Water restrictions are stupid: a rant
Received the quarterly water bill: $46.25 for a three bedroom house for three months. $23.63 was for water use (30 kilolitres). At a price (after the price rise) of 80c per kilolitre.
That’s 80c (actually 79.82c) per 1000 litres.
You charge 79.82c per one thousand litres and find, surprise!, surprise!, people use a lot of water ( Read more... )
That’s 80c (actually 79.82c) per 1000 litres.
You charge 79.82c per one thousand litres and find, surprise!, surprise!, people use a lot of water ( Read more... )
The first is that "value to life" is absolutely not "true" monetary value - the only effect of "value to life" is to ensure a certain level of demand. The other side of the equation is, of course, supply.
Would schmoes like us be allowed to afford it? Yes, absoutely, at current levels of supply, if it's driven by market forces. Schmoes like us - and, in fact, schmoes poorer than us are the bulk of the market. There's only so much water even very rich people can use - and, of course, the higher you price it the less even they will use. So the market sweet spot is still in selling large amounts to lots of people, for the following reasons:
1) Current levels of wastage. IF