The Strange Economics of Water, and Why It Shouldn’t Be Free: A Guest Post

Photo: Comstock


Water is a topic that’s come up repeatedly on this blog. We’ve written about attempts to do away with bottled water; why it’s a bad idea to ban bottled water; whether festivals should hand out free water; and the need for safe supplies of water around the world.

Here now is a guest post from Charles Fishman, whose new book (reviewed today in the Journal, btw) is called “The Big Thirst: The Secret Life and Turbulent Future of Water.” (Fishman’s earlier book is “The Wal-Mart Effect.”) The Big Thirst covers some of the four billion-year history of water on Earth, and its little-known but abundant fourth state: “molecular water,” fused into rock 400 miles deep, which is where most of the planet’s water is located. Fishman tackles the debate around water as an increasingly precious resource while reminding us that water can’t actually be “used up.” But, he makes clear, the era of easy water is over, and that’s something to think about, hard.

What Do the Economics of Bottled Water Tell Us About the Economics of Water? A Guest Post
By Charles Fishman

Just before last year’s NBA season, the Cleveland Cavaliers quietly removed all 18 water fountains from their home stadium, the Quicken Loans Arena, “the Q,” which seats 20,500 people. Q managers taped up signs where each water fountain had been that read: “For your convenience, complimentary cups of water are available at all concession stands through the Q.”

There are many words to describe concession stands at U.S. professional sports arenas; “convenient” isn’t one of them.

For more than three months, through dozens of events attended by almost 1 million spectators, there were no water fountains in the Q. If you wanted a drink of water, you had to stand in line at the concession stand, and when it was your turn, you could receive a free nine-ounce cup of water, or you could buy a chilled bottle of Aquafina for $4.

When the Cleveland Plain Dealer published an article about the disappearing water fountains halfway through the NBA season, the Cavaliers first said they were following advice from the NBA, that water fountains spread swine flu (the NBA never gave such guidance). The Plain Dealer pointed out that the removal was illegal — public buildings are required by building codes to have water fountains, the number based on capacity. Fans were so angry — once the paper pointed out that the fountains were gone; strange they hadn’t noticed — that the Cavaliers set up temporary water stations around the arena, so those who wanted a drink didn’t have to stand in line.

The Q then scrambled to re-install the fountains. By then, the Cavaliers alone had hosted 29 sold-out home games at the Q — almost 600,000 thirsty fans. If just 10 percent of those fans bought a $4 bottle of water they otherwise wouldn’t have, that’s nearly $10,000 in additional concession revenue, just for water, at each game.

When it was suggested to the Cavaliers that selling bottled water had been the point of taking out the water fountains, the team spokesman was indignant. “That’s simply absurd. That never crossed our minds.”

Sometimes the economics of water are as clear as water itself. And sometimes, they’re not. The disappearing water fountains make perfect sense for the arena. But what about the thirsty fans? Those who bought a single bottle of Aquafina at the Q were paying more for a couple swallows of water than they paid for a gallon of gasoline. In the cold case at a convenience store, you can get a half-liter of bottled water for 99 cents — 17 ounces for a dollar. The designer water in the same case, FIJI Water, costs 50 percent more, $1.49 for a half-liter, with the square bottle at no extra charge.

How incredible is that? If you drank the 99-cent bottle today, then took the bottle home and continued to use it, you could refill it every day with tap water until July 3, 2017, before you’d spent 99 cents on the tap water. Even the cheap bottled water is 2,000 times more expensive than the water we’ve got on tap at home.

Bottled water is a brilliant business, in that it depends on our participating in this amazing price paradox. The real question is why we do it, and what it says about water economics.

Three things are clear.

First, when we buy bottled water, we’re not buying the water itself — we’re buying convenience, we’re buying coldness, and we’re buying branding (and some false measure of reassurance about safety). It’s easier to grab a bottle of water from our own fridge than to have a clean reuseable bottle, keep track of that elusive top, fill it, and keep it in the fridge. Bottled water in the cold case is often a good choice — compared to soda — when you just want something to drink. And although all water is essentially the same — a quarter of bottled water (Nestle Pure Life, Aquafina and Dasani) is re-filtered city tap water — we like the statement of carrying a bottle of Evian or SmartWater.

Second, we are not willing to pay much for water at home. Any time a water utility moves to raise water rates, the outcry is stupendous. Residents act as if increasing the water bill from $23 a month to $30 a month will force them to choose between their heart medicine and their water. In fact, the average household water bill in the U.S. is $34 a month, $1 a day. That’s less than half the cable TV or cell phone bill. Water at home is perhaps the best deal any of us get (now that The New York Times is no longer free online) — and a symbol of the very human instinct that basic water service should be cheap. But since a single half-liter of bottled water costs as much as a day’s worth of cooking, washing, showering, and toilet-flushing for a whole family, it’s clear we can learn both to appreciate water, and to pay for it.

