Last month, Megan McArdle pointed out that the state of California is reacting to the water shortages in one of the least effective ways by mandating rationing, rather than addressing the absurd under-pricing of the resource:
I’ve seen a lot of apocalyptic writing about California only having a year of water left (not true), and I’ve heard some idle talk about whether California can continue to grow. But California’s problem is not that it doesn’t have enough water to support its population. Rather, the problem is that its population uses more water than it has to. And the reason people do this is that water in California is seriously underpriced, as Marginal Revolution‘s Alex Tabarrok notes. While the new emergency rules do include provisions for local utilities to raise rates, that would still leave water in the state ludicrously mispriced. According to Tabarrok, the average household in San Diego pays less than 80 cents a day for the 150 gallons of water it uses. This is less than my two-person household pays for considerably less water usage, in an area where rainfall is so plentiful that the neighborhood next door to me has a recurrent flooding problem.
Artificially cheap water encourages people to install lush, green lawns that need lots of watering instead of native plants more appropriate to the local climate. It means they don’t even look for information about the water efficiency of their fixtures and appliances. They take long showers and let the tap run while they’re on the phone with Mom. In a thousand ways, it creates demand far in excess of supply.
Having artificially goosed demand, the government then tries to curb it by mandating efficiency levels and outlawing water-hogging landscaping. Unfortunately, this doesn’t work nearly as well as pricing water properly, then letting people figure out how they want to conserve it. For one thing, you can only affect large and visible targets, such as appliance manufacturers or lawns. For another, people will often try to evade your regulations — my low-flow showerhead came with handy instructions on how to remove the flow restrictor. And, perhaps most important, you limit the potential conservation to the caps. So people have an efficient dishwasher but don’t consider doing small loads by hand; they have a low-flow showerhead but don’t consider taking shorter showers. In short, no one is looking for ways to conserve more than whatever you’ve mandated. This may be enough to temporarily manage the current crisis, but it does nothing to set California’s water usage on a more sustainable path.
