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Umm what's the incentive or motivation behind making this trade able? At first glance this seems incredibly concerning, especially if we ever get to a point wh

Umm what's the incentive or motivation behind making this trade able? At first glance this seems incredibly concerning, especially if we ever get to a point where some people can 'afford' water while others can't. While we don't need oil or gold for our immediate survival, they do play key roles into how our society operates. I'm hoping to understand more on why we should treat water in the same way.

easytiger 6y ago
The same reason grain and cheese have derivative markets Michael Burry, of Big Short fame, is well known for moving his interest to water investment/trading many years ago https://www.killik.com/the-edit/why-michael-burry-is-investing-in-water/ https://www.killik.com/the-edit/why-michael-burry-is-investi... This article goes some way to explaining the rationale
- puranjay 6y ago
  > The same reason grain and cheese have derivative markets Grain and cheese are the product of human activity. Fresh, clean water exists in plenty in nature.
  - harperlee 6y ago
    I may need coffee, but what problem is entailed by what you state?
  - VMG 6y ago
    https://en.wikipedia.org/wiki/Water_conflict https://en.wikipedia.org/wiki/Water_conflict
  - stevesimmons 6y ago
    >Fresh, clean water exists in plenty in nature. Except in the places/times it isn't, which is much of the world for some of the time, and some of the world for much of the time. Water rights exist, and who gets to exercise them in times of shortage can be very contentious, and even a cause for war.
    - puranjay 6y ago
      > Water rights exist, and who gets to exercise them in times of shortage can be very contentious, and even a cause for war. Which is precisely why trading water futures is an immoral idea and can't be compared to trading any other commodity. There exist alternatives for every commodity on the planet (don't have oil? Use coal. No coal? Use wood, etc.), but there are none for water.
      - eru 6y ago
        You probably think that trading organs is immoral as well? There's plenty of alternatives to any specific water, just use some other water. (And if you really want to, you can make water from oxygen and hydrocarbons.)
      - easytiger 6y ago
        This is philosophically giberish. The world is not delivering water to your exact location at all times on demand. Logistics, infrastructure and regulations are.
  - bagpuss 6y ago
    1 litre of water = 1 kilo. Difficult to extract, store and transport while maintaining quality.
  - sanxiyn 6y ago
    On the other hand, moving water is certainly the product of human activity, such as California Aqueduct moving water from Northern California to Southern California.
  - Areading314 6y ago
    The idea that fresh, drinkable water exists "in plenty" is extremely off base. Humans need vast quantities of fresh water to allow modern-day life. Furthermore it is incredibly expensive to provide fresh water at any meaningful scale when it is not available naturally.
    - puranjay 6y ago
      Humans need vast quantities of fresh water. A human does not. There is "plenty" of water for an individual in nature.
      - eru 6y ago
        Human industry and agriculture needs lots of water. The numbers are fairly large even for individuals. Humans themselves need fairly small amounts for direct use like eating, drinking, hygiene.
      - itsoktocry 6y ago
        >There is "plenty" of water for an individual in nature. What do you mean by "nature"? Do you own the land where the water is, or do you simply plan on collecting rainwater? Otherwise, you don't own the water. This is a real-life problem that countries and communities the world over are dealing with.
      - anoncake 6y ago
        Earth is populated by humans, not by a human.
    - jeltz 6y ago
      Yes and no. There are huge amounts of fresh drinkable water. It is just that it is in Canada and Russia and not where we have our agriculture. Here in Stockholm we have much more clean water than we ever could use, just like Russia and Canada. Water shortages are local problems. The issue is just that a lot of the world's agriculture are on places with little water.
  - mulmen 6y ago
    Dams and pipes are also products of human activity.
  - easytiger 6y ago
    > Fresh, clean water exists in plenty in nature Not really no. It requires huge amounts of infrastructure, logistics, regulation to get it to people. Industrial activity, farming use water to make the food you eat
  - eru 6y ago
    What about iron ore or gold?
- fakedang 6y ago
  And he exited his water positions a few years back too.
deleted 6y ago
[deleted]
zodiac 6y ago
> especially if we ever get to a point where some people can 'afford' water while others can't. If we do get to a point where this is true, it will primarily be because of decreasing amounts of water sources, increasing population, etc. Banning water futures won't magically solve these problems.
- figassis 6y ago
  But will likely accelerate them
  - throwaway_pdp09 6y ago
    Why?
  - julienreszka 6y ago
    Why would it accelerate problems? More likely people will have an incentive to make water sustainable.
    - dgb23 6y ago
      When a private company owns one of the most basic resources for survival, then they have the ultimate leverage over you. Privately owned water is being extracted from a region and then sold. They have no incentive to sell water to those who need it to survive, except if they also accidentally make the owners more money. One basic consequence is incredible human suffering and an extreme amount of power imbalance. Then, it is a matter of time and critical mass until things get ugly and violent.
      - julienreszka 6y ago
        I see your point
      - zodiac 6y ago
        It sounds like you have a problem against privately owned water rights (the exclusive right to extract water from some region and then sell it), not against water futures per se? FWIW I'm sympathetic to that position (in some form), it would just be better to be more precise... people are acting like "water is a basic human right" is a principle that can straightforwardly be used to derive the rest of our water policy.
