Hi Guest,
Water Conservation: Government Mandate or Consumer Choice
On January 15, 2008 Long Beach placed restrictions on homeowners allowing them to water their yards only one time per week. How did the situation get this bad and why did Long Beach choose to take this drastic step?
Here’s a short reminder of the laws of supply and demand. On the supply side, producers are willing to produce more of a product, the higher the price a market will pay. On the demand side, consumers will buy less of a product, the more the product costs. In a free market situation, producers (supply) and consumers (demand) desires are balanced against each other and this determines the market price. When products are exchanged at the theoretical market price, the consumers consume all that the producers produce. Economics explains why a producer that sells a product above the market price will not sell everything (surplus) and if he sells the product below the market price he will run out of product (shortage).
Water is subject to these same economic laws. For years, our water delivery agencies have successfully produced new sources of water and sold it at prices high enough to maintain a surplus. California’s population is growing and the demand for water continues to increase. Throw in a drought and the supply side is reduced. This balance of supply and demand is at a critical point right now and unless prices go up (forcing consumers to conserve), there will be a water shortage.
Politicians make the decisions on how to price water and how the public can use water. Politicians do not want to be responsible for pricing water at a rate that causes hardships for the poor to afford the basic necessities of drinking and bathing. However, low water prices do not force consumers to make the choices to find ways to conserve water themselves. Think about this. You are a homeowner and you see that your water rate will increase 10 times. Will you stop taking showers, stop drinking water, or will you start to take conservation seriously. Economics says you will that you will find a way to conserve.
The market price is the result of thousands of individual decisions. Governments have tried to cheat these fundamental laws throughout history by fixing the prices for products. Fixing the ceiling (upper) price for a product was responsible for food shortages in Russia, fuel shortages in the US, and the shortage of affordable housing in inner cities today. Rising prices are the result of supply not keeping up with demand and rising prices will help keep demand down to balance out supply.
You are the politician and you are given two choices. Choice 1 (consumer choice): Increase the price of water to a level that decreases consumer demand and risk the poor in our society choosing to go without drinking and bathing water. Choice 2 (Government Mandate): Keep the price of water below market and restrict the use of water to the necessities and let the landscapes go dry. Next time you think about rising water prices, you might see how water price increases can help to keep water flowing into our gardens and force consumers to pay attention to wasting water.
