Sunday, April 07, 2013

Water Prices in Texas

The NY Times published a pretty good piece today by Kate Galbraith on drought adaptation in Texas.  She points out some pro-active actions by the state to bring supply and demand into balance.

"The implications have finally sunk in among lawmakers and business leaders here, who like to boast about the economic appeal of Texas’s low taxes and relaxed regulatory environment: no water equals no business. In a state fabled for its everything-is-bigger mentality, the idea of conserving resources is beginning to take hold. They are even turning sewage into drinking water.
The overwhelmingly conservative and tightfisted Texas House of Representatives recently voted to create a fund to finance water development and conservation projects and is considering allocating $2 billion to jump-start it. The State Senate is weighing a similar measure. The state’s water plan, released last year, recommends spending $57 billion (in 2013 dollars) over the next half-century to ensure there is enough water to go around; Texas’s population of 26 million is expected to grow by 80 percent by 2060."
The piece would merit an A+ if she bothered to collect data on water prices in Texas.    I dock her points because of this silly sentence;   "Economies will rise and fall on the availability of water, whose price is inexorably marching upward."   She implies that it is a bad thing that water prices are rising.  For capitalism to work its magic in helping us to adapt to climate change we need this price to rise. Let the price system signal scarcity.  Why does the NY Times favor a command and control economy?  

Had Ms. Galbraith looked up some data, she might have found this chart on residential water prices across cities.      Dallas residential water bills are 50% lower than Boston's!  A family of 4 that consumers 50 gallons per day per family member has a monthly water bill of $38 in Dallas!    If there is a drought, let prices reflect this scarcity and then allow the free market to work.    Those who fear free markets can't have it both ways.  You can't oppose free market prices and then bemoan "crisis".    If you like to play the game that way, you can move to North Korea.  That enlightened country also follows this pricing approach.