Is Water Too Cheap?

Levitt has blogged about how higher gas prices can be good for the country. Are higher water prices next?

Mercatus Center economist David Zetland argues that California’s water supply problems are really just water pricing problems. He recently called for a new price structure that would punish water guzzlers and encourage conservation.

Currently, Los Angeles residents pay just $2.80 for the first 885 gallons they use per day, and $3.40 for the next 885. Under Zetland’s plan, the first 75 gallons per day would be free, and each additional 75 gallons would cost $5.60. To get a sense of scale, consider that the average Los Angeles household of three uses 350 gallons of water a day, according to Zetland — that’s about seven bathtubs full.

Tap water is still far cheaper per gallon than bottled water. But would higher prices at the tap be as influential in changing water consumption as higher prices at the pump?


Candide

I have lived long enough to see first hand that Americans never learn any lesson from a crisis.

When I was a kid in the 70s, there was a water crisis and people went to every house handing out a brick for every toilet in the house. As soon as the "crisis" was over it was back to watering everything in sight.

Also in the 70s, people waited in lines for gas and the auto makers started making smaller cars. As soon as the crisis was over it was right back to the biggest gas guzzlers they could make....guess what?

Matthew Smith

We can all live without petroleum, but not one of us can live without water, yet we contaminate our drinking supply with the pharmaceuticals we pass, the industrial waste we pour into the groundwater and rivers, herbicides and pesticides, and so many other wastes and chemicals. We're engaged in endless bloody petroleum wars; you haven't seen anything yet- wait until we're fighting for the commodity of clean drinking water. For some perspective, see Darfur.

About 520 gallons of water go into a cow for each quart of milk that comes out. Up to 4,400 gallons of water are consumed to reach an end result of a pair of leather shoes. To grow a coffee plant, transport it, and brew it- 75 gallons of water for a volumetric cup of java. You can save a few gallons each day by taking a shorter shower, but every time you throw away food, you are virtually wasting dozens or hundreds of gallons.

When as many as 5 million people die unnecessarily each year because of lack of water and water-related illnesses; one-third are under age 5; it is murder to be so cavalier with our lawn sprinklers and car washing.

Grow food, not lawns.

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EAO

I grew up in California (now live in Washington State) and remember in the '80s having to conserve water during periods of droughts. That meant quick showers, turning off the water while brushing your teeth, etc...These have remained habits since. I'm shocked to learn that in the LA area the avg. household of 3 uses ~350 gallon per/day. We're a family of 4 and use ~125 gallons per/day. I still think we have a ways to go in order to reduce our own household water consumption. Our natural resources are not "free" and we need to determine a fair price to pay for what we need, not desire to maintain our households. I'm all in favor of sticking it to people in the wallet for overconsumption and lack of awareness or caring about making lifestyle changes conserve our precious natural resources.

rachael

How about giving tickets property owners for letting their sprinkler systems point in the wrong direction and watering the streets and sidewalks?

I am in Sherman Oaks, CA and I have a dog, so I am walking a lot. There is a steady stream of water constantly running down streets here from poorly managed sprinkler systems. It makes me so mad.

I also walk by a lot of apartment complexes with that have the same sprinkler system problem. BUT this is the worst, apartment buildings have their parking garages and walk areas power washed regularly. So wasteful. I think that the gardeners should be given strict regulations from the government on how to use water. On a side note, for the environment - they should be regulated on those gas powered blowers.

Apartment buildings also don't have a recycling system.

David Zetland

Hey -- I *just* found my way over to this post about my piece on forbes.com.

1) People interested in these issues should read my blog: http://aguanomics.com/

2) My proposal was for a free allocation PER CAPITA.

3) I did NOT address the ag/urban debate in it. For my ideas on that, see these posts:

http://aguanomics.com/2008/07/forbescom-feedback.html

http://aguanomics.com/2008/07/aguanomics-at-business-pundit.html

4) Glad to see so much interest in these issues. Keep talking!

patrick

@Ben D (#5)

Not sure about CA, but in MI the standard for renters is to have water paid for by the landlord as well. This is due to law, but I'm guess not the same one you are thinking of. In MI, your water bill is a lien on your property. If you don't pay it, they auction your house. It is therefore in the best interest of the landlord to make sure it is paid and not rely on the renter.

adora

In Hong Kong, there was a lot of water shortage in the late 70's before the artificial reservoir was built. Price have been use to keep people from wasting.

My family (with 9 people) used to spend about USD$400 per month on water bill in the 90's and we probably only use 1/3 of what average American family usage.

Since water is human right, usage lower than certain level is free. Poor people would use rice water (water used for raising rice, gray water) to wash their floor or water their plant.

