The Cost of Water

WaterBarrelHere is another sad story about the drought in California. It’s an even better example of catastrophe theory than Nassim Taleb killing chickens. The water table can fall steadily for one hundred years, until one day it falls below your well shaft and then suddenly you are out of water. The goal of good policy, of course, is to see the catastrophe coming and avoid it.

On the other side of the country, Detroit has no running water because the city is bankrupt, can’t pay its bills, and has already mortgaged the water works. Detroit, by the way, lies on a strait between two huge freshwater lakes.

I think water is a right. However, if all of our customers took that stand — that it’s a human right and we’re not going to pay — then no one would have water.

The UN says that water should be free, because it’s essential to life. That’s only true if you have a rain barrel on the roof. City water entails plant and equipment, and workers who must be paid. What the UN means is that, if you live in a “rich” country, someone else can be taxed to provide you with free water. If you live in a poor country – the UN will hunt up a rich country to pay for your water.

No one questions the morality of using tax coercion to make something “free” which is obviously not free. It’s essential for life, after all. Jeremiah doesn’t question the morality. He questions the arithmetic.

Should water be free for people to grow lettuce in the California desert – and then sell it for three dollars a head? To Jeremiah, this sounds like an arbitrage opportunity. You take water as a factor cost of zero, and then convert it to something you can sell at a profit. Why grow almonds when you can grow broccoli? Water is free!

Should water be free to irrigate lawns and golf courses? How about pumping millions of gallons into shale strata, instead of hydraulic fluid? Hell, hydraulic fluid is $20 per gallon – and water is free. Maybe, since water is a “human right,” we could pump it from the Detroit River to go frack the Permian Basin. It’s too bad for cold and thirsty Detroit that natural gas isn’t also a human right.

Fortunately, no one takes the UN seriously on this. All municipalities charge something for household water, enough to cover their costs, and generally they charge more for higher volumes.   If anything, water charges need to be higher – and ramp steeply for commercial use. Even among ordinary bankrupt Detroiters, providing water for free is an invitation to waste it.

See also: Cost of water from desalination


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