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In Praise of Prices

May 2, 2012, 2:21 pm

It is amazing the number of goofy ideas folks have generated to try to substitute for prices in matching supply and demand.  And none of them ever work.  David Zetland has a good example in the world of water, where politicians are willing to jump through just about any hoop to avoid matching water supply and demand via prices.

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Category: Economics, Regulation
  • DoctorT

    Restricting demand on a limited water supply in a non-urban environment is one of the few instances where zoning regulations make sense. I have lived in two locations where there was no city-provided water and a limited supply of underground water. Hydrologists determined how much water was available, and the land was zoned for lot sizes big enough to prevent depletion of the underground water supply. Home owners pay for the limited water supply in two ways: they have to buy a larger amount of land and then pay for well digging, pump installation, and maintenance and repair of their water systems. Too bad that connection between water supply and costs doesn't occur in most urban areas (particularly those in the west where the federal government subsidized the capital costs of piping water dozens or hundreds of miles).