Paul

All this crying about low income families. Why should they get a break? Or, why should I have to pay more because I make more? I worked very hard to make a comfortable income for my family. If you are having such a hard time that you can't afford water for your family, maybe you should look at your lifestyle and adjust some priorities.

Twilight

In Nova Scotia (a place that is not a part of the United States), we have a vast amount of fresh water compared to our population. Watering your lawn or filling your swimming pool is not an issue (although it may be poor conservation practice). After reading this discussion, I am very glad to live in a place where water is so abundant (my dog always has some surface water to drink when we hike). Good luck, California - and for what it's worth, I would be in favour of dramatically raising the rates for the big-consumption customers. What you've done to the Colorado River makes me sad!

Jim F.

As water is a needed resource for everybody, why not make water pricing based on ability to pay, as well on consumption. Therefore the poorer household can still afford to bathe, drink etc. so long as they do not over consume. Thus a higher income household will pay more for their water, and also have consumption costs associated with it. Im not saying make the higher income households pay dramatically more for water, but I dont think it would damage their spending habbits paying slightly more for water as compared to a welfare household.

Greg

If prices are too low, then who is paying for all the reservoirs, aqueducts, and other infrastructure necessary to bring Las Angeleans their water?

If the water users pay what is necessary to fund the infrastructure, then the market will adjust. If water is subsidized by taxes... well, there's your problem. Remove the subsidies. Let the users pay the bill.

Ben D

I live in LA County and the standard here for rentals is that the landlord pays for water and trash. I'm not sure, but I have the feeling it's the law.

So right now for renters in LA County, water is essentially free... at least the variable cost.

Frank

per day or per month?

Sandi Mays

I think higher water prices in areas that have a water shortage make a lot of sense. I have family in Arizona. They have a green lawn and a pool. Really? If you choose to live in the dessert you should get over the need to maintain a glorious green suburban lawn.

Of course, there are consequences. If high water costs are factored into the cost of living & manufacturing in a certain geographies, then people and companies will have to make hard choices. There could be a mass exodus in areas where water is scarce.

Adam

I would definitely love to see a system that charges people who believe they need a lawn filled with plants that can't normally grow in the climate they chose to live in.

Cheryl Friend

Hi - I have lived in places were water cost $0.10 per undrinkable gallon. Trust me, we were clean but there were no lawns and we still had to boil the stuff to drink it. If people have to pay they will conserve and use appropriately.

Jon

I live in NE Ohio, and I often hear that folks in California & Arizona etc. pay LESS for their water than we do. Is that true? We have an abundant supply

Stevo CO water lawyer

Water is such a classic economics lesson in supply and demand of a renewable resource. In Hong Kong, there is presumably a small supply and therefore even moderate demand results in a high price. In California, demand is high, but there is also a pretty large supply. Generally, volume of municipal use is many times lower than for agriculture. Efforts at conservation serve to put off necessary investment in additional treatment by municipal suppliers. In areas of short supply such as the Southwest, a graded rate structure can help reduce need for additional supplies to be converted from agriculture or depleted from the small remaining share allocated to local ecosystems.

Unfortunately, lack of water, at least in the modern U.S. has never been a barrier to (wise) development. The value of water used in agriculture is just too much lower than converting that water to use in homes. Desalinization is extremely expensive and energy intensive. Hopefully wise use of existing renewable supplies will keep us from going down the path of greater supply at any cost If we can give a cut of clean water back to the needs of the environment, our existing infrastructure delivers an amazingly convenient, affordable supply of the most important natural resource. We are once again, shown to be incredibly lucky in this country. Let's hope climate change doesn't revoke our good fortune. If that happens, we all really might have to start paying $675 or more a month for water.

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mfw13

Malisa,

Yes, people can change their water-usage habits overnight! How much effort does it take to learn to take 3-minute showers instead of 10-minute ones, to not leave the water running while you are brushing teeth, shaving, washing hands, doing dishes, etc., and to only do laundry if you have a full load?

Answer...not much!

The bigger issue here, however, is not individual usage...it's agricultural usage. If memory serves me correctly, roughly 80% of all water in California is used for agriculture. Until you incentivize agriculture to use water more efficiently (which is hard to do because they can pass water price increases on to their customers), you will not put a dent in overall water consumption.

Kristin Mac

Sorry to post so much but this is my lifes work! :) As of right now, reusing "gray" water is really difficult and cost prohibitive large-scale. so it's usually done only when the benefits far outweigh the potential health risks; if even a few stray "#2 germs" survived reclamation treatment, a whole water supply can be contaminated (by our modern heath standards) for a long time. Good news is that conventionally flushed water re-enters the water cycle pretty quickly and is born again as rain. Lots of people are starting to collect roof runoff and rainwater in rain barrels for their lawns/gardens, and some are filtering the roof runoff for other uses.