A while back I wrote about the NYC water system, which is in a rather precarious position and could more or less collapse due to any number of factors at any point (no redundancy etc). I suggested that they should raise the price of water until there were some viable alternatives (as a good gets more expensive, more firms enter the market and other ways of creating/supplying the good become profitable). They have not yet implemented my suggestion.
Today, via Paul Kedrosky, I read about the insane clampdown on residential water use in Australia. Residental use accounts for only 9% of the overall water use in Australia, so a 40% reduction in residential use will reduce overall water consumption by under 4%. Nevertheless, the government has apparently decided that whoever is using the other 91% of the water is off-limits (farmers? did I hear someone say farmers?).
This response to the problem represents everything that is wrong with today's environmental movement and politics. However, there is a big water shortage in Australia due to six years of drought. Obviously something needs to be done. What to do?
Hmm. how about privatizing the water industry so that supply and demand determine the price of water? Some residential users might cut down on water consumption, particularly during the early days when water prices will spike. The commercial users of the other 91% of the water (I assume mostly farmers) will make BIG cuts to their use of water. Certain food products which require lots of water to grow will no longer be grown in drought areas. Water prices will eventually reach equilibrium at a level that is higher than the initial price but much lower than the spike.
Of course, everyone hates privatized water. Corporations shouldn't 'own' our water, blah blah blah. So, if you can't privatize, what can you do? Well, just raising the price of water would do the trick - just remember that you have to raise it for *everyone*. In California, farmers pay $1 for the same amount of water that we pay $10 for in the city. Guess who is using all of the water in CA?
Another option would be to give everyone a water quota based on their current usage and then let people buy and sell parts of their quota. This effectively puts a price on water in a more politically palatable way, since everyone continues to get what they were getting before, and it will lead those using the most water (ie farmers) to come up with cost-effective ways to cut down on their usage. However, if you are using an unsustainable amount of water, this isn't going to fix the problem, so you would have to start reducing the quotas over time. This will be less painful if done gradually as people will miraculously find cheap ways to reduce consumption (or to increase supply - Antarctica isn't all that far away after all).
The problem with all of these solutions is that they won't cause consumers lots of pain. Causing consumers pain is one of the main goals of the modern environmental movement. The movement feels that people should have to sacrifice to conserve, that we shouldn't be able to get it for free or to force it all upon the poor farmers (even though they are in fact the ones using all of the water, and most of them are, in fact, quite wealthy). You can see this in the policies that have been enacted in Australia- more and more command and control, where hosing down your car is now grounds for an arrest.
I think it is safe to say that these policies aren't going to solve Australia's water problems. Let's hope they don't end up with a police state before they figure it out.
Posted by Stephen Bronstein at February 18, 2007 04:57 PM