kortilla 6y ago
> Umm what's the incentive or motivation behind making this trade able? Because it’s pretty fucking important and the best way to make sure it’s not wasted is to get it as freely traded as possible. Rations are terrible and we need pricing to make sure we aren’t doing something dumb like growing almonds in a desert with water that needs to be used for drinking water or even just another crop that isn’t so inefficient. As it stands, the super old water rights around the US of farmers are fucking the rest of society because they don’t pay for it on an open market.
- hombre_fatal 6y ago
  The title is provocative as people's minds immediately go to some sort of dystopia where nobody can afford a water bottle because of megacorp capitalism or something. But it's sobering to realize how much water agriculture can waste today. My cousin inherited some sort of farm license when they bought their property in the countryside. It has a well down into the water table and river access. He was saying how he could freely pump 100,000L/day if they wanted to, mainly going on about how weird it was to see how few stipulations there were in said license.
- iso1631 6y ago
  > As it stands, the super old water rights around the US of farmers are fucking the rest of society because they don’t pay for it on an open market. This is just an extension of land. Certain people are granted a monopoly on a resource because their ancestors knew the right people, or were simply lucky. Inherited luck. No way to run a country.
  - eru 6y ago
    Well, a land value tax is a good idea, sure. And would extend to water rights that might come with the land. Or alternatively, the government could officially own all the water supply and auction it off. None of these is an argument against trading of water or water futures.
ALittleLight 6y ago
Say I'm a farmer and I need X gallons of water next year. How much does that cost me? It costs YX where Y is the cost of water per gallon next year - which is unknown. "Unknown" is something of a problem when preparing the budget for next year. I could buy X gallons now, but then I'd need a way to store it. Or, I could agree to pay a specific price now for water that would be delivered in the future.
lanman 6y ago
> especially if we ever get to a point where some people can 'afford' water while others can't. Aren't we already arriving at that point? The Flint water crisis is still ongoing since 2014. https://en.wikipedia.org/wiki/Flint_water_crisis https://en.wikipedia.org/wiki/Flint_water_crisis
solatic 6y ago
Futures markets improve the affordability of the resource by its actual consumers by stabilizing its price. Unpredictable prices, even if they end up being low, hurt consumers by requiring consumers to keep cash in reserve just in case the (remember, unpredictable) price swings wildly. That cash in reserve is cash that cannot be spent elsewhere, be it necessities like food or luxuries produced elsewhere in the economy.
- amelius 6y ago
  Has this been found empirically or is this just a theory, just like how the free market without government intervention always is supposed to give the most favorable outcome?
  - goodcanadian 6y ago
    I think this highlights an oft-missed point. There is no such thing as a free market without government intervention. Left to their own devices, traders will always try to game the market to their own advantage.
    - eru 6y ago
      Your comment is somewhat of a non sequitur. First, if you look hard enough, you can see traces of the hand of government in almost anything on earth, including any market. In practice, government meddling is a matter of degree and kind. The dose makes the poison. There are some markets that are free enough of interference that we can fruitfully analyze them as 'free' markets. Second, what do you mean by 'try to game the market'? In general, markets are sustainable in the long run without government interference (and usually actually more stable this way). Interactions in markets often behave like the famous Prisoner's Dilemma. So, yes, for a single interaction it's profitable to cheat the other guy, but repeated interactions tend very strongly towards cooperation.
      - goodcanadian 6y ago
        Free markets only work when there are large numbers of sellers and buyers. One example (out of many) of a necessary government intervention is to prevent monopolies from forming (or at least regulate them). Whenever one party has an outsized influence, they will tilt the whole market in their favour. It doesn't even have to be a monopoly, if a single player makes up a substantial portion of the market, they can affect it in non-free ways. Even Adam Smith recognised the need for government regulation to ensure that markets remain free. Edit: I think you may have misread my comment; I wasn't claiming that there is no such thing as a market without government interference (though that is probably mostly true). I was claiming that a market cannot be free without government regulating it to keep it free.
solveit 6y ago
It's sad how people just don't believe that markets are good at all.
- eru 6y ago
  And this is HN already. The attitude of the general population is often worse. I do remember early HN and even early reddit being much more pro-market. I wonder, assuming my perception mirrors a real change, whether that's down to changes in individuals' attitudes or to different people making up the bulk of the communities? Are we just going mainstream?
  - ianleeclark 6y ago
    > do remember early HN and even early reddit being much more pro-market It shows you have registered in 2007. Quite a lot of history has happened since then which may have altered people's opinion of the pro-market narrative. > Are we just going mainstream? Mainstream opinion is very pro-market. Calling for abolition of either markets or value itself is a highly niche position--you will typically only see people calling, to varying degrees, of smoothing rough edges.
    - eru 6y ago
