If we generously assume someone needs 2 liters of water/day to survive, then only 3% of California's water production is needed for its population to not die of thirst. A market system could easily be set up where this tiny sliver of water is reserved for this purpose, avoiding the scenario where those dastardly rich twirl their mustaches and cackle while the poor wither.
There is a legitimate argument behind treating water as a market good like anything else. There is an incredible amount of waste due to water rights in California (e.g. Almond growing during droughts) because water isn't sold in an auction.
We obviously need some token amount guaranteed for drinking water. But the rest used for industrial and farming purposes should be auctioned by the government.
In a market economy, people are a lot less likely to be THAT poor or to be surrounded by similarly desperately poor people unable to help them quench their thirst.
In the desert of San Jose, California where I live, water costs a half cent per gallon. Even if the market price is 10 times that, a gallon of drinking water would only cost a nickel.
In the US there is $300 billion a year in charitable giving. I'm not worried that no one will give free drinking water people who can't afford a nickel a day for water. In fact, there are free water fountains already.
So I don't think that is a serious consideration. The problem we would help solve by adopting more market oriented prices is vastly more important than edge cases that are already handled by other efforts.
As to your first point, public ownership generally does not set market prices for resources. Governments often don't even have the means to determine what the market price is. And then they don't change them in response to conditions.
Or they just give them away for free, making it impossible for the private sector to compete. Free things result in greater demand and shortages. And pressure to create more of the resource to give away, more than the population would use if there were a market price.
Our roads are a good example. At rush hour they are clogged with traffic. Drivers pay nothing more for traveling at 5 pm than they do at 5 am. More roads are built so more can be given away. And the additional capacity is only needed part of the time, making it even more expensive.
By contrast, a road with demand-based prices would be most profitable if the price was high enough to keep too many drivers from getting on the road. Too many drivers and traffic slows to a crawl.
And that happens every day. And that only happens because of the public ownership.
But you are right. One can say that if the decision makers understood this issue, public ownership would not be a problem. Roads would have market prices.
And they do in Singapore. It's not a democracy. The decision makers do understand the issue and you pay more to drive at rush hour there.
The price issue isn't rich homes vs poor homes. It's agriculture vs homes. Municipalities are already paying many times more for water than farms.
A water market would allow municipal water systems to purchase water and provide lower water bills for all people -- residential use is a tiny, tiny minority of water use in the state.
The folks cutting back would be the alfalfa farmers in the central valley, who essentially transform water into grass and sell it (and export it out of state).
Poor choice of word "survive" there. I meant economically survive in high-priced-water areas such as what California might be if it had a free water market. I agree with you that people a willing and should pay more for luxuries like lawns in the desert.
For drinking, you won't be living there in the first place if you can't afford the water bill, so nobody's going to die of thirst. That, and drinking water is a negligible proportion of water that people use domestically overall.
We could easily give any individual a 'basic water income' of, say, ten litres a day for drinking and cleaning.
Trading water wouldn't impact that kind of scheme. (Eg the government could just buy water at market prices and distribute as this basic income in kind.)
The important thing is that we DON'T have enough water for all uses we can dream off, like growing almonds in the desert.
So you need some kind of rationing. That means denying water to some uses.
Rationing via market prices is one of the most (economically) effective and just ways we have come up with.
(If you want to make some argument about how the water in a specific country should be the common good of everyone; you can still do the trading. Just have the government own all water sources, auction off the supply, and distribute the proceeds to everyone individually.)
This. One other thing I might suggest is some sort of variable cost model where every person gets 1 unit of water per day for free and then consumption above that scales up. Most people will consume more than the bare minimum to survive (lets say the unit is 2 liters). Doing this raises the base for everyone to be able to contribute to society yet still collects money needed for infrastructure costs, etc. ) One we have some of the utilities under this system, things like health care would be nice follow-ons.
You need so little water for drinking that it's essentially free or close to free.
Properly trading water is more important for industry and agriculture. And I'd be very happy, if some very 'thirsty' crops like almonds or industrial applications would stop because they might not be profitable once you take the full cost of water into account.
