Ben Powell on Drought and Water Pricing

Ben Powell at Texas Tech has an essay on water scarcity at Huffington Post in which he channels David Zetland:

But water shortages in Lubbock and elsewhere are not meteorological phenomena. The shortages are a man-made result of bad economic policy.

Droughts make water scarcer, but by themselves they cannot cause shortages. To have a shortage and a risk of depletion, a resource must be mispriced.

With the freedom to choose, consumers can demonstrate whether it’s worth the cost to them to water their lawn an extra day or hose dust off of their house. Realistic pricing also incentivizes them to take account of water’s scarcity when they consume it in ways that aren’t currently prohibited. Have your long shower if you want . . . but pay the real price of it instead of the current subsidized rate.

Of course Ben is correct in his analysis and his policy recommendation, although I would nuance it with David’s “some for free, pay for more” to address some of the income distribution/regressivity aspects of municipal water pricing. Water is almost universally mispriced and wasted, exacerbating the distress and economic costs of drought.

One thought on “Ben Powell on Drought and Water Pricing

  1. Just a little example of the sort of pricing you mean. I’ve a place in Portugal, connected to the town mains. Very low price (€20 a month, which might well not be economic) for basic water supply. We rarely go above that.

    But when you do go above that then each unit of water (in bands, not actually every extra litre) becomes more expensive. We can see it on the bill when we fill up the above ground pool for the kids visiting in the summer. And not noticing a burst pipe cost hundreds of euros before we got around to finding out about it.

    Anyone who tries to water their garden gets a very large shock and rightly so in the Algarve, a water deficient area.

    It’s a good system, I thoroughly recommend it.

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