Another Arizona Water Ariticle With No Mention of Price

Well, the Arizona Republic has done it again.  It has published yet another first-section front page water article (this makes about 50 in a row) discussing ways to make demand match supply without once discussing price.  This time, the reporting centers on a new online water supply and demand simulation model (here) introduced by Arizona State University.  With the model, the public gets to play dictator, implementing all kinds of policies and restrictions on individual consumers to see what effect these command and control steps have on water supply and demand.  And it is almost anti-climactic when I tell you that price does not enter in any way into the model. 

I probably don't have to remind readers that Phoenix has some of the cheapest water in the country, with prices less than half what they are in, say, water-logged Seattle.  Don't you think that might have a little to do with why supply and demand don't match?

Let's say there are about a 1000 key raw materials we use in modern society -- oil, natural gas, iron ore, uranium, bauxite, titanium, gold, silver, etc.  Of these, how do we match supply and demand?  Well, for 999 of the 1000, we use this thingie called the price mechanism.  The exception is water.  And it is incredible to me that not one but dozens of articles could be written by our newspaper about matching water supply and demand and not one of them could mention price, the mechanism we use to match supply and demand for 99.9% of commodities.  Remember when Hillary suggested a while back we need a special academy for government workers?  This is what they would teach -- that all problems can only be solved by government command and control.  As I wrote before:

In their general pandering and populism, politicians are afraid to
raise water prices, fearing the decision would be criticized.  So, they
keep prices artificially low, knowing that this low price is causing
reservoirs and aquifers to be pumped faster than their replacement
rate.  Then, as the reservoirs go dry, the politicians blame us, the
consumers, for being too profligate with water and call for ... wait
for it ... more power for themselves, the ones whose spinelessness is
the root cause of the problem, to allocate and ration water and
development

  • Jerome, AZ, has just now installed water meters, enabling the town to charge on usage. It earlier had charged residential units a flat fee. (Some progress is better than none!)Fees are to be determined but, you're right on target.

    Check out http://cactusheat.blogspot.com

  • Corky Boyd

    One only has to go back to the late '60s and '70s with the natural gas fiasco to see what government pricing did to rational development. The classic was the multi-tiered pricing system, where gas from new fields over 15,000 ft. deep were allowed the world price of about $6.00/millioncf. Gas from existing fields was pegged at $.50. You can guess where the efforts were. God forbid someone hit gas at 14,900 feet. Best to stop and drill again on the same lease a couple of hundred yards away, hoping for a deeper hit.

    When Reagan deregulated gas prices, guess what happened? The first casualty was Hughes Tool (drill bits) and all the oil service companies. Noone drilled at that level anymore. There was plenty of gas at 5-8,000 ft. Gas prices plummeted. It was simply the government prioritizing the most ineffecient method of developing gas fields with an ill advised pricing structure.

    Other classic cases regulatory mismanagement were the ICC and the trucking industry. Rate scedule books ran over 3,000 pages and covered every city pair and different categories of freight. We'e not talking agricultural goods vs. industrial goods, we are talking electrical goods vs. electronic goods each with a different rate. And the ICC determined how many and which companies could serve every city pair and each commodity. Airlines had a similar structure, with the CAB determining how many airlies and which ones could serve each city pair (never more than 3). Today, with fuel prices 4 to 7 times as high, air travel is now less expensive than then.

    The market rules. All governments can do is create gluts or shortages with arbitrary prices.

  • TCO

    Like an immigration defense that does not discuss the effect of supply and demand on worker wages in the industries where immigrants go...

  • Darin Johnson

    I tend to agree with your point about water pricing, but I think your comparison to Seattle's prices may not be valid. The basis for your assertion is the survey from the City of Austin, which used 8,500 gallons in a month as the standard for assessing water price. This is about four times what anybody in Seattle buys from the utility (I live in Seattle) and I think using this much would put you into a rarely-used third tier with an extremely high price. In other words, I think the price for Seattle water you're using is artificially high.

  • Bob r

    "This is about four times what anybody in Seattle buys from the utility (I live in Seattle) and I think using this much would put you into a rarely-used third tier with an extremely high price."

    I thought that was exactly the point: higher pricing causes lower usage. I have no idea how Seattle does it now, but when I lived there in the mid 1980's the charge for sewage was also based on water use: use more water (e.g., keep the grass green), pay more for sewage; they got you coming and going. I'm in Woodinville (east of Seattle about 10 miles) now and Metro charges a flat fee for sewage -- doesn't matter one bit how much water you use.

  • Chris

    An investment firm is paying a minimum of $22,500 an acre-foot for water in Prescott Valley. However, investors, developers and interested parties will have an opportunity to outbid the firm for rights to 2,724 acre-feet of effluent water in a two-day auction on Oct. 29-30, 2007, in Prescott Valley.

    The winning bidder can resell, assign or pledge the rights in one or more applications to the Arizona Department of Water Resources for a Certificate of Assured Water Supply, which the state requires for all new subdivisions in Prescott Valley.

    For more information about the auction and prices visit http://www.waterexchange.com.