Water -- Meeting our Destiny

By LYNN REASER

Published: Thursday, October 22, 2009 6:47 PM PDT

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Indulging in free or cheap water is not an inalienable right. While some might believe that long showers are essential to life, liberty and the pursuit of happiness, that view is truly a stretch. Water is a good like any other. It is a scarce resource and should be treated as such.

Solving the Problem
Three approaches exist to meet our water challenge: regulation, moral suasion and pricing.

Regulation involves rationing or limiting water consumption by restricting lawn watering, car washing, or other activities either in terms of time of day or amount. Its enforcement is often spotty, frequently putting the onus on neighbors to report violators. This is clearly an inefficient means of reducing water usage. Moral suasion relies on peoples’ belief that they "should do the right thing." While laudable, results can often by uneven and not enduring. Much of the reduction in water consumption recently experienced in San Diego reflects the impact of the recession. Once recovery resumes, habits may revert largely to their prior ways.

Pricing water to reflect its cost is a simple and straightforward solution. Households and businesses will adjust their behavior and reduce their consumption because it is in their own best interest. No policing is necessary either from neighbors or city officials. Water conservation no longer relies on people searching their social and moral conscience each time they turn on the tap.

Pricing a Scarce Resource
Economics 101 teaches that a good priced too low encourages wasteful consumption and inadequate investment in infrastructure. Water has clearly been priced this way. Is it any surprise that we have a "crisis" developing?

An optimal solution would be to price water at its marginal cost. That would clearly cost buyers of large properties with extensive lawns or agricultural interests dearly since they had made their purchases on very different assumptions. The proposal of setting "base" usage amounts related to property size and number of residents represents a compromise solution. Basic water rates would be applied to those usage rates, with progressively higher rates charged for water consumption exceeding those levels.

These tiered rates would induce major shifts in behavior, with homeowners transitioning to smaller lawns or landscapes more appropriate to San Diego’s indigenous climate. This would be an important step since about half of all domestic water consumption is used for outdoor landscaping. More efficient pricing can prevent a water "crisis."

-- LYNN REASER

Lynn Reaser is the chief economist at Point Loma Nazarene University.

4 Comments so far on this story...

An excellent albeit incomplete formula to improve San Diego's water situation. I would add that San Diego like so many other cities must find a better economic engine than new home construction.....the has to be a serious recognition that water is a finite resource and should be treated as such.

Posted by Qkruse | reply to this comment
October 26, 2009 11:25 am

Do we have any idea what an all-in cost of water delivery would be? When we include the cost of the water at the source, transport, all the piping, etc, how much are we actually subsidized? What would it cost to water the lawn and run at a true, unsubsidized breakeven?

Posted by David Lynn | reply to this comment
October 26, 2009 1:29 pm

Ms. Reaser omits a fourth means of resolving the "water challenge": increase and stabilize the supply by fixing Delta conveyance and adding storage. What are the chances that California's 50 year old water infrastructure maximizes the safe yield from our various water resources? The same three arguments she makes could have been articulated sixty years ago when California had no State Water Project, California was experiencing an earlier drought, and the population was a third less than today. Best solution for now: fix the Delta conveyance and build more surface storage -- at a lower cost than desalination, by the way, and better that than re-structuring the whole state economy according to "Economics 101" alone. At least bring in some concepts from upper division econ courses. Engineering 101 and above would help, too.

Posted by Linden Burzell | reply to this comment
October 26, 2009 7:31 pm

From 2002 to 2006 the state Department of Water Resources increased the amount of water being exported south from the delta by more than 150%, from about 200 million acre feet per year to over 600 million acre feet per year, in order to help southern California cope with being forced to live within its legal allotment of Colorado River water by the federal government. The result was completely predictable, the Delta environment and fish stocks collapsed, threatening the state's Salmon and other fishing industries and the stabilty of delta levees. Proponents of a new peripheral canal hope that central valley farmers and southern California water agencies will be allowed to use it to move unlimited amounts of northern Californ'a water around the Delta, regardless of the impacts on that region. It simply isn't going to happen, since northern California and Delta voters won't support such a giant water grab.

Posted by Watcher | reply to this comment
October 28, 2009 9:55 am

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