Water, Water, Everywhere

WATER, WATER, EVERYWHERE….Via Tyler Cowen, David Zetland writes in Forbes that California wouldn’t have to ration water if prices responded to supply and demand instead of being fixed bureaucratically:

If water was priced to reflect scarcity, a decrease in supply would lead to an increase in price, and people would demand less….I propose a system where every person gets the first 75 gallons, or 1.5 bathtubs, per day for free but pays $5.60 for each 75 gallons after that. Under my system, the monthly bill for the average household of three would come to $95.

Details aside, maybe that’s the right way to go. After all, market pricing is usually the best default method for allocating goods and services. One thing, though: this is going to be a hard sell unless agribusiness is included too. If we charged them market prices for water (a) food prices would go up a few pennies and (b) there’d be so much water left over for residential use we’d hardly know what to do with it. We’d be awash in the stuff.

Just a pipe dream, of course. Our current welter of overlapping regulatory regimes, fiat property rights, and massive lobbying efforts insures that water policy will continue to be crazy for decades to come. But someday the revolution will come.