- Cafe Hayek - https://cafehayek.com -

Paradox

Tweet [1]

Ms. Kate Fried
Senior Communications Manager
Food & Water Watch
1616 P Street NW, Suite 300
Washington, DC 20036

Dear Ms. Fried:

In your e-mail seeking to enlist my opposition to a policy of allocating water by market pricing, you write: “Moreover, because most residential water consumption goes towards essential uses like drinking, cooking and sanitation, consumer demand for water is unlikely to change regardless of price.”  That is, every drop of water is so essential to every household that even substantially higher water prices will not reduce residential water use.

But then you say “water pricing is most likely to negatively affect low-income consumers.  Raising water prices could mean that some households are denied access.”  That is, higher prices for water will cause low-income consumers not only to use less water in their homes but to stop using water in their homes altogether.

So which is it?  Will market pricing of water affect consumer demand or will it not?

In fact, neither of your scenarios is remotely plausible.  If your first scenario were realistic, then bottled-water suppliers such as Evian could double, triple, or even quintuple their prices without reducing the demand for their products.  If your second scenario were realistic, low-income consumers would prefer to lose all access to water in their homes rather than spend even moderately less on clothing, cell phones, and even pets.

Sincerely,

Donald J. Boudreaux

Comments