Friday, April 8, 2011

An economics of water: Why “Free” Is the Wrong Price for Water

I just came accross an interesting paper Change this Why "Free" Is the Wrong Price for Water—Even If You Live on $1 a Day 
 some extracts:
Although we don’t often consider it, free isn’t that great. The lack of a price—on water or on any other resource—leads to all kinds of inequities and inefficiencies. Water is the most vital substance in every aspect of human endeavor, but the economics of water are a mash-up of tradition, wishful thinking, and poor planning.  In Las Vegas, the water supply is in such desperately critical shape that the water utility pays homeowners $40,000 per acre to rip up their lawns. And yet Las Vegas has among the lowest residential water rates in the country. A typical family’s bill there is $23.62 a month. In Atlanta, the same amount of water would cost you $50.

The average home in the U.S. pays $3.24 for 1,000 gallons of water.
The average home in Las Vegas pays $2.71 for 1,000 gallons of water.
A farmer in the Imperial Valley pays six cents for 1,000 gallons of water.
And here’s the really astonishing thing: The farmer in the Imperial Valley is using exactly the same water as the guys in Las Vegas
 Exactly HOW to solve the use of water is another question though. I remembered visiting Namibia (very dry place) and they had staggered payments, so the people paid very little for the first liters, but it was prohibitively expensive to fill your pool or water your lawn. That made a lot of sense. A privatization of water resources would lead to better management, but I believe that that is a dangerous path to tread. I guess it is about the so called "tragedy of the commons" - a concept that often is misinterpreted to mean that commons are bad, that is not at all what was intended by Hardin when he coined it. It was that commons need to be managed that was his point. Privatize them is just one way of doing that. Mostly commons are managed perfectly fine by communities. I think the fluid nature of water makes it, together with the air, the most difficult commons to manage. Public waterworks certainly should start to price money. Overall, all nature resource use should be charged for in my opinion, just to keep our consumption in check. If this is done by the public sector it will get an awful lot of money which partly can be redistributed to ensure that poor people are not harmed by these policies. Ultimately the poor use a lot less anyway - that is the definition of poverty in the first place....

No comments:

Post a Comment