[reposted from aguanomics]

In this post yesterday, I said that the price of water should rise.

In response, aqua-girl said...

How can you say that! I think it is morally reprehensible to charge money for water. Water resources belong to everybody and consuming water is a basic human right.

I think economists are immoral!

Let's respond to aqua-girl's comments:

1. Economists are often amoral -- they are interested in efficiency (maximizing surplus, wealth), not equity (the distribution of that wealth).
2. Water is certainly something that everyone needs to live and charging a price for something someone needs to live (and for which no substitutes exist) is immoral.
3. But, free things must have an unlimited supply. If not, demand exceeds supply, and shortages result.
4. Shortages result in rationing that favors the politically powerful and/or resource-rich. Shortages hurt the poor -- see examples such as this.
5. Also note that something owned by everyone is not protected from depredation and the tragedy of the commons often results.
6. Hence aqua-girl's idea will end up hurting the poor she is trying to help -- either because it will divert the resource to the powerful or destroy it.

Although I disagree with aqua-girl's idea (all free all the time), I am not the heartless, immoral economist (redundant?) she imagines. As I have said many many times on this blog (and in Chapter 7 of my dissertation), I recommend that everyone receive some water for free. After they receive this amount, they must pay for additional water. Put differently, water is free to misers, but wasters pay heavily.

The free/pay price schedule (a form of increasing-block pricing) is not my original idea. I heard about its use in South Africa, where a judge recently ruled that people have the right to 50 liters/capita/day (LCD).

People in Southern California use about 800LCD. I've recommended a basic right of 400LCD (just over 100 gallons), with extra available to those who want to buy it. People in Beverly Hills use over 1,200LCD.

Bottom Line: It's immoral to deny water to people, so everyone should get some water for free (equity). There will not be enough water if it's free, so everyone should pay if they want more than their free allocation (efficiency).

PLEASE COMMENT ON THE ORIGINAL POST, HERE