Think Freely Media presents Common Sense with Paul Jacob

All Wet

Water Shortage

Which is worse, paying for stuff you use . . . or being constantly harassed for using it?

One consequence of widespread failure to charge market rates for water turns out to be hyper-regulation of hydro-usage, and the penalizing — even criminalizing — of using “too much” H2O.

To deal with drought, California now regards it as criminal to “waste” water. Don’t hose down that sidewalk! Las Vegas tries to save water by paying people to rip out their lawns. The EPA is developing technology to force hotels to monitor guests’ specific water usage.

In unhampered markets, sudden and big drops in supply tend to cause sudden and big rises in prices. People economize without being forced. If you must pay more for orange juice because of frozen crops, you either buy less juice or buy less of something else (if orange juice is your favorite thing). But the shelves don’t go bare.

The worse supply problems are, the higher the prices, the more customers economize, the more producers produce. So when there’s a local drought, what will a water company do (as opposed to an overweening water authority)? Charge more. Pipe in water from other states. Other solutions I can’t think of offhand . . . because I’m not running a water company. I lack the direct incentive that the possible profit from solving the problem provides.

Let people cooperate with each other. That is how they’ll solve their water problems — without governmental bullying.

The water will come like rain.

This is Common Sense. I’m Paul Jacob.

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By: CS Admin


  1. JFB says:

    In a regulated, non-market governmentally controlled market sector the mechanism to control demand is more control. Water in California is simply a precursor to how many forms of demand must be limited on a controlled society, including shortly medical services and eventually Internet bandwith.
    So predictable, so sad, so stupid. The result is invariably less supply, gross inefficiency and greater regulation to counter the problems the previous regulation caused to develop. 
    Well done planners and statists, and the short sighted who have put you in place!

  2. John Shuey says:

    Just think how much better off CA would be vs. their pending water crisis if they had invested the money they are now wasting on the high-speed rail boondoggle in desalinization projects and then charged market rates for the product.

  3. Drifter says:

    Utilities like public water companies do no operate on supply and demand. They have set amortized costs.  Example: If consumers use less water (conservation)  water companies will raise the rates to recover their costs…and their revenue stream.

    • matt says:

      However, you are addressing the point of water companies provide what is called a “public good”, i.e. something that must function even without paid use. For example, snow removal, the military, etc. Moreover, this public good is a publicly-funded State monopoly; by definition, a monopoly has no competition (either by barriers to entry or State regulation). Your example of “If consumers use less water (conservation) water companies will raise the rates to recover their costs…and their revenue stream” (no pun intended I’m sure) only demonstrates the sad reality of a broken system — consumers are forced to pay for “lost revenue” for using less water when 1) they are paying more money for using less of a product (where does capitalism fit into that?), and 2) taxpayers are already funding the water company through government taxes and subsidy. Sad.

  4. ed says:

    In a free society who ‘owns’ the moving water? Can each successive upstream owner damn a stream/river running through their property? I’m all for the free market but water resource is probably harder to deal with than land.

  5. matt says:

    This is a great example of Demand-Side Economics on display — Publicly-subsidized State monopolies are perpetuated by a steady revenue (taxes) stream by artificially manipulated markets. Hence, we should focus on Supply-Side Economics, which relies on the natural Equilibrium effect that free markets provide — individual consumers affecting prices v. quantity to determine supply v. demand. In other words, Supply-Side Economics is all about individual choice on the micro-level, and societal preference on the macro-level, whereas Demand-Side Economics relinquishes control of market forces and fluctuations to the State, making it sole arbiter of both individual and societal products and services by manipulating demand by offering only limited products/services. Capitalism, not ‘Pure Capitalism”, is the only true method of achieving market balance and prospering economic models. 

  6. […] we now know. Read the column at Townhall. Come back here and click the links to Friday’s water Common Sense. And look up online the work of PERC, and of economists like […]

  7. […] talked about it before. And, as before — indeed, as is so often the case when government constricts our […]

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