Right, the extent of any subsidy would be specific to an individual system. The approach is generally to set the price somewhere above an estimate of the competitive equilibrium price but below the monopoly price, to give the utility company a rate of return that makes it worth their while.
Because everyone gets water under the same / similar terms and conditions, in effect some users subsidize other users. For example, if urban customers are easily served, in a sense they subsidize rural customers.
If water companies were allowed to maximize profits freely, they would charge the most for the water you need the most, then offer lower prices for additional use. A government would be more likely to negotiate a price structure that made some minimum level of water affordable to every household, with higher charges for additional use. In that sense, basic household use would be subsidized by people who consume beyond the minimum.
I think it boils down to the fact that if people cooperate and reduce consumption during scarcity, cities can avoid saddling all consumers/taxpayers with the expense of excess capacity. When people mistake a regulated monopoly for a free market, they see no reason to cooperate.
That’s a good point. I was lumping them in with gas and electric, but on reflection that seems to be true every place I can think of that I’ve lived as well.
The ones I’ve seen here are self-sustaining from water/sewer rates. The rates themselves are determined as a projection of the operating costs (take a certain number of future years and estimate operating costs, based on observed costs and any anticipated future capital expenses). Any funds left over are saved and used for capital projects. I’m not sure the utility would cease to exist if it didn’t make a profit; break-even seems to be the goal.
You get into more levels of government when you talk about drilling a well, or capturing water from a river. The state is likely to regulate who can withdraw water and how much they can withdraw.
Just like dumping CO2 into the atmosphere costs nothing but the government taxes it because it is polluting the common property, so taking water from the environment should also be taxed to a point where the water taken is in equilibrium with the replenishment rate. Up until now that is not being done and that is the root of the problem. If in one location there is plenty of water and no concern about it being replenished then there is no problem or need to limit. But if water is becoming scarce then the government, as keeper of the environment and of the common property of all, needs to tax the extraction so that water users do the best they can to limit their usage.
All the talk about poor people not having enough water to drink is either ignorance or demagoguery. Only a miniscule fraction of water is used for drinking. Not even the drop in the bucket. Most water is used for agriculture, industry and other uses. Drinking water is not even a blip on this radar.
The “water is necessary for life” argument is just silly. You could multiply the price of water by 10 and not a single person in America would go thirsty. Subsidizing people’s water just means they have more money for pizza, gas, movies or whatever. That’s all.
Assigning water by government regulation is always going to be inefficient. Why should water go to one use and not another? Lately I hear a lot of noise against using water for golf courses. I think golf is boring but if people like to play golf and pay for the water what is wrong with that? Who is the government to tell us that water cannot be used for golf courses but can be used for growing turnips? This is a bad system. If people prefer turnips over golf then the free market would produce the same result but if people prefer golf over turnips, then why should the government force the opposite?
The price system serves to convey information. How badly do I want to take that extra shower? How badly does that guy want to play golf? How badly does my neighbor want to water her flowers? If all those things can be measured in the same units ($) then we can compare and see who wants the water the most. Just like apples or gasoline. But if we take that out of the equation then consumers have no way to compare. And when there are shortages the government asks us to conserve but that is not a good system and will only work for short duration.
Why should my neighbor not water her flowers but I can take as many showers as I like? I know her flowers are more important to her than my third shower is to me. Why should we subsidize the growing of turnips but prohibit golf courses?
Where the use of any good is dictated by the government then you have inefficiencies. Let people decide what they want to do with what they buy.
Most experiments where governments try to restrict the free market and direct resources to certain have proven to be bad in their results. The free market regulates itself and yields the best results for most of the people. But subsidize a good for one group and you immediately have wastage as they have no incentive to conserve.
Ah, well, at least we have some movement on your part, sailor, in that you are now discussing inefficiencies, rather than simply holding forth the incorrect, as well as improper view that water is just some commodity like any other. But your “let the market dictate resource use” argument fails to address two very important aspects of this issue:
Water is necessary for life (despite the fact that most of it is not used for drinking, as you accurately point out)
Letting he who has the most money purchase all the water he wants doesn’t efficiently distribute water, it only distributes it according to wealth.