      Interesting, from what I can tell the mainstream seems crazy far left and in favour of all kinds of interventions to 'smooth rough edges' and worse. Rhetoric against rich people is rather popular. But yes, from an even further left point of view, full on abolishing of markets ain't that popular. (A few countries tried going in that direction throughout history, it never ended well.) In the US the Republicans are against free trade, and the Democrats have their usually anti market stance. About stuff since 2007: the economic difficulties in the years after mostly showed that when central banks refuse to print enough money, nominal spending drops, and the economy tanks. (The Israeli and Australian central banks kept their countries' nominal GDP stable, and mostly avoided recession.) But you are right that the perception in the mainstream does not agree with that perspective (as I mentioned, the mainstream is by-and-large anti-market.)
vishnugupta 6y ago
> especially if we ever get to a point where some people can 'afford' water while others can't. We are almost there. In Bangalore, India due to hockey-stick like expansion of houses, mainly high rise gated communities, the municipality is just not able to supply tap water. They all rely on daily supply of water tankers. However, even that water isn't potable. So house holds buy bottled water or have RO machines. Bear in mind, this is the situation for middle/upper-middle-income group. Lower income groups just drink any water they can, waterborne disease is rampant. This[1] talk from P Sainath about the water crisis in India is revealing. I would the situation would be similar in other emerging countries. I remember that a few months ago Cape Town, SA ran out of water[2]. Water was strictly rationed. [1] https://www.youtube.com/watch?v=E-l2LvA2dSI https://www.youtube.com/watch?v=E-l2LvA2dSI [2] https://www.weforum.org/agenda/2019/08/cape-town-was-90-days-away-from-running-out-of-water-heres-how-it-averted-the-crisis/ https://www.weforum.org/agenda/2019/08/cape-town-was-90-days...
- IronRanger 6y ago
  With the core factor being that there are more people than the water supplies can support. The solution here is a one-child or no-child policy, just as in China.
  - rorykoehler 6y ago
    Desalination at scale is the solution.
    - cdmckay 6y ago
      This has environmental consequences.
      - rorykoehler 6y ago
        We've opened pandora's box. I'm not saying a one child policy isn't a solution but it's not the solution.
    - 6y ago
eru 6y ago
You need so little water for drinking that it's essentially free or close to free. Properly trading water is more important for industry and agriculture. And I'd be very happy, if some very 'thirsty' crops like almonds or industrial applications would stop because they might not be profitable once you take the full cost of water into account. The alternative is what you see eg in California, where residential users of water often face severe restrictions, but many agricultural users have grandfathered water rights that they have to squander to keep.
- yodelshady 6y ago
  > You need so little water for drinking that it's essentially free or close to free. Yeah, that's developed-world life talking. Markets absolutely work at dissuading growing almonds in the desert. Until there's too much wealth disparity, and Peter is willing to pay more than Paul has in total for desert-grown almonds. Either Paul steals the water or he dies, and thieves aren't popular. Of course there's another form of currency - votes. I can't really say they're universally distributed, because FPTP screws up the purchasing power of a vote. But I'd give good odds on a very strong correlation between a functioning democracy and cheap water.
  - eru 6y ago
    Do you have an example of a place that has both a reasonably free trade in water and where poor people can't afford water to drink? > Markets absolutely work at dissuading growing almonds in the desert. Until there's too much wealth disparity, and Peter is willing to pay more than Paul has in total for desert-grown almonds. Either Paul steals the water or he dies, and thieves aren't popular. Eh, unlikely. Peter will just get his almonds from the cheapest supplier, who is unlikely to be growing in a desert. There's nothing special about water in the scenario you are describing. Plenty of other commodities are traded on markets, and more developed markets have meant better and more secure supply for everyone, especially poor people. > Of course there's another form of currency - votes. I can't really say they're universally distributed, because FPTP screws up the purchasing power of a vote. But I'd give good odds on a very strong correlation between a functioning democracy and cheap water. Only some countries use FPTP. In any case, there's a strong correlation between any attributes generally seen as desirable. Figuring out causation is harder. Btw, you know what poor people lack even more than money: influence and connections. I wouldn't look to politics to improving their lot.
georgeek 6y ago
Almost everything that one would need for daily subsistence is tied to benchmark future contracts: cattle, soy beans, rice, wheat, sugar, coffee are all traded as futures on exchanges. Most coffee in the world is traded against the Coffee C future benchmark for instance: https://www.theice.com/products/15/Coffee-C-Futures https://www.theice.com/products/15/Coffee-C-Futures Giving producers and consumers a way to get a standardized contract at a given point ahead in time usually makes the price of the underlying commodity much more stable. It has been argued that the way our society operates is based on the concept of futures contracts. It all began with the Dutch tulip futures in the 17th century that stabilized flower prices and made them a viable business: https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania
- triangleman 6y ago
  Don't miss the "Legal Changes" section of that article. The bubble and subsequent bust, it turns out, was caused by government meddling (at the behest of powerful economic interests, mind you).
chordalkeyboard 6y ago
Capitalism's ability to make things into commodities is a way of making more of things. The timeliness is that water is getting scarce enough that soon people may not be able to afford water. This is a way to make it so that water stays affordable by incorporating it into a system where there is a profit incentive for producing more of it.
- bawana 6y ago
