On fiscal policy, politics, society, philosophy, and culture. Follow on twitter: @profchristians
Wednesday, April 11, 2012
Water: a Public Good?
Is water a public good? Privatizing water has led to all kinds of traumatic consequences in poor countries, with many complaints aimed at IMF conditionality-imposed schemes. India is considering a draft bill to privatize water there, where shortage seems particularly imminent: "India has more than 17 percent of the world's population, but has only 4% of world's renewable water
resources with 2.6% of world's land area." There is plenty of worry about what the bill will mean in terms of pricing for profit-oriented industry and long-term infrastructural consequences. In a post last month I suggested that I thought waste disposal likely ought to be a public good because a private market would tend to want more garbage (more volume, more profit), while a public system might try to minimize garbage in order to reduce costs or meet other social goals such as conservation--the same principle seems to hold for water.
Basically we consume too much, both directly and indirectly, we waste a lot due to aging infrastructure, and we otherwise contaminate it with chemicals. A startling stat: municipal water in 71% of U.S. cities has too much hexavalent chromium in it. If you don't remember why you should worry about that, you just need to think Julia Roberts:
Here is the CIA World Factbook's page on water resources, showing " the long-term average water availability for a country in cubic kilometers," i.e., the total water available to the country in an average year.
A better way to look at the water data is on a per-capita basis. The World Resources Institute has a good chart. Per capita, Canada is far better off than the US, Indonesia is about the same, and China and India are far worse off. (Welcome to Canada, thirsty American immigrants!) And at the opposite end of the chart, some of the little islands at the bottom of the "absolute" chart (like Dominica) are so water-rich in per-capita terms that their governments are thinking of bottling the stuff up and exporting it.
Of course, the ironic thing is that immigrants tend to settle in the most water-stressed parts of their new host countries: British Columbia or California, for example. (It holds true even in less-developed countries: Peru has massive amounts of water resources, but most of the internal and international migrants settle in Lima, which is in the middle of a desert and has as much of a problem with water supply as Cairo! Fujimori tried to promote privatisation during his presidency, but it never went anywhere.
Why would a water company that could have a potential customer base of over a billion people waste any of its product? Quite the contrary. With about 15-20%% of the world's population in their customer base and only 4% of the water, it seems there would be a big incentive not to waste!
I remember an article in the Economist around 2000 or so that suggested that private firms (in Europe, if I recall) are much more efficient at conserving water. They, unlike governments, face the very large incentive of not wasting money and going bankrupt. Plus, attaching actual market-determined prices would make consumers more conscious of what they are expending. Compare the market for high-milage cars vs. the market for low-flow shower heads and toilets. Consumers buy the latter because they are forced to and they by the former because they feel it in their wallet.
Eric--quite right and thank you for that link. I knew that looking at aggregate supply was not informative but didn't have a per-capita analysis handy, now I do. And of course this is about tax, it's always about tax :-)
Lucien--not waste but try to sell more rather than encourage conservation. You can't make money by discouraging the use of your product (cf tobacco). More importantly, there's no argument here that water should be free. The argument is that a not-for-profit water provider, such as government, will not need to price in shareholder returns, while a for-profit provider will have to do so. If your argument is that water should be more expensive so consumers will use less, I cannot see how that supports an argument that rents derived by inflating the price above cost should go to the private sector instead of to the public sector. If you can find a link to the Economist article I would like to read it.
I wanted to send you a quick note because I read what you wrote about water conservation here.
I just finished helping to create an infographic about how much fresh water goes into things we do and consume. The idea is to bring a little extra awareness to what our every day impact is.
Some of the information was pretty surprising! I had no idea just how much water is needed to produce some of the foods I eat...
Anyway, after reading what you wrote, I thought you might like to use the infographic on Tax, Society and Culture.
It's totally free to use, of course. If you do use it, please link back to the original source so anyone else that would like to use it can too.
The infographic is here in the original post link: http://www.lochnesswatergardens.com/pondblog/how-much-water/
Hey, water! My favourite non-tax topic =)
ReplyDeleteA better way to look at the water data is on a per-capita basis. The World Resources Institute has a good chart. Per capita, Canada is far better off than the US, Indonesia is about the same, and China and India are far worse off. (Welcome to Canada, thirsty American immigrants!) And at the opposite end of the chart, some of the little islands at the bottom of the "absolute" chart (like Dominica) are so water-rich in per-capita terms that their governments are thinking of bottling the stuff up and exporting it.
Of course, the ironic thing is that immigrants tend to settle in the most water-stressed parts of their new host countries: British Columbia or California, for example. (It holds true even in less-developed countries: Peru has massive amounts of water resources, but most of the internal and international migrants settle in Lima, which is in the middle of a desert and has as much of a problem with water supply as Cairo! Fujimori tried to promote privatisation during his presidency, but it never went anywhere.
Why would a water company that could have a potential customer base of over a billion people waste any of its product? Quite the contrary. With about 15-20%% of the world's population in their customer base and only 4% of the water, it seems there would be a big incentive not to waste!
ReplyDeleteI remember an article in the Economist around 2000 or so that suggested that private firms (in Europe, if I recall) are much more efficient at conserving water. They, unlike governments, face the very large incentive of not wasting money and going bankrupt. Plus, attaching actual market-determined prices would make consumers more conscious of what they are expending. Compare the market for high-milage cars vs. the market for low-flow shower heads and toilets. Consumers buy the latter because they are forced to and they by the former because they feel it in their wallet.
Eric--quite right and thank you for that link. I knew that looking at aggregate supply was not informative but didn't have a per-capita analysis handy, now I do. And of course this is about tax, it's always about tax :-)
ReplyDeleteLucien--not waste but try to sell more rather than encourage conservation. You can't make money by discouraging the use of your product (cf tobacco). More importantly, there's no argument here that water should be free. The argument is that a not-for-profit water provider, such as government, will not need to price in shareholder returns, while a for-profit provider will have to do so. If your argument is that water should be more expensive so consumers will use less, I cannot see how that supports an argument that rents derived by inflating the price above cost should go to the private sector instead of to the public sector. If you can find a link to the Economist article I would like to read it.
ReplyDeleteHi Allison,
ReplyDeleteI wanted to send you a quick note because I read what you wrote about water conservation here.
I just finished helping to create an infographic about how much fresh water goes into things we do and consume. The idea is to bring a little extra awareness to what our every day impact is.
Some of the information was pretty surprising! I had no idea just how much water is needed to produce some of the foods I eat...
Anyway, after reading what you wrote, I thought you might like to use the infographic on Tax, Society and Culture.
It's totally free to use, of course. If you do use it, please link back to the original source so anyone else that would like to use it can too.
The infographic is here in the original post link: http://www.lochnesswatergardens.com/pondblog/how-much-water/
Thanks!!
~ Mel
Melanie Palmero, Loch Ness Water Gardens
Tel: (864) 538-0022 | Mobile: (404) 384-7268
melanie@lochnesswatergardens.com | www.LochNessWaterGardens.com