Conservation Efforts

Achieving environmental sustainability has increasingly become a major concern for many people. In light of this, I decided to share two interesting observations I've come across regarding conservation efforts.

1. Water conservation

California is experiencing a water shortage. The state has responded by sponsoring efforts to reduce household consumption of water, such as discouraging wasteful practices via commercials and charging higher water rates for those whose monthly use exceeds that of last year.

A 2007 Becker-Posner post questions the efficacy of such measures. Becker points out that households account for only 8% of total water usage, compared to 40% for agriculture and another 40% for power generation. Moreover, water used in the home has a reutilization rate of about 75%, meaning that ¾ of water consumed by residents is returned to the water cycle and available for future use. Agricultural water use has a 40% reutilization rate.

To put these numbers into perspective, imagine that California residents somehow reduce their water consumption by 50%. The amount of water saved, after accounting for reutilization, equals that which would have been saved by reducing agricultural water use by a mere 4% (approximately). In other words, for every 1% in savings achieved by the agricultural industry, residents would have to save 12% of their respective water use to make equal gains.

As a result, Becker proposes implementing a price rate that increases with consumption, so that the largest water consumers pay higher rates on their water than small consumers do. This scheme would incentivize more efficient farming practices like drip irrigation and lead to real reductions in water waste. While the plan would also increase the price of crops for consumers, these costs would be partly offset by residents' benefiting from water rates lower than what they would be without such a pricing mechanism for farms (since less household conservation would be necessary). Even more important to remember is the drastically reduced likelihood of a true drought occuring with this mechanism in place.

2. Fuel efficiencies

This one comes from a Freakonomics blog. I’ll illustrate it with a hypothetical:

Imagine that you own a small business that uses two vehicles equally: a large truck with 10 mpg and a small sedan with 20 mpg. You have enough money to trade in either the truck for one that gets 20 mpg, or the sedan for one that gets 1000 mpg (that’s right, 3 zeroes). Assuming both cars will still be driven the same distance, what should you do?

You probably guessed that I wouldn't be asking if the answer weren't “trade in the truck.” You're right. Understanding why requires a reevaluation of how we think about fuel efficiency. The standard metric of efficiency is miles per gallon, which tells us how far we can go on one gallon of gas. But people don't think this way. They drive only as much as they need to and then ask, “How many gallons did that take?” So the metric we really care about is gallons per mile (gpm), the inverse of mpg.

To illustrate this, let’s look at the new fuel efficiencies of both cars: the 10 mpg truck used to take 0.10 gpm, but now with 20 mpg it would take 0.05 gpm; the 20 mpg sedan used to take 0.05 gpm, but now with 1000 mpg it would take 0.001 gpm. If both cars drive 100 miles each week (the distance driven is an arbitrary constant), the truck would save 5 gallons each week, while the car would save 4.9 gallons each week. So you would save more money by upgrading the truck. In fact, given that the truck doubles its fuel efficiency in mpg (from 10 to 20), it doesn’t matter what the new sedan's mpg is, because the truck will always save more gas. Try it out if you don't believe me!

You can play around with the original numbers to produce different results, but the point is that improvements in mpg become less meaningful at higher mpg’s. So trading your 4Runner for a Ford Escape is probably a better value than trading your Accord for a Prius. Pretty interesting, right?