Water and economics

It could be that one of the great injustices of the world is that for some of us the marginal cost of water is zero.

As this injustice is likely to get worse, the way for its victims to cope will be to apply supply and demand and marginal cost to pricing.  Here is an article about water markets.

When we were looking for a place to build our home we focused on a part of British Columbia through which there is a diagonal line.  One one side of this line it is dry sometimes getting close to desert.  On the other side is a cedar-hemlock forest.  Having previously lived in areas short of water I was determined we should be on the wet side.

As it turned out the  “pile of rocks” my wife refused to look at the first time we drove by has three streams on it.

The stream from which we take our water goes underground and flows into a river.  The water that goes through our house goes into a septic field and flows underground into the river.

Therefore the marginal cost of our water is zero and we don’t worry about water conservation.

I am not saying where we live because I don’t want a lot of other people coming to live in this valley.

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2 Responses

  1. In a lot of countries, including my own, Australia, the effective marginal price of water is high. Approximately $1000 a megaliter. As such, all farmers are forbidden to construct ponds or dams, and you need to buy one of the falling number of restricted licenses to pump water out of the ground. Pumping river water is verboten, or comes with a high price.

    If you want extra water, you have to buy it. Citrus farmers sell their water rights to higher paying cotton farmers, and their land returns to grazing land. Even beef farmers convert to sheep, which need less water.

    Political consequences? One hell of a stink, verging on violence. But the government of all parties enforce this result. There is a market price of water, and if you have not enough water you have to buy it, whether a farm, a home or a town.

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