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One of the most ridiculous regulatory actions of the past few years (and that is a stiff competition) has been the move to require low-flow toilets in the interests of water conservation, even for those areas in which water is not in short supply.

So it is with a frisson of joy that one reads the effect of the regulation on that capital of greensterism, San Francisco. Too much sludge is backing up, and the aroma is offensive. The city is spending millions on sewage plant upgrades, partly to combat the odor, and millions more on bleach, which will be—wait for it—pumped into San Francisco Bay at a rate of 8.5 million pounds per year. Naturally, an environmental movement has arisen to protest this.

The claimed benefit from low-flow toilets is a savings of 20 million gallons of water per year. This leads to an interesting calculation, because a single family home in SF pays $10.50 for its first 300 cubic feet of water use, and $4.90 for each 100 cubic feet used thereafter. One cubic foot equals 7.48 gallons, so the total value the city places on the 20 million gallons saved by the low-flow program is $131,000.

In fact, the 20 million gallon savings from low flow looks too conservative to me, unless San Franciscans really know how to hold their water, but it would take a lot of savings to make up for the costs imposed by the sludge backup.

The fundamental point stands: it is absurd to price water at $0.006 per gallon, and then force people to spend hundreds of dollars in money, and more in other inconveniences, to reduce this cost. If a toilet is flushed five times a day, with a gallon of water saved each time, the value saved is 3 cents, and the annual savings are $10.95.

San Francisco says that low-flow toilets can save a family of four 20,000 gallons per year, a number which must assume very old toilets that use a phenomenal amount of water (or serious health problems), but even this number results in savings of only $120 for the family for the year, which would hardly justify multiple multi-hundred dollar toilet investments. Not to worry though, because the taxpayers will subsidize the purchase for you. Of course, the subsidy only applies to super low-flow, and one might logically wonder if this will not actually increase the sludge/odor/bleach problem, so that every dollar of misspent subsidy requires further expenditures to offset the bad effects. Oh well, they can always take the money from the schools, since it looks like nobody in the government can do arithmetic anyway.

Christie, it turns out, has a preternatural gift for making the complex seem deceptively simple.

That’s from Matt Bai’s largely flattering portrait of the NJ gov. See the preternatural gift yourself here.

Paul Krugman dusts off Naomi Klein’s “Shock Doctrine” schtick to explain Madison, Wisconsin:

Here’s a thought: maybe Madison, Wis., isn’t Cairo after all. Maybe it’s Baghdad—specifically, Baghdad in 2003, when the Bush administration put Iraq under the rule of officials chosen for loyalty and political reliability rather than experience and competence.

As many readers may recall, the results were spectacular—in a bad way. Instead of focusing on the urgent problems of a shattered economy and society, which would soon descend into a murderous civil war, those Bush appointees were obsessed with imposing a conservative ideological vision. Indeed, with looters still prowling the streets of Baghdad, L. Paul Bremer, the American viceroy, told a Washington Post reporter that one of his top priorities was to “corporatize and privatize state-owned enterprises”— Mr. Bremer’s words, not the reporter’s—and to “wean people from the idea the state supports everything.”

The story of the privatization-obsessed Coalition Provisional Authority was the centerpiece of Naomi Klein’s best-selling book “The Shock Doctrine,” which argued that it was part of a broader pattern. From Chile in the 1970s onward, she suggested, right-wing ideologues have exploited crises to push through an agenda that has nothing to do with resolving those crises, and everything to do with imposing their vision of a harsher, more unequal, less democratic society.

Which brings us to Wisconsin 2011, where the shock doctrine is on full display.

You’ve got to love how a guy who shared the Obama administration’s obsession with never letting “a crisis go to waste” but who also lambasted the White House for not exploiting the crisis enough is suddenly criticizing conservatives for relying on crises.

But what I find truly amazing is how he has to go East, to Baghdad, to find a geographic analogue to Madison and not north to his beloved Europe, where the parallels are so much more obvious. Also, don’t miss David Harsanyi on the lengths Krugman will go to trying to confuse people about what’s going on.

