In Drought, a Flood of Central Planning

Wednesday, October 15, 2014

Edwardo Porter of the New York Times writes an illuminating yet frustrating article titled, "The Risks of Cheap Water". Within, Porter indicates how easily free market mechanisms could solve supply-and-demand issues, particularly in the drought-stricken American Southwest. That's the illuminating part:

But the proliferation of limits on water use will not solve the problem because regulations do nothing to address the main driver of the nation's wanton consumption of water: its price.

"Most water problems are readily addressed with innovation," said David G. Victor of the University of California, San Diego. "Getting the water price right to signal scarcity is crucially important."

The signals today are way off. Water is far too cheap across most American cities and towns. But what's worse is the way the United States quenches the thirst of farmers, who account for 80 percent of the nation's water consumption and for whom water costs virtually nothing.

Adding to the challenges are the obstacles placed in the way of water trading. "Markets are essential to ensuring that water, when it's scarce, can go to the most valuable uses," said Barton H. Thompson, an expert on environmental resources at Stanford Law School. Without them, "the allocation of water is certainly arbitrary."


The price of water going into Americans' homes often does not even cover the cost of delivering it, let alone the depreciation of utilities' infrastructure or their R&D. It certainly doesn't account for other costs imposed by water use -- on, say, fisheries or the environment [sic] -- caused by taking water out of rivers or lakes. [bold added]
The frustrating part is that the governments responsible for this fiasco of central planning invariably respond with ... more regulations. At best, these include such pseudocapitalist measures as setting up "markets" that might have arisen spontaneously had water not been so heavily regulated or subsidized in the first place. (I say "pseudocapitalist" because I have no reason to believe that any of these entities is attempting to transition to laissez-faire.) This is in addition to the fact that other aspects of capitalism (e.g., property rights within waterways) could have prevented the injuries and property damage (which are often decried as "environmental" damage) and blamed on "capitalism".

I don't wish to shoot the messenger for not being a radical capitalist; most people are so used to the regulatory state that it takes a high degree of independence to even question something like very low water rates. Porter notes that water rate hikes invariably draw angry reactions. Perhaps that -- a government so pervasive for so long that it seems natural -- is the greatest hazard of all presented by apparently cheap water.

-- CAV

P.S. Here's another problem caused by the pervasiveness of central planning: Water rates might ought to be higher now than they are, but would they really be cheaper, after a period of transition and in terms of income, for most people? We can only speculate, with good cause to think they would, due to the nature of central planning.


Today: Corrected link to property rights in waterways. 


John Shepard said...

Hi Gus. I thought I'd mention that the link for "property rights within waterways" to another other post of yours, "Quick Roundup 441," which I managed to find by editing the URL, does not work.

The URL currently is:

But it should be (or at least it works for me, and I assume it's the article you meant to link to):

Gus Van Horn said...

Thanks, John. Apparently, when I am logged on to Google (which owns Blogger), my blog URLs get transformed. (A feature for them, a bug for me.

Based on that I fixed the link.