The short version I got from you as a solution to this is to give people a free supply for personal use but then charge at cost. But then I've thought:My "solution" to his conundrum is to give rights for a "basic" allocation to everyone (i.e., the poor will get water) and price remaining water via sustainable cost (30 year budgets) or -- better -- auctions.
In principle if there are property rights in water resources, then there is no water crisis, except insofar as water might become pricey for the poor.
- If you privatize water supplies, how do you ensure that they give people a free supply?
- If the water is supplied publicly how do you avoid water being given away below cost due to public choice pressures?
Therefore the idea of a "water crisis" must be due to poorly defined property rights and/or water being distributed by means of governments subject to public choice pressures.
Then we are back to the solution as define property rights and privatize water supply - but then how do you ensure the poor get a free supply for personal use?
Am I missing any key conceptual elements here?
Bottom Line: Property rights matter, and the institutions around them will define how well they work.