Image by David Shankbone.

It’s rare that the political blogosphere burns up with arguments regarding statistical methodology, but the comments of Jim Manzi at National Review  on a recent report by the Economic Policy Institute’s Jeffrey Keefe on public sector pay in Wisconsin has generated a running debate with Ezra Klein, plus some interesting comments from Megan McArdle and Kevin Williamson. Over the past year,  Jason Richwine of the Heritage Foundation and I have spent a lot of time thinking about public sector pay, including articles in the Wall Street Journal last year, the American Spectator, the Weekly Standard, and a new piece on California public employee pay in today’s Wall Street Journal.

The EPI analyzed Wisconsin salaries using survey data on thousands of individuals, containing information on their earnings and a raft of earnings-related characteristics such as age, education, race, gender, marital status and, most importantly, whether the individual works in government or the private sector. EPI’s Keefe used regression analysis to control for differences in these characteristics to isolate the effects of government employment on wages, finding a pay penalty of 11 percent. (We find a smaller 5 percent penalty for Wisconsin workers, presumably due to different specifications.)

We’ve used identical techniques to study federal employee pay, where we find a government pay premium of 14 percent. (If you’re wondering why EPI and other left-leaning think tanks have never produced a study on federal pay, there’s your answer.)

Over at the Corner, Manzi basically took issue with the whole approach that EPI and we have used.

Keefe is considering almost any full-time employee in Wisconsin with the identical years of education, race, gender, etc., as providing labor of equivalent market value, whether they are theoretical physicists, police officers, retail-store managers, accountants, salespeople, or anything else.

Manzi is basically arguing for “omitted variable bias,” in which the lack of data regarding relevant variables leads to a model to generating faulty or misleading results.

In our Weekly Standard article we acknowledged this potential problem:

Perhaps federal workers have some personality trait—greater motivation, for example—that we cannot measure adequately with our standard control variables. Or maybe our “years of education” variable disguises more prestigious degrees held by federal workers.

To address this, we did a second form of analysis that isn’t subject to Manzi’s objections. Rather than comparing different people at one point in time, this second approach – called a “fixed effects model” – follows the same people over time, specifically as private sector workers found new jobs which could be in the public or private sector. If workers get a bigger raise when they switch from private to federal employment than workers who switch from one private job to another, we can infer that the federal government overpays. As it happens, the fixed effects model shows an 8 percent pay premium in the first year of federal employment. We also know from the cross sectional regressions that the pay premium tends to grow with job tenure, so this result confirms our initial findings while addressing Manzi’s concerns.

The fixed effects model’s results on state/local salaries are at least roughly in line with Keefe’s findings, in that it finds that salaries are around the same in the two sectors. For technical reasons, if there’s measurement error in the data it will push the premium/penalty toward zero; so we know that the federal premium is at least 8 percent for new hires, but the state/local penalty could be larger than the fixed effects model shows.

But that doesn’t mean that EPI’s conclusion that Wisconsin workers are underpaid holds true. I recently raised questions regarding EPI’s treatment of benefits, and our new Journal piece shows – using California workers as an example – that generous benefits and job security can easily make up for a modest public sector salary penalty. (See here for a more technical explanation of our results.) An upcoming op-ed will focus on Wisconsin workers and may show the same results.

I suspect there’s a bit of ideological bias on both sides. When a statistical method shows that state/local workers are underpaid on salaries, the left embraces them and the right is skeptical. But if those very same methods show that federal workers receive a hefty salary premium, the left ignores them – is Ezra Klein now going to conclude that federal employees are overpaid? – and the right, or at least my part of it, buys into them. In the end, though, the methods we’re talking about have been widely used in a variety of areas – the union pay premium, gender and race discrimination, and so on – and we should take their results seriously.

Andrew Biggs is a resident scholar at the American Enterprise Institute. His work on public sector pay is co-authored with Jason Richwine, a senior policy analyst at the Heritage Foundation.