Given my profession, I’m incentivized to freak out about drought. If I thought it wasn’t a big deal, I’d have to find something else to write about. But in darker moments, I wonder if I’m overdoing the freakout.
Chris Austin’s writeup of Ellen Hanak’s comments at this week’s California water bond hearing raise the question anew:
Ellen Hanak, senior fellow at the Public Policy Institute of California, gave a retrospective of how the state managed during the recent drought. “California has lived through droughts before,” she began, noting that when they looked at the impact of drought on the state’s economy, “the conclusion was that because of our variable climate, we are set up as an economy to manage droughts pretty well.”
“One key reason why the economy is fairly resilient to drought is because a lot of the economic activity is in the urban sector, which is not that reliant on large quantities of water as a production input,” she said. Urban utilities manage droughts by compressing at the residential level first, and not shorting the industries, commerce or key public health and safety sectors like hospitals, so the job losses in the urban sector aren’t many.
“Agriculture tends to suffer more during a drought because water is such a key production input and agriculture is a big user of water, but from the standpoint of the statewide economy, that’s not such an issue as it is such a small share of the economy. It’s about 1 or 2% depending on how you count it,” she said.
I like Hanak’s phrase: “demand compression”.