  water or cpus or gpus.....it's all the same....secondary markets only allow abuse, not 'fair access'
  - chordalkeyboard 6y ago
    You don't think people should be allowed to sell water unless they own the water source? What would be the environmental cost of prohibiting sales of cpus/gpus by anyone who didn't own a cpu/gpu factory?
tasuki 6y ago
> Umm what's the incentive or motivation behind making this trade able? Why shouldn't it be? I buy water every day. > At first glance this seems incredibly concerning Why? > While we don't need oil or gold for our immediate survival, they do play key roles into how our society operates. I'm hoping to understand more on why we should treat water in the same way. Because it's very important for our survival!
siruva07 6y ago
The incentive is to start pricing water appropriately. When water is priced appropriately it will be valued. When it is not priced appropriately, it is wasted and misused. We should treat water the same way because water is a human right, a commodity, and a resource. This discussion is prominent in the early chapters of Planet Water (https://www.amazon.com/Planet-Water-Investing-Valuable-Resource/dp/0470277408 https://www.amazon.com/Planet-Water-Investing-Valuable-Resou...) By mispricing the resource, we've gotten to where we are: 1) Massive inequality 2) Bottled water has become the default backup system to investing in rebuilding the tap water system 3) There is not enough investment to rebuild the tap water system. The paradox is best seen at an airport where a bottle of water is $5 in a single use plastic bottle (that lasts for 450 years) and the water fountain which is "free." As a social capitalist, I believe "free" water is bad for the marketplace. I've written about this more here: https://drinktap.substack.com/p/tap-june-2020-update https://drinktap.substack.com/p/tap-june-2020-update
imtringued 6y ago
Water futures are just a promise to deliver water at a certain price. You can sell the promise for money even if you don't have the water today but you know you will have the water tomorrow. If you sell your water on the day it is extracted then you are vulnerable to daily market swings. Sometimes there will be gluts, sometimes droughts.
ThomPete 6y ago
Billions would die without oil as oil pumps and pipes gives access to water among many other things.
Chris2048 6y ago
> especially if we ever get to a point where some people can 'afford' water while others can't Does the trading of other kinds of future cause this? For example, the fact that corn or oil can be traded. > we don't need oil or gold for our immediate survival gold, maybe not, it's mostly used by financial institutions as collateral, but I think we require petrol a lot.
hh3k0 6y ago
> Umm what's the incentive or motivation behind making this trade able? Money.
deleted 6y ago
[deleted]
deeeeplearning 6y ago
>Umm what's the incentive or motivation behind making this trade able? Uh.. Money? lol
dnautics 6y ago
What's the problem? These are futures, not options, so the dynamic is different and you MUST take delivery at the price you bid for. If anything this is a fantastic step in the right direction of starting to acknowledge that the cost of consumption should be borne by the consumers (and not by the politically less privileged).
- dheera 6y ago
  Except this will encourage people to take delivery and resell it at a markup, and the victims of this scheme will be the lower income class. Water should be free upto basic living necessities, and the government should be responsible for maintaining that.
  - tempsy 6y ago
    it’s all financially settled. there’s no actual physical delivery of water with these contracts.
  - Dylan16807 6y ago
    Water's cheap and storage isn't. I would expect resale to only significantly affect the price of extreme bulk use. Residential use isn't that big and I expect the vast majority of the price to stay in distribution and filtering.
    - deleted 6y ago
      [deleted]
  - dnautics 6y ago
    > Water should be free upto basic living necessities. If you mean to an end user, that's your opinion. I think we should aspire to that, but water is most definitely not "free" in general, and treating it as such is very dangerous. Even if government is responsible for providing water to the people, there is a cost (to the government for obtaining that water), and that cost needs to be accounted for somewhere. Perhaps you can provide a better price discovery mechanism that efficiently matches the price to its cost, that is robust to environmental swings and minimizes waste. Please let us know.
AnthonyMouse 6y ago
> Umm what's the incentive or motivation behind making this trade able? Water is a scarce commodity used in industry. Since there is more demand than supply, supply has to be allocated in some way. Markets are the ordinary way of doing that. What do you propose as an alternative? Here are some examples. The first option is to give everyone the same amount of water, and prohibit anyone with more than they need from selling it, since that would be back to markets again. That obviously doesn't work, because some, like farms and power plants, need more than the typical household, and they would have no way to get it. Another option would be to make water free to everyone. Use as much as you want. But it's scarce, so some would water their lawn in the middle of a drought and people would die. Another option would be central planning. The politburo would decide how much water everyone gets. This requires your politicians to be smart enough to make better allocations than markets would and then actually apply that intelligence to the problem even when there is no personal benefit in doing that and a large personal benefit from corrupt allocations. Historically the results of doing things this way have ranged from mediocre to presiding over the deaths of millions of people. Markets work better than all of those things, so what do you propose that works better than markets? Note that there is a version of the first option that works great in combination with markets -- everyone gets a minimum amount of water required to live and then all the rest of the water is sold in the market. But then you still have markets for water.
timeeater 6y ago
If water is free, it gets squandered.

