In this post yesterday, I said that the price of water should rise.
In response, aqua-girl said...
How can you say that! I think it is morally reprehensible to charge money for water. Water resources belong to everybody and consuming water is a basic human right.Let's respond to aqua-girl's comments:
I think economists are immoral!
- Economists are often amoral -- they are interested in efficiency (maximizing surplus, wealth), not equity (the distribution of that wealth).
- Water is certainly something that everyone needs to live and charging a price for something someone needs to live (and for which no substitutes exist) is immoral.
- But, free things must have an unlimited supply. If not, demand exceeds supply, and shortages result.
- Shortages result in rationing that favors the politically powerful and/or resource-rich. Shortages hurt the poor -- see examples such as this.
- Also note that something owned by everyone is not protected from depredation and the tragedy of the commons often results.
- Hence aqua-girl's idea will end up hurting the poor she is trying to help -- either because it will divert the resource to the powerful or destroy it.
The free/pay price schedule (a form of increasing-block pricing) is not my original idea. I heard about its use in South Africa, where a judge recently ruled that people have the right to 50 liters/capita/day (LCD).
People in Southern California use about 800LCD. I've recommended a basic right of 400LCD (just over 100 gallons), with extra available to those who want to buy it. People in Beverly Hills use over 1,200LCD.
Bottom Line: It's immoral to deny water to people, so everyone should get some water for free (equity). There will not be enough water if it's free, so everyone should pay if they want more than their free allocation (efficiency).
13 comments:
Thank you for this very concise explanation. I've only just discovered your blog, via EE, but it is in my reader now and I hope to learn more.
My own interest (among many) is water for agriculture vs other uses.
Interesting you mention South Africa's case. Note that, in as much that I incline to agree with notion to supply such basic needs for free, this does place strain on the municipalities servicing a growing pool of connections that have little pay-back. Not only does this mean that water pricing is very progressive (someone needs to pay), but that the need to expand the reticulation system often leads to underinvestment in maintenance. Although the principles are to be supported, it is a balancing act for municipalities to make it work.
I am intrigued by David, agua-guy's "admission" that economists are immoral. Aqua-girl's assertion and solution are a matter of ethics, which overlaps with economics. This is a great context for an introductory discussion of ethics in the context of economics. We could use water.
I own property in the middle of the desert...I would like my free water delivered there please.
For the stuff I use in town I will pay for that out of pocket.
It's immoral to deny water to people, so everyone should get some water for free (equity). There will not be enough water if it's free, so everyone should pay if they want more than their free allocation (efficiency).
This logic reads to me as if there is not enough water for everybody [There will not be enough water if it's free, ] so therefore we should charge a fee for it.
I'd hate to think a fellow alum constructs a logical sequence in this way.
Best,
D
Interesting idea David ("subsistence water for free - conspicuous consumption at fee"). I like it. But is it logically sound/could it be applied to other basic human survival necessities?
I would be curious to see what you and (others) think, because it does suggest a justification for government involvement in provison of private goods. Many of your previous posts suggest to me that your default position is that government should stay out...
DANO: Are you agecon alum?
DANO: Are you agecon alum?
No, sorry - Aggie alum is what I meant. CA&ES, EnvHort. Coursework in AgEcon there, nothing else.
BTW, your "subsistence water for free - conspicuous consumption at fee" is how many Front Range (Colo) communities are starting to bill for municipal water.
My city just passed tiered rate structure billing, baseline based on summer ET application of max 15" irrigation across parcel (meaning homeowner turf reductions to maintain steady fees).
Best,
D
Oh David - DEAR Doctor David Zetland! Please heal me...I didn't realize how cute you were cuz' I hadn't REALLY looked at your pic yet.
Today however, with your affectionate attention, you made me feel like a star again:
http://www.mic.no/nmi.nsf/pic/lene3288/$file/lene3288.jpg
I think we r going to need lots more than 100 gallons of water to cool us down...Do we have to pay?
@ MdW -- the threshold in SA is set too high.
@ FC -- I said amoral :)
@ dano -- The KEY point is that the first 50% of consumption should be "free" and the rest should be sold to cover ALL costs. Note my comment on 400LCD for free based on 800LCD current use.
@ gormk -- water has a human survival component (drinking) and lots of frivolous uses (lawns, car wash). I am trying to price discriminate by setting a low threshold to capture the former and charge a lot for the latter. The same can be said for some crops (see today's post).
@ aqua-girl -- nice picture -- but maybe we don't want you to get too cooled off....
The KEY point is that the first 50% of consumption should be "free" and the rest should be sold to cover ALL costs. Note my comment on 400LCD for free based on 800LCD current use.
Got it. Apologies.
Best,
D
The problem with your thought process is that water is an infinite resource once you add technology. Two-thirds of the planet are covered in water that only needs desalination. Electrolysis machines can take take hydrogen gas and oxygen and fuse them into water uses electric current. Oxygen is the key gas in our atmosphere (which can be produced by plant life indefinitely) and Hydrogen is the most common gas in the universe.
I agree that there will be a price, but I can see this as a public good that meets my own strict standards for government provisioning (taxes pay for a water supply). Of course the great thing is that this doesn't rule out bottled water and soft-drinks which deliver the same mechanism with a paid bonus (flavor, convenience, etc.).
My $0.02
Fry,
It appears that my "economic" through process is not the same as yours.
"water is an infinite resource once you add technology" to an economist means "free", as in no cost to consume. Since conversion of salt water and/or water from gases takes energy, it is NOT free. Technology has not found a way of getting something from nothing (e.g., perpetual motion machine), so we will always need to consider cost and water is not infinite.
"a public good that meets my own strict standards for government provisioning (taxes pay for a water supply)." The definition of a public good is that it is non-rival (I can use it and you can use it) and non-excludable (I can't keep you from using it). Radio broadcast is one example, but water has neither characteristic. Thus, water (a private good), needs to be managed through the appropriate institutions. Government provision via collect taxes and give away water will not work and has not worked pretty much anywhere, ever. (It's not failed for as long as there was more water supply than demand.) That's not to say that government cannot provide water service, but it has to do so int eh same way it would provide any private good, i.e., by charging a price that equates supply and demand.
Keep reading the blog, and you will learn more aguanomics :)
David, I`m coming to this a bit late, but while you say that "economists are often amoral" I think you`re being a bit too sweeping (and a bit too Coasean). Austrian economists, for example, ground their thinking on the morality of voluntary exchange (and their criticisms of the use of the state on both the ethics of force and the frequent corruption of the state to benefit elites), and any economist who focuses on "common property" must be initimately concerned with perceived fairness within the relevant community.
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