I am wondering if you have any resources about water usage in NYC. I have always been proud of our non-filtered, non-pumped system, however, I realized later that we were so stupid on the economics that we never even billed many people. Now we use twice as much water as the average American, at ~130 gal/person/day, though down from our 1990 peak of 200+!So this observation gets at several related topics, i.e., cost, consumption, pricing and scarcity. I'll comment on each.
Cost recovery: Most water utilities are run (or regulated) to recover costs. Operating costs (energy, chemicals, etc.) are the smallest share (perhaps 10-20%) and thus "easy" to cover with initial revenues. Fixed investment and renewal costs are often much higher (80-90%) as well as spread over time, so they are far less likely to be covered, usually because politicians prefer "cheap water now and problems for their successors later" and tell regulators to set prices too low. (Regulators of municipal or investor owned utilities have the same job; ownership isn't really the problem.) Finally, there are "opportunity costs" that are missed most of the time by managers who do not consider environmental impacts, etc. I wrote a good column on those here.
Water consumption: Forget "dirt cheap" -- water is way cheaper at about $1 per m^3 (1,000 liters) delivered to your house. (10 cubic yards of dirt, or 7.5 cubic meters, costs $320 at Home Depot, which is $42/m^3 without delivery!) That low price -- assuming a water meter! -- means that most people don't think about how much water they consume. They just use what "feels right" and pay the bill. Most water "conservation" has come from water-efficient appliances (an idea Trump is trying to kill) more than people changing their habits.
Water pricing: In the past, most people paid a flat charge for water (I do in Amsterdam) instead of a volumetric charge based on metered use. That system makes sense where people are unlikely to "waste" water on yards but it doesn't help people patch leaks, etc. I'm a big fan of metered pricing where discretionary use is a problem (anywhere with lawns). Read this post on how to price water or this paper on the introduction of water metering in the UK.
Water scarcity: Excess demand relative to supply means that scarcity is present and ongoing scarcity can lead to shortages, e.g., when Sao Paulo nearly ran out of water (drought, leaking system, cheap prices) or in California (mismanaged rights, weak controls on groundwater use, subsidies to lawns, etc.) Scarcity is a local issue so it doesn't always pay to worry about it in places with plenty of water (e.g., Amsterdam and perhaps
Bottom Line: PJ doesn't really need to worry about NYC running out of water, but that's more because the system is still running within capacity, not necessarily because New Yorkers are the biggest environmentalists. Unfortunately, many other parts of the world are facing water shortages because they do not maintain their systems, charge customers too little or price water without regard to scarcity.