Which leads to the final point about water economics. “Free” is the wrong price for water. In fact, the lack of a price for routine water service is the most important thing that’s wrong with water — resources that are free are wasted; there’s no incentive to learn to use them smartly; there’s no money to maintain and modernize the existing water system; there’s no incentive to reach back and protect the source of something that’s free.

If it’s free, the message is that it’s unlimited.

In the U.S., we spend $21 billion a year on bottled water. We spend $29 billion maintaining our entire water system: the pipes, treatment plants, and pumps. We spend almost as much on crushable plastic bottles as we do on our most fundamental infrastructure system.

That’s why, in Philadelphia, where I live, we have 3,300 miles of water mains — and the water department replaces 20 miles of main a year. A 160-year replacement cycle. It’s fine to indulge in a bottle of FIJI Water, just not at the expense of the water system itself.

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  1. Aditya says:

    The concept whatever is free is wasted is true in a consumerist society. Even air we breathe is free.
    A longer term approach would be to raise awareness and reduce waste. But then the commercial
    Guys will fret! !!

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    • Erica says:

      Air is not scarce, so it wouldn’t make sense for it to be an economic commodity. Water is scarce, so when there is demand for a limited resource, it doesn’t make sense for this resource not to be regulated in some way. Putting a price on that resource is a way of preventing that resource from being used up too quickly at the expense of the environment or others. Raising awareness is great, but unfortunately there is a small inventive for an individual to do so. Hopefully people will be able to work together to fix the issue of water scarcity, but there needs to also be alternative solutions to fixing this issue. The concept that free scarce goods are wasted is true in any society.

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  2. Mary.. says:

    I just watch a wonderfully informative cartoon that reiterates what you are saying about bottled water. Please get the word out:

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  3. Pelecypod says:

    There are a couple of fundamental differences between bottle and tap water.

    The first is chemical – municipal water supplies add chlorine to water so that it doesn’t get contaminated in the pipe between the treatment plant and your tap. Most bottled water comes out of the treatment plant before the chlorine is added – eliminating the unpleasant chlorine taste. Most European countries use ozone to purify water – but ozone doesn’t stay resident in water – so the water has a high chance of being contaminated before it reaches your tap. That’s risk and frequency of after-treatment contamination is one of the main drivers that Europeans feel that drinking bottled water is safer (and for their system, they are probably right).

    The second is regulatory – the EPA regulates water coming out of the treatment plant, but the FDA regulates bottled water. The testing requirements and standards required by the EPA are far more strict than those required by the FDA, who only requires random sampling of one bottle in every few thousand. So the chances of getting a contaminated bottle of water are greater than getting contaminated water from your tap.

    One major thing that contributes to a flavor difference is the source of the water. Water that is treated from a surface water (a lake or river) is likely to have fewer minerals than water that is drawn from wells. A simple way to eliminate most of the flavor of water is to run it through a simple filter that includes activated carbon.

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  4. Ryan says:

    Conversely, I agree with this logic; water is practically free and yet there is undoubtedly an infinite amount of it on the planet. So, as the years pass by and the population rises, what happens when the water that we get for free is not where we need it to be, i.e. free-flowing from the tap?

    I’d quite happily pay more for water and have those funds spent on consolidated water supplies, if it meant stopping idiots from buying the bottled stuff that’s been shipped halfway round the world, just so I can be ‘cool’ and sport a designer brand as I’m taking a gulp. Insane…

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  5. Mary says:

    In hong kong, we believe that the tap water is dirty to drink. We use it to wash the dishes , to clean the floor, but we seldom drink unless it was boiled. It cost time and money to boil the water and you never bring a lot of water with you when you are shopping. That’s why we drink bottled water but it do not mean that we waste water.

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  6. James says:

    I have to ask, who exactly are you calling “we” here? I get my water from my well, and use it to refill the plastic water bottles that I pick up at parties & events, and which wind up in the car. Been doing this for years, ever since I discovered that the 1-2 liter size of soft drink/ water bottle makes a far better & cheaper canteen for hiking & biking than anything I could buy for the purpose.

    So you lemmings can keep running over the bottled water cliff if you like, but definitely include me out.

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  7. John says:

    Bottled water dose taste a bit better, to make tap water taste better a filter thingy is awesome

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  8. Eric M. Jones says:

    Plastic is the last thing you would ever want to drink from. Significant amounts of plasticizers leach into the contents. Also, hoses used for soda fountains leach PBA and other nasty chemicals into the drinks.

    Tap water is a much better bet.

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