easytiger 6y ago

The same reason grain and cheese have derivative markets Michael Burry, of Big Short fame, is well known for moving his interest to water investment/trading many years ago https://www.killik.com/the-edit/why-michael-burry-is-investing-in-water/ https://www.killik.com/the-edit/why-michael-burry-is-investi... This article goes some way to explaining the rationale

puranjay 6y ago
> The same reason grain and cheese have derivative markets Grain and cheese are the product of human activity. Fresh, clean water exists in plenty in nature.
- harperlee 6y ago
  I may need coffee, but what problem is entailed by what you state?
- VMG 6y ago
  https://en.wikipedia.org/wiki/Water_conflict https://en.wikipedia.org/wiki/Water_conflict
- stevesimmons 6y ago
  >Fresh, clean water exists in plenty in nature. Except in the places/times it isn't, which is much of the world for some of the time, and some of the world for much of the time. Water rights exist, and who gets to exercise them in times of shortage can be very contentious, and even a cause for war.
  - puranjay 6y ago
    > Water rights exist, and who gets to exercise them in times of shortage can be very contentious, and even a cause for war. Which is precisely why trading water futures is an immoral idea and can't be compared to trading any other commodity. There exist alternatives for every commodity on the planet (don't have oil? Use coal. No coal? Use wood, etc.), but there are none for water.
    - eru 6y ago
      You probably think that trading organs is immoral as well? There's plenty of alternatives to any specific water, just use some other water. (And if you really want to, you can make water from oxygen and hydrocarbons.)
    - easytiger 6y ago
      This is philosophically giberish. The world is not delivering water to your exact location at all times on demand. Logistics, infrastructure and regulations are.
- bagpuss 6y ago
  1 litre of water = 1 kilo. Difficult to extract, store and transport while maintaining quality.
- sanxiyn 6y ago
  On the other hand, moving water is certainly the product of human activity, such as California Aqueduct moving water from Northern California to Southern California.
- Areading314 6y ago
  The idea that fresh, drinkable water exists "in plenty" is extremely off base. Humans need vast quantities of fresh water to allow modern-day life. Furthermore it is incredibly expensive to provide fresh water at any meaningful scale when it is not available naturally.
  - puranjay 6y ago
    Humans need vast quantities of fresh water. A human does not. There is "plenty" of water for an individual in nature.
    - eru 6y ago
      Human industry and agriculture needs lots of water. The numbers are fairly large even for individuals. Humans themselves need fairly small amounts for direct use like eating, drinking, hygiene.
    - itsoktocry 6y ago
      >There is "plenty" of water for an individual in nature. What do you mean by "nature"? Do you own the land where the water is, or do you simply plan on collecting rainwater? Otherwise, you don't own the water. This is a real-life problem that countries and communities the world over are dealing with.
    - anoncake 6y ago
      Earth is populated by humans, not by a human.
  - jeltz 6y ago
    Yes and no. There are huge amounts of fresh drinkable water. It is just that it is in Canada and Russia and not where we have our agriculture. Here in Stockholm we have much more clean water than we ever could use, just like Russia and Canada. Water shortages are local problems. The issue is just that a lot of the world's agriculture are on places with little water.
- mulmen 6y ago
  Dams and pipes are also products of human activity.
- easytiger 6y ago
  > Fresh, clean water exists in plenty in nature Not really no. It requires huge amounts of infrastructure, logistics, regulation to get it to people. Industrial activity, farming use water to make the food you eat
- eru 6y ago
  What about iron ore or gold?
fakedang 6y ago
And he exited his water positions a few years back too.

deleted 6y ago

[deleted]

zodiac 6y ago

> especially if we ever get to a point where some people can 'afford' water while others can't. If we do get to a point where this is true, it will primarily be because of decreasing amounts of water sources, increasing population, etc. Banning water futures won't magically solve these problems.

figassis 6y ago
But will likely accelerate them
- throwaway_pdp09 6y ago
  Why?
- julienreszka 6y ago
  Why would it accelerate problems? More likely people will have an incentive to make water sustainable.
  - dgb23 6y ago
    When a private company owns one of the most basic resources for survival, then they have the ultimate leverage over you. Privately owned water is being extracted from a region and then sold. They have no incentive to sell water to those who need it to survive, except if they also accidentally make the owners more money. One basic consequence is incredible human suffering and an extreme amount of power imbalance. Then, it is a matter of time and critical mass until things get ugly and violent.
    - julienreszka 6y ago
      I see your point
    - zodiac 6y ago
      It sounds like you have a problem against privately owned water rights (the exclusive right to extract water from some region and then sell it), not against water futures per se? FWIW I'm sympathetic to that position (in some form), it would just be better to be more precise... people are acting like "water is a basic human right" is a principle that can straightforwardly be used to derive the rest of our water policy.

