Compound interest may be, as Albert Einstein reportedly said, the most powerful force in the universe, but the price mechanism runs a close second. Prices send signals to producers and consumers, adjusting demand and supply 24/7, and nobody is in charge! No bureaucrats, no committees, no rationing, nothing, it just works, all on its own. That, to SLL and its many other fans, is its primary virtue, and to statists and its other enemies, its primary flaw. Water in California and throughout much of the west is currently in short supply. The government’s fingerprints are usually all over any but temporary shortages and surpluses, and they certainly are in the case of water. It’s price is a political issue, and surprise, surprise, it is dramatically underpriced! And surprise, surprise, there’s not enough to go around! From Brian Doherty, at reason.com, a welcome dose of non-rationing rationality:
When it comes to rationing, give markets a chance.
You may have heard—and if you don’t live out here you may not have cared—that “California has just one year of water left.”
Alex Tabarrok at Marginal Revolution blog has a good roundup on why people think that, why it isn’t necessarily true, and why ignoring price when it comes to rationing scarce things is a terrible idea:
California has plenty of water…just not enough to satisfy every possible use of water that people can imagine when the price is close to zero. As David Zetland points out in an excellent interview with Russ Roberts, people in San Diego county use around 150 gallons of water a day. Meanwhile in Sydney Australia, with a roughly comparable climate and standard of living, people use about half that amount. Trust me, no one in Sydney is going thirsty.
So how much are people in San Diego paying for their daily use of 150 gallons of water? About 78 cents. As Matt Kahn puts it:
Where in the Constitution does it say that the people of California have the right to pay .5 cents per gallon of water?
http://reason.com/blog/2015/03/19/water-in-california-too-scarce-or-just-u
To continue reading, and for a number of excellent links: Just Underpriced?
Reblogged this on Starvin Larry and commented:
Get the politicians out of it,and the water market will work itself out.
There is enough,just not enough for all the people living in what’s basically a desert to waste close to a hundred gallons per person,per day,or for the farmers to get really heap water,and grow water intensive crops like rice and alfalfa. raise the price of water to the farmers to actual market price-and no one’s going to be growing rice and alfalfa in the desert any more.