It is common for people who have money to assume that distribution of resources according to wealth is “efficient.” It is not. It’s just another arbitrary way to deciding how to distribute resources. And when the resource, unlike, say, asparagus, or candles, is a vital component of living, so vital that we offer it as a governmental service, then you simply cannot just let the method of determining distribution be based upon wealth. As I pointed out above, this is true for police services, fire protection, roads, etc. You artfully failed to address this apsect, I notice, I suspect because you can’t.
This seems to make a point then deflate it in the same bullet. Society at large uses much more water than necessary to sustain life because the economics encourage it. This isn’t just a matter of direct purchase of water by the consumer, it’s the whole range of consumer choices. A pound of protein in the form of beef takes into the thousands of gallons of water to produce, immensely much more water than, say, a pound of protein in the form of tofu. Some sources claim that half of the water in the U.S. is used for cattle production. I am not opposed to that usage, but it’s clear that water is abundant enough to make a product that nearly everybody can buy, and we are not in a Dune world where extreme conservation is required just to sustain life (several sources cited here).
The distribution is efficient. You mean you think it’s not fair. What’s *tremendously *efficient is the pricing, and therefore regulation of the market at the gross level. Allowing supply and demand to set the price in a free market is immensely more efficient than trying to set the price from Central Control. To allow free-market pricing means that the price responds very quickly to changes to in supply and demand. To try and manhandle that process would mean intractable economic models, forecasting, data collection, and other efforts that would still never be timely, resulting in shortages or surpluses. That’s what economists mean when they talk about efficiencies in a free market–there is zero effort expended to manage pricing or who can buy what.
Water is essentially different from these public services you mention because we choose exactly how much our household will consume and we pay precisely according to that choice. We can paint a picture of water being essential for life and public health, but it’s been addressed already that most uses of water, even household uses, are not essential to sustaining life. We *cannot *let the method be based on wealth? Well, of course we can. That’s exactly what we do.
I would take the communist argument to mean that a distribution determined by the government is likely to cause its own problems, often as a result of government’s good intentions. Many of the shortages in the Soviet Union were the result of policies like artificially lowering the price of bread, since that was a necessity. Lowering the price lead to an increase in demand and supply could no longer keep up.
(I don’t know if that’s exactly what sailor meant, of course.)
I’m reminded of my days managing apartments. The county government gave us free shower heads to install and they even did an inspection to make sure we installed them. However, most of the tenants promptly replaced them with regular flow heads. So the net effect was to waste two sets of shower heads with negligible impact on water usage. (I know the impact was negligible because I handled the bills; water was ultimately paid for by the apartment complex and then passed on to tenants).
However, I don’t think either extreme is really the answer. We need a balance of government distribution with capitalist pricing. Looking at my neighborhood as an example… instead of pricing water separately from sewer service and sewer upgrades, they could price water to include the sewer fees. The monthly bill would be the same, but the cost per unit of water would be at least four times as high, thus passing more costs to the higher users like my neighbor who washes down his driveway twice a week.
Yup. This reminds me of a woman I used to date who lived in a condo which had a very large number of units, maybe about 200. All the utilities were included in the condo fees: water, electricity, gas, etc. The expense in utilities was just huge. Everybody left their lights on all the time, water consumption was just incredibly high, etc. They kept trying to diminish this but it was hopeless. My own friend would leave all the lights on when she went out of the house. After all, the effective price of electricity was 1/200th of the real price and it was not worth turning them off. Nobody would repair leaky faucets or toilet tanks.
The only effective answer would be for each tenant to have their own meter and pay for their own utilities but the condos had been built some time ago like that and now it would mean total replacement of pipes and wiring so that each unit would have its own meter. They kept talking of doing it but the upfront price was too much so they just kept putting it off and paying all the huge utility bills. It is just human nature.
