The real problem is that the price of water in California, as in most of America, has virtually nothing to do with supply and demand. Although water is distributed by public and private monopolies that could easily charge high prices, municipalities and regulators set prices that are as low as possible. Underpriced water sends the wrong signal to the people using it: It tells them not to worry about how much they use.While the Zetland article is about California, its basic message holds true for all places, including New Zealand. Prices are the signals that people respond to when it comes to the use of resources. Underprice a resource and people will use too much of it. This is as true for water as it is for any other good. A high price tells consumers to use less, the demand curve for water is downward sloping.
Sunday, 20 July 2008
The Water Shortage Myth
David Zetland has an piece (The Water Shortage Myth) in Forbes about water scarcity and pricing in California. He writes
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Until the secret water diverting has been exposed, we are fools to believe anything we are told about this so-called "water shortage." After Fresno, CA's Mayor Alan Autry’s group was caught, he had them issue a R.O. against me - committing perjury to discredit the city’s own sewer layout, which verifies EXACTLY what is taking place. I was previously employed by the ringleader - for 25 yrs I heard him talk of secretly diverting the water supply for future development but until he and the Dept. of Public Works were caught, I did not believe it.
BELIEVE IT!
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