Sydney, Melbourne, Canberra, Adelaide and Perth now seem to have more or less permanent water restrictions in place – several of which ban any watering of lawns, any use of garden sprinklers, washing cars with a hose, or watering gardens except in certain hours.
Call me a crazy economic rationalist, but if we really think we don’t have enough water, why don’t we put the price up? Under the current system, we refuse to sell water to people who’d dearly love to water their lawns, but keep the price artificially low for people who want a big bath. And we’ll let you water your garden, but not with a time-saving sprinkler, only with a hand-held hose. Wouldn’t the more sensible approach be to set the price so as to bring demand down to the desired level? After all, this is what we do with electricity, milk, bread, and hey, just about every other commodity.
I get two answers to this when I suggest it to friends.
1. If you want water, you can always buy a rainwater tank. True, but we’re imposing a very high price for that extra water. Most lawn-lovers will watch their grass die before they pay the cost of installing a tank.
2. Water is a human right, and we shouldn’t deny it to poor people. Agreed – and using price mechanisms rather than quantity restrictions can make the poor better off, not worse off. When we put the water price up, let’s write an annual rebate cheque to low income households, allowing them to buy what we judge to be a reasonable amount of water each year. Some will buy the water. Others will use the money for something else. Water restrictions are about as efficient a way of helping low-income Australians as sending your bank details to a Nigerian emailer is at tackling poverty in Africa.
Incidentally, (1) and (2) are related. Those who can afford to circumvent water restrictions by buying a watertank will tend to be the more