7 Feb 2011

The Economist forgets the economics

the Economist had an update on ongoing chaos in California water management, but they forgot something:*
In your article on water in the American West, you left out a fifth dimension: economics.

Water demand is higher when it's cheap, and water is cheap in places like Las Vegas because prices are based on the cost of delivery, not supply and demand or scarcity. The water bill for a family of four using 100 gallons/person/day in Vegas ($33/month) indicates that Ms. Mulroy has not learned much from the dismal science. In San Francisco, the same family would pay $58/month. Not surprisingly, per capita consumption in San Francisco is 57 gallons/month. In Vegas, it's 110 gallons [source]

On a larger scale, agricultural water users continue to "waste" water in places like the Imperial Valley because they cannot easily sell their water to other farmers, cities or environmental organizations. Under "use it or lose it" rights to water supplies, it's better to flood irrigate than let the water flow by. Markets would give them the option of selling water to higher and better uses. I hope that the Economist puts a little more economics into future updates.
* Fleck and Emily Green also commented.