kortilla 6y ago

> Umm what's the incentive or motivation behind making this trade able? Because it’s pretty fucking important and the best way to make sure it’s not wasted is to get it as freely traded as possible. Rations are terrible and we need pricing to make sure we aren’t doing something dumb like growing almonds in a desert with water that needs to be used for drinking water or even just another crop that isn’t so inefficient. As it stands, the super old water rights around the US of farmers are fucking the rest of society because they don’t pay for it on an open market.

hombre_fatal 6y ago
The title is provocative as people's minds immediately go to some sort of dystopia where nobody can afford a water bottle because of megacorp capitalism or something. But it's sobering to realize how much water agriculture can waste today. My cousin inherited some sort of farm license when they bought their property in the countryside. It has a well down into the water table and river access. He was saying how he could freely pump 100,000L/day if they wanted to, mainly going on about how weird it was to see how few stipulations there were in said license.
iso1631 6y ago
> As it stands, the super old water rights around the US of farmers are fucking the rest of society because they don’t pay for it on an open market. This is just an extension of land. Certain people are granted a monopoly on a resource because their ancestors knew the right people, or were simply lucky. Inherited luck. No way to run a country.
- eru 6y ago
  Well, a land value tax is a good idea, sure. And would extend to water rights that might come with the land. Or alternatively, the government could officially own all the water supply and auction it off. None of these is an argument against trading of water or water futures.

ALittleLight 6y ago

Say I'm a farmer and I need X gallons of water next year. How much does that cost me? It costs YX where Y is the cost of water per gallon next year - which is unknown. "Unknown" is something of a problem when preparing the budget for next year. I could buy X gallons now, but then I'd need a way to store it. Or, I could agree to pay a specific price now for water that would be delivered in the future.

lanman 6y ago

> especially if we ever get to a point where some people can 'afford' water while others can't. Aren't we already arriving at that point? The Flint water crisis is still ongoing since 2014. https://en.wikipedia.org/wiki/Flint_water_crisis https://en.wikipedia.org/wiki/Flint_water_crisis

solatic 6y ago

Futures markets improve the affordability of the resource by its actual consumers by stabilizing its price. Unpredictable prices, even if they end up being low, hurt consumers by requiring consumers to keep cash in reserve just in case the (remember, unpredictable) price swings wildly. That cash in reserve is cash that cannot be spent elsewhere, be it necessities like food or luxuries produced elsewhere in the economy.

amelius 6y ago
Has this been found empirically or is this just a theory, just like how the free market without government intervention always is supposed to give the most favorable outcome?
- goodcanadian 6y ago
  I think this highlights an oft-missed point. There is no such thing as a free market without government intervention. Left to their own devices, traders will always try to game the market to their own advantage.
  - eru 6y ago
    Your comment is somewhat of a non sequitur. First, if you look hard enough, you can see traces of the hand of government in almost anything on earth, including any market. In practice, government meddling is a matter of degree and kind. The dose makes the poison. There are some markets that are free enough of interference that we can fruitfully analyze them as 'free' markets. Second, what do you mean by 'try to game the market'? In general, markets are sustainable in the long run without government interference (and usually actually more stable this way). Interactions in markets often behave like the famous Prisoner's Dilemma. So, yes, for a single interaction it's profitable to cheat the other guy, but repeated interactions tend very strongly towards cooperation.
    - goodcanadian 6y ago
      Free markets only work when there are large numbers of sellers and buyers. One example (out of many) of a necessary government intervention is to prevent monopolies from forming (or at least regulate them). Whenever one party has an outsized influence, they will tilt the whole market in their favour. It doesn't even have to be a monopoly, if a single player makes up a substantial portion of the market, they can affect it in non-free ways. Even Adam Smith recognised the need for government regulation to ensure that markets remain free. Edit: I think you may have misread my comment; I wasn't claiming that there is no such thing as a market without government interference (though that is probably mostly true). I was claiming that a market cannot be free without government regulating it to keep it free.

solveit 6y ago

It's sad how people just don't believe that markets are good at all.

eru 6y ago
And this is HN already. The attitude of the general population is often worse. I do remember early HN and even early reddit being much more pro-market. I wonder, assuming my perception mirrors a real change, whether that's down to changes in individuals' attitudes or to different people making up the bulk of the communities? Are we just going mainstream?
- ianleeclark 6y ago
  > do remember early HN and even early reddit being much more pro-market It shows you have registered in 2007. Quite a lot of history has happened since then which may have altered people's opinion of the pro-market narrative. > Are we just going mainstream? Mainstream opinion is very pro-market. Calling for abolition of either markets or value itself is a highly niche position--you will typically only see people calling, to varying degrees, of smoothing rough edges.
  - eru 6y ago
    Interesting, from what I can tell the mainstream seems crazy far left and in favour of all kinds of interventions to 'smooth rough edges' and worse. Rhetoric against rich people is rather popular. But yes, from an even further left point of view, full on abolishing of markets ain't that popular. (A few countries tried going in that direction throughout history, it never ended well.) In the US the Republicans are against free trade, and the Democrats have their usually anti market stance. About stuff since 2007: the economic difficulties in the years after mostly showed that when central banks refuse to print enough money, nominal spending drops, and the economy tanks. (The Israeli and Australian central banks kept their countries' nominal GDP stable, and mostly avoided recession.) But you are right that the perception in the mainstream does not agree with that perspective (as I mentioned, the mainstream is by-and-large anti-market.)

