21 June 2008

The Water Industry

Mike in Yahoo groups writes:
We don't have health care, we have a health care industry, we don't have water management we have a water management industry, we don't have communication, we have a communication industry. The whole of Mankind needs certain vital things that we all use and need such as these few, and we need them readily available, but when the remedy to these needs are put behind a toll booth we all pay about 30% more and receive about the same degradation in service. Utilities are such as these, we all need and use, why would we need an industry between us and a vital service? It would be different if the contracted service was a premium, but it's not, these "providers" have us over the proverbial barrel in many ways.
This is an interesting perspective with which I have a few quibbles:
  1. Many problems (of cost and provision) in these areas are BECAUSE of government regulation, interference and distortions. The "industry" that surrounds water, health care and communication (and the military!) has something in common -- the government. Note that we do not worry about cost controls and poor quality in the computer, alcohol or car industries -- that's because they are mostly lightly regulated.
  2. WRT water, I'd say that many problems can be traced back to average cost accounting, which is required of many water providers (public or private). Because of this (and the way that it serves marginal demand at less than marginal cost), we get over-expansion and scarce supplies. When water is "privatized", the first action (raising prices, cutting back service) is frequently blamed on the private company when the real source is the government.
  3. Health care is worse, for similar reasons. Communications are not a human right.
Bottom Line: Business has to work in a regulated environment, and those regulations can cause (or support) harm just as much as they can prevent it. More regulation is not automatically good.

7 comments:

M said...

Just because things occur together does not mean one causes the other. Coincident events are simply coincident, not cause/effect related.

So to say that because we have industries which are regulated means that regulations cause the badness is foundationless.

Instead, I would look to underlying causes of each problem or event. Poor regulation is an artifact of lack of respect for all stakeholders, as is the problem inherent in industrial waste and mismanagement, IMHO. This is generated by the same cause, I think as the cheating events in the Prisoner Dilema and Free Rider problems.

David Zetland said...

M -- I agree on the differences between correlation and causation. My examples *are* of industries that are messed up in regulation. most of these problems can be traced back to the tension between social and selfish -- often because the regulations over/underestimate those forces.

I am all for community (or stakeholder) regulation/oversight, which allows local knowledge to be used in solving problems...

parknfly07 said...

Stakeholder oversight is what we have in the US. Have you heard of Lobbyists?

parknfly07 said...

What I mean is that not all stakeholders know what is going on and those who don't are not respected. The appeal to the seventh generation for decision making includes necessarily all stakeholders since by then all secondary and tertiary effects will have an opportunity to become manifest.

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