Or put another way, the total economic value of all exported almonds from California is about $3.5 to $4 billion. The water use is about on par with the entire city of Los Angeles for that almond export crop. The metro area of LA has a trillion dollar economy by comparison (250+ fold larger than the almond exports). That's an economically irrational imbalance.

The obvious question becomes: is that what California wants to do with its scarce water resources, export large parts of it at an extremely low value basis? At some point in the near future it's likely some hard choices will need to be made, including whether to invest extremely large sums of money into more desalination plants or to begin restricting the most voracious water consumers (cattle are another one, although I'm unsure of their export ratios).

From a free market perspective, I would think it to be more efficient to directly subsidize farmers, ie, with generous tax credits, than to subsidize water.

Then you get to subsidize food but still have an efficient allocation of water.

Farmers might be more incentivized to grow crops with less water requirements but more food value.

See the American West, water was sold cheaply and is still for the most part under priced resulting in waste. throw in laws preventing farmers from one area selling their own well water or stream water to other farmers who merely may be a county line away and it just exaggerates usage from reservoirs

While subsidies might be incentivizing waste, this is better than the alternative, which is not having enough food.

The "free market" solution to take food out of people's table is a very good way to have some politicians at the gallows in no time (see Arab Spring)

> The "free market" solution

Free market agriculture has been far more successful at eliminating hunger than any other system.

Every country heavily subsidizes and protects their agriculture market.

There is no free market in agriculture.

World hunger has not been 'solved' and any success cannot simply be credited to 'free markets' for a such a large scale complex human social problem.

Hunger is a solved problem everywhere there is a free market.

It makes sense for countries to protect their domestic food production as a military asset - cutting off the food supply is a common warfare tactic. Subsidies also come about because of powerful agricultural lobbying interests. As to if subsidies reduce hunger, the evidence is scant to none. There is plenty of evidence, however, that they result in inefficient misallocation of resources, such as water.

Also, many subsidies in the US are in the form of price supports, and paying farmers to not farm. These are designed to increase costs to consumers, because the free market was allegedly too successful in reducing the price of food.

Check out the great American pig slaughter during the Depression:

https://livinghistoryfarm.org/farminginthe30s/crops_17.html

The subsidies are actually minuscule, compared to welfare spending and other transfer payments to the needy.

That's blatantly false. The US, Europe, China, Japan and every top agricultural nation subsidizes agriculture.

Subsidized agriculture has been responsible for pretty much ending hunger in most of the world. Free market agriculture hasn't been responsible for ending any hunger.

In the USA, welfare spending dwarfs farm subsidies by a factor of >50. No doubt this is true elsewhere, too. Private ownership of agriculture is what ended hunger. Its effect has been shown quite convincingly in Massachusetts and China.

> In the USA, welfare spending dwarfs farm subsidies by a factor of >50.

That depends on what you count as a "subsidy". Are all the roads, dams, diverting of rivers, etc counted as "subsidies"?

> Its effect has been shown quite convincingly in Massachusetts and China.

Modern subsidized agriculture in both countries has quite convincingly showed it.

Not sure why you are now moving the goalpost to welfare.

The US didn't always have agricultural subsidies. Hunger in the US was virtually eliminated before the Civil War. Agricultural subsidies did not happen until after WW1.

You could argue that government help in wiping out the natives and stealing their land and giving it to the white settlers is an agricultural subsidy. It's true that we've never had persistent hunger in the US. But that's cause we stole all the natives land. The natives however suffered tremendous hunger/starvation though.

> But that's cause we stole all the natives land.

Archaeological bone evidence of the pre-Columbian Indians is that they periodically had famines. Having land is not a sufficient condition for having a consistent, sufficient food supply.

The US, around 1800, was the first country in history to achieve a consistent food surplus.

you are talking about the current value as offered by the industry, but the actual value it will have down the line is not messured in monetary terms. Or at least, if you think money were happinies, you argue for inflation. Differential equations are often used to model dynamic systems. What you mention is only one first order solution to a partial deq only (ok, i'm pretending, sew me), implying a linear relation, but you omit the other dimension. Who is going to buy from the industry, in case the inflation rises to the point of starving most of the country? Point being, this is not as simple as you imply, by a long shot.

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