I am eco tripping. Eco for economics. Others are eco tripping. Eco for ecology.
Monday evening I got through about six or seven podcasts from Bloomberg and and picking up on several things, the latest of whom I think deserves to be in the T50 Project - for my project encompassing the top 50 thinkers I will focus on from here until the old deathbed. This new guy is David Zetland, economist focusing on the matter of water supply (and demand).
What I learned from Zetland the other night helps explain something I simply couldn't quite believe in a conversation I had last year with a water guy at Deet's house. The conversation drifted (because I pushed) onto the subject of water. If I remember correctly, there was some matter of controversy in which river(s) should be diverted to provide water for Southern California. My new associate turned opponent and said 'conservation' which angled him towards rationing and other such mandatory controls on consumption. I naturally replied that all you have to do is let the price rise and people will use less water. I couldn't believe that he opposed that suggestion, but he did.
I can't remember if he went into a diatribe about water being a right, and I wish I could find the blog entry where I'm sure I recounted the discussion. However Zetland tells me that most water districts do not price water. What?
The way we have worked with water provision forever is as if it were unlimited. There has never been a supply problem and so the economics of water provision have always been cost plus a small margin. The water itself is free, you pay for the infrastructure of delivery and maintenance on that. So if you purchased 200 gallons a month or seventeen acre-feet, the marginal cost of water was zero. Now of course if you got 17 acre feet of water, chances are you've already paid for the huge fat pipe and are getting water at a somewhat different rate. However the difference between getting 17 or 25 was essentially zero, even during times of drought, because the water itself was free.
Zetland says that it regularly requires the equivalent of a bureacratic miracle for water providers to actually implement a progressive pricing system on their water supply. Why? Because this is the way we've always done it. And because ecologists and other environmentalists generally don't like the idea of saying that water is not free. Yet in fact pricing water in a progressive structure actually works better than regimes of conservation and mandated rationing, just like us market oriented people would think.
That doesn't change the way most Americans, especially water bureaucrats think. That needs to change.