During my commute this morning, one of the segments on the piped-in TV news that repeats endlessly on the bus mentioned that the City of Long Beach, California, had decided put new water restrictions in effect due to an impending water shortage. The city is advising residents to refrain from watering their lawns and taking long showers – while urging restaurants to only serve water to diners who request it. According to the Los Angeles Times story on the new restrictions, residents and businesses who don't heed the call to conserve will receive a warning from officials, while repeat offenders may face a fine.
Now, water woes are nothing new for Southern California. This semi-arid region was never designed to be home to tens of millions of people – particularly Americans, who rank first in the world in per capita water consumption. A severe drought, combined with new rules about how much water Southern California is allowed siphon off from other parts of the state, have lead to this latest water crisis, and restrictions from other jurisdictions are apparently just around the corner.
But honestly, the whole thing got me thinking how silly it is to ask people to conserve for conservation's sake. Sure, there are lots of good people among us who will follow the recommendations to use less. But, if we are prepared to fine people who don't go along with the call to conserve, why not just simply raise the price of water itself? Basic economics tells us that when faced with higher prices, people will naturally find ways to cutback. In my mind, it might be more effective to link people's consumption (or over consumption) more closely to their pocketbook, rather than to just hope the water police can track down those profligate water users and give them a fine.
To make sure low- and fixed-income people aren't unduly punished, a two-tier pricing system could be put into effect, so that each household was allowed a base level of water use at a lower rate, and any consumption above that was priced at the higher rate.
Of course, it might be that raising water rates may involve some political hurdles (especially for municipal utilities), and it's easier to just ask people to conserve without giving people a more concrete reason to change their behavior. But since this is likely not the last water shortage that the region will face, it might pay to have people start paying more for the privilege of maintaining a green lawn or taking an excessively long shower.
Comments
Real pricing would get rid of water shortages
Your right on point Christian. The problem with water policy is that continues to be steeped in the "necessity" school of public goods: since water is a necessity, it must be provided to everyone on an equal basis.
An economic approach to pricing water would allow the price to change based on its scarcity. We have the technology to price based on quantity demanded, so we should move away from the flat rate fee that is typical of most municipal and county water systems.
One one to do this would be to develop a "basoc water bundle"--a basic level of water that would be priced at relatively low marginal rates. This would the be the amount of water a typical household might use for the "necessities" of life--drinking, cooking, showers/bath. The price would increase for units of water consumed beyond this bundle.
Commercial users could be priced at a graduated rate from the first unit consumed. (This should also apply to residential users, but this would be politically difficult.)
The key is for water price to *increase* as consumption increases--let consumers decide whether its worth it to take the long shower, water their lawn, or wash the car.
Part and parcel to this would be to put all water utilities on an independent financial footing so they do not rely on general taxes to subsidize water use.
Makes too much sense
This post is spot-on; Christian's suggestion makes far too much sense and is therefore doomed in practice. The public sector has so many opportunities to use pricing for the public good, but more often than not, it shies away. Government often makes such arbitrary choices of what to subsidize, but no matter what the subsidy usually backfires. I'll never understand why it's OK to invade a country but political suicide to compel citizens to conserve.