vishnugupta 6y ago

> especially if we ever get to a point where some people can 'afford' water while others can't. We are almost there. In Bangalore, India due to hockey-stick like expansion of houses, mainly high rise gated communities, the municipality is just not able to supply tap water. They all rely on daily supply of water tankers. However, even that water isn't potable. So house holds buy bottled water or have RO machines. Bear in mind, this is the situation for middle/upper-middle-income group. Lower income groups just drink any water they can, waterborne disease is rampant. This[1] talk from P Sainath about the water crisis in India is revealing. I would the situation would be similar in other emerging countries. I remember that a few months ago Cape Town, SA ran out of water[2]. Water was strictly rationed. [1] https://www.youtube.com/watch?v=E-l2LvA2dSI https://www.youtube.com/watch?v=E-l2LvA2dSI [2] https://www.weforum.org/agenda/2019/08/cape-town-was-90-days-away-from-running-out-of-water-heres-how-it-averted-the-crisis/ https://www.weforum.org/agenda/2019/08/cape-town-was-90-days...

IronRanger 6y ago
With the core factor being that there are more people than the water supplies can support. The solution here is a one-child or no-child policy, just as in China.
- rorykoehler 6y ago
  Desalination at scale is the solution.
  - cdmckay 6y ago
    This has environmental consequences.
    - rorykoehler 6y ago
      We've opened pandora's box. I'm not saying a one child policy isn't a solution but it's not the solution.
  - 6y ago

eru 6y ago

You need so little water for drinking that it's essentially free or close to free. Properly trading water is more important for industry and agriculture. And I'd be very happy, if some very 'thirsty' crops like almonds or industrial applications would stop because they might not be profitable once you take the full cost of water into account. The alternative is what you see eg in California, where residential users of water often face severe restrictions, but many agricultural users have grandfathered water rights that they have to squander to keep.

yodelshady 6y ago
> You need so little water for drinking that it's essentially free or close to free. Yeah, that's developed-world life talking. Markets absolutely work at dissuading growing almonds in the desert. Until there's too much wealth disparity, and Peter is willing to pay more than Paul has in total for desert-grown almonds. Either Paul steals the water or he dies, and thieves aren't popular. Of course there's another form of currency - votes. I can't really say they're universally distributed, because FPTP screws up the purchasing power of a vote. But I'd give good odds on a very strong correlation between a functioning democracy and cheap water.
- eru 6y ago
  Do you have an example of a place that has both a reasonably free trade in water and where poor people can't afford water to drink? > Markets absolutely work at dissuading growing almonds in the desert. Until there's too much wealth disparity, and Peter is willing to pay more than Paul has in total for desert-grown almonds. Either Paul steals the water or he dies, and thieves aren't popular. Eh, unlikely. Peter will just get his almonds from the cheapest supplier, who is unlikely to be growing in a desert. There's nothing special about water in the scenario you are describing. Plenty of other commodities are traded on markets, and more developed markets have meant better and more secure supply for everyone, especially poor people. > Of course there's another form of currency - votes. I can't really say they're universally distributed, because FPTP screws up the purchasing power of a vote. But I'd give good odds on a very strong correlation between a functioning democracy and cheap water. Only some countries use FPTP. In any case, there's a strong correlation between any attributes generally seen as desirable. Figuring out causation is harder. Btw, you know what poor people lack even more than money: influence and connections. I wouldn't look to politics to improving their lot.

georgeek 6y ago

Almost everything that one would need for daily subsistence is tied to benchmark future contracts: cattle, soy beans, rice, wheat, sugar, coffee are all traded as futures on exchanges. Most coffee in the world is traded against the Coffee C future benchmark for instance: https://www.theice.com/products/15/Coffee-C-Futures https://www.theice.com/products/15/Coffee-C-Futures Giving producers and consumers a way to get a standardized contract at a given point ahead in time usually makes the price of the underlying commodity much more stable. It has been argued that the way our society operates is based on the concept of futures contracts. It all began with the Dutch tulip futures in the 17th century that stabilized flower prices and made them a viable business: https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania

triangleman 6y ago
Don't miss the "Legal Changes" section of that article. The bubble and subsequent bust, it turns out, was caused by government meddling (at the behest of powerful economic interests, mind you).

chordalkeyboard 6y ago

Capitalism's ability to make things into commodities is a way of making more of things. The timeliness is that water is getting scarce enough that soon people may not be able to afford water. This is a way to make it so that water stays affordable by incorporating it into a system where there is a profit incentive for producing more of it.

