My paper was signalling the whole time - Robin Hanson wins again

by rockthecasbah2 min read4th Aug 202019 comments

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SignalingPoliticsConflict vs MistakeWorld Modeling
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Robin Hanson Meme

I recently wrote a paper on how the Jordanian monarchy decided who to give water to and who to take water away from. As I near completion, I am realizing that signalling theory from Robin Hanson gives a pretty compelling explanation of my results, probably better than my explanation. I will give a brief summary.

So in the 1990s and 2000's poor neighbourhoods of East Amman periodically had water shortages. Whole neighbourhoods would go without pumped water for a month and people would riot. The Government of Jordan (GoJ) does not like riots and were motivated to stop this.

Jordan has two relevant water sources they could use to make up the shortfall of 100-150 million cubic meters MCM. The Northern Highlands are close to the capital Amman and have a few profitable farms and a lot of smaller, unprofitable "prestige" farms owned by Jordanians. The southern desert is a good 600 km away and has four large profitable farms. The farms are owned by rich, politically connected Jordanian families and operated almost entirely by Egyptian migrant laborers.

The World Bank for twenty years suggested taxing the farms in the Northern Highlands to close the unprofitable ones then redirecting that water from the capital. Since Amman sits on the Northern Highlands the costs of transporting the water are trivial.

Instead the Jordanians paid about a billion dollars to build a massive pipeline to the southern farms, then shut them down instead. They don't publish the data I could use to compare how much more expensive the Disi pipeline solution was, but capital costs were about a billion USD and the energy costs are likely double the cost of other sources (of order 1 dollar per cubic meter). The water sectors cost recovery ration dropped by 30% the year they finished the project, financed by public debt until a 2018 fee increase forced by the WB.

The Jordanians have justified their decision for two reasons. The first is that closing the farms in the north would require negotiating with hundreds of farmers with diverse motives and finances, which was beyond the governments capacity. In the south they had only to negotiate with a small number of elites. This argument is strong.

The second argument is that closing the northern farms would have created unemployment which would create instability. They worried that farmers would lose their jobs and head to Amman to burden the social security system. The southern farms are worked almost completely by Egyptian farmers.

This argument is really weak if you think about it. Firstly, these unprofitable farms are using an average of 200 km^3, so to make up the difference they had to close 500 farms. The closed farms in the north also mostly hire Egyptians, so the lost jobs are like 2-10 per farm. So they spent a billion dollars to save 5,000 jobs. Assuming 10 Jordanian jobs lost per farm closed, they paid 200,000 USD per job saved. In a country with a GDP per capita of 5,000 USD. Assuming they protected those jobs for ten years (the aquifers will collapse eventually anyway), they could have just paid the farmers the money and saved 75%. This is a conservative estimate, since many of those farms have no Jordanians on them.

If you had a billion dollars to spend on Jordanian unemployment, paying to substitute water to keep unprofitable farms afloat is the last thing you would do. Honestly you could have just cut the Egyptian farm worker visa program and killed two birds with one stone by increasing Jordanian employment, cutting the implicit subsidy to the farms, and they would have spent 0 dollars. It is possible the Jordanians just didn't think of this, although the World Bank never got tired of pointing it out.

I slightly prefer the explanation that the GoJ was signalling loyalty to these social groups. The farmers in the Northern Highlands are inside the ruling coalition the royal court has to signal that they get special priviliges. And failing to supply East Amman is a clear signal to the masses that the King doesn't care about their lives, which they can't do. If politics is really about loyalty signalling (not unemployment), the GoJ's actions are more instrumentally rational.

Also Jordanians do perceive the water transfers as loyalty signals, based on interviews from anthropologists in donor areas.

But the paper is almost accepted so no time to change it now.

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