The alternative is what you see eg in California, where residential users of water often face severe restrictions, but many agricultural users have grandfathered water rights that they have to squander to keep.
Every person gets a free daily "survival" quota. Above that, you pay market. The latter subsidises the former. You pay less for your drinking water and more for your lawns and alfalfa.
I disagree. I think agricultural water is the perfect use case for a market. Perhaps this is just semantics, but I don’t think you can make an absolute water right; it’s scarce, and farmers are not guaranteed as much water as they want, nor are homeowners guaranteed a right to water their lawns in a drought. Markets are a good way of prioritizing allocation of scarce resources.
But I think it’s sensible to have a high-level allocation where first we make sure that there is enough water for people to drink, and if you want to call that your “water right” then I’m on board.
We also allocate a bunch of water to recreational and conservation/wildlife purposes, and again I wouldn’t want to auction off all of the national parks of course.
But within the (very large) remainder that we allocate to productive usages, I see no reason to get in the way of the invisible hand. If almonds are higher yield than alfalfa then we should not divert water from almonds to alfalfa. A liquid (pardon the pun) market would make these allocations more efficient.
There isn't any lack of drinking water in the US other than maybe parts of Nevada. It's mostly used for commercial or agricultural purposes. When there is a shortage the question should be which the least important commercial or agricultural use.
Just using market based pricing would solve it. But western states have a shitty water rights policy that doesn't allow it. Someone growing water intensive crops in an arid region get priority over junior users. It's a bad system.
And to build on that, only about 5% of California's water goes to indoor household use. It, or perhaps the first 50/100 gallons per person per day, could easily be free based on a tiny fee to the other 95%.
California resorts to rationing. Nobody seems to understand how supply & demand works (and that it can't be repealed). Rationing means half the people will get more than they need, half will get less.
Water is a scarce resource in some places. Rationing water on a market is a reasonable solution. We do it for literally every other scarce resource. Food, oil, iron, etc.
1) Water is a life necessity, but it can also be a superfluous want (e.g. lawns) and it can also be a greedy natural resource grab (e.g. Nestle). Generally speaking, we have enough water to go around for human needs, but people regularly use the emotional appeal of human needs to justify low prices for their wants or exploitation. At the very least, financial markets for water are devoid of shallow emotional appeals to morality and acknowledge it for what it is. All that I ask is that we always ensure that human needs are met, and that is a job for governments. Let financial markets work with the rest...hell, the government should probably sell what's left over to the highest bidders.
2) the real difficulty of selling water is infrastructure. It's expensive, and unlike most commodities, it is almost completely fixed-cost. And the vast vast hypermajority of water consumers only have a single feasible source of water producers. The idea of water futures, then, seems a little absurd. This essentially limits trading to only those who can feasibly take delivery, and in reality that limits you to the same single-source provider you've had from the very beginning. I can't help but think that auctions or dynamic pricing are a better and more efficient idea.
If California had a proper market price for their water, they could alleviate this problem a lot easier than outright restrictions. People will be a lot more careful with their water usage if it's more expensive, that includes the big companies and farms that use the water, no one wants their margins cut into.
If people think that's regressive, give a discount to people in low income housing...but current water prices are mostly just subsidizing the rich and corporate farms. I would rather not subsidize anyone, but I'd rather subsidize the poor than have corporate welfare.
There is already a great way to do this: prices! The market isn't perfect, but with commodities it really does seem to function. We don't need artificial usage limits, we just need to charge for water on the open market. Reserve whatever is needed for residential use and sustainability and auction the rest. Or allow it to be sold freely.
Right now many pleases have a tragedy of the commons situation. If you don't use up as much water as possible, and dig deeper wells to use it up faster than your neighbors, then you can end up with no water and out of business. If you could secure specific water rights you could plan your business. Farms _would_ go out of business with crops that are too water-intensive relative to the price, but that is actually a desirable property of the system. Those crops will raise in price until the demand lowers and the cost of higher water is sustained. Lower water-utilizing crops will replace the previous higher intensity usage.
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