bawana 6y ago
water or cpus or gpus.....it's all the same....secondary markets only allow abuse, not 'fair access'
- chordalkeyboard 6y ago
  You don't think people should be allowed to sell water unless they own the water source? What would be the environmental cost of prohibiting sales of cpus/gpus by anyone who didn't own a cpu/gpu factory?

tasuki 6y ago

> Umm what's the incentive or motivation behind making this trade able? Why shouldn't it be? I buy water every day. > At first glance this seems incredibly concerning Why? > While we don't need oil or gold for our immediate survival, they do play key roles into how our society operates. I'm hoping to understand more on why we should treat water in the same way. Because it's very important for our survival!

siruva07 6y ago

The incentive is to start pricing water appropriately. When water is priced appropriately it will be valued. When it is not priced appropriately, it is wasted and misused. We should treat water the same way because water is a human right, a commodity, and a resource. This discussion is prominent in the early chapters of Planet Water (https://www.amazon.com/Planet-Water-Investing-Valuable-Resource/dp/0470277408 https://www.amazon.com/Planet-Water-Investing-Valuable-Resou...) By mispricing the resource, we've gotten to where we are: 1) Massive inequality 2) Bottled water has become the default backup system to investing in rebuilding the tap water system 3) There is not enough investment to rebuild the tap water system. The paradox is best seen at an airport where a bottle of water is $5 in a single use plastic bottle (that lasts for 450 years) and the water fountain which is "free." As a social capitalist, I believe "free" water is bad for the marketplace. I've written about this more here: https://drinktap.substack.com/p/tap-june-2020-update https://drinktap.substack.com/p/tap-june-2020-update

imtringued 6y ago

Water futures are just a promise to deliver water at a certain price. You can sell the promise for money even if you don't have the water today but you know you will have the water tomorrow. If you sell your water on the day it is extracted then you are vulnerable to daily market swings. Sometimes there will be gluts, sometimes droughts.

ThomPete 6y ago

Billions would die without oil as oil pumps and pipes gives access to water among many other things.

Chris2048 6y ago

> especially if we ever get to a point where some people can 'afford' water while others can't Does the trading of other kinds of future cause this? For example, the fact that corn or oil can be traded. > we don't need oil or gold for our immediate survival gold, maybe not, it's mostly used by financial institutions as collateral, but I think we require petrol a lot.

hh3k0 6y ago

> Umm what's the incentive or motivation behind making this trade able? Money.

deleted 6y ago

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deeeeplearning 6y ago

>Umm what's the incentive or motivation behind making this trade able? Uh.. Money? lol

dnautics 6y ago

What's the problem? These are futures, not options, so the dynamic is different and you MUST take delivery at the price you bid for. If anything this is a fantastic step in the right direction of starting to acknowledge that the cost of consumption should be borne by the consumers (and not by the politically less privileged).

dheera 6y ago
Except this will encourage people to take delivery and resell it at a markup, and the victims of this scheme will be the lower income class. Water should be free upto basic living necessities, and the government should be responsible for maintaining that.
- tempsy 6y ago
  it’s all financially settled. there’s no actual physical delivery of water with these contracts.
- Dylan16807 6y ago
  Water's cheap and storage isn't. I would expect resale to only significantly affect the price of extreme bulk use. Residential use isn't that big and I expect the vast majority of the price to stay in distribution and filtering.
  - deleted 6y ago
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- dnautics 6y ago
  > Water should be free upto basic living necessities. If you mean to an end user, that's your opinion. I think we should aspire to that, but water is most definitely not "free" in general, and treating it as such is very dangerous. Even if government is responsible for providing water to the people, there is a cost (to the government for obtaining that water), and that cost needs to be accounted for somewhere. Perhaps you can provide a better price discovery mechanism that efficiently matches the price to its cost, that is robust to environmental swings and minimizes waste. Please let us know.

AnthonyMouse 6y ago

> Umm what's the incentive or motivation behind making this trade able? Water is a scarce commodity used in industry. Since there is more demand than supply, supply has to be allocated in some way. Markets are the ordinary way of doing that. What do you propose as an alternative? Here are some examples. The first option is to give everyone the same amount of water, and prohibit anyone with more than they need from selling it, since that would be back to markets again. That obviously doesn't work, because some, like farms and power plants, need more than the typical household, and they would have no way to get it. Another option would be to make water free to everyone. Use as much as you want. But it's scarce, so some would water their lawn in the middle of a drought and people would die. Another option would be central planning. The politburo would decide how much water everyone gets. This requires your politicians to be smart enough to make better allocations than markets would and then actually apply that intelligence to the problem even when there is no personal benefit in doing that and a large personal benefit from corrupt allocations. Historically the results of doing things this way have ranged from mediocre to presiding over the deaths of millions of people. Markets work better than all of those things, so what do you propose that works better than markets? Note that there is a version of the first option that works great in combination with markets -- everyone gets a minimum amount of water required to live and then all the rest of the water is sold in the market. But then you still have markets for water.

timeeater 6y ago

If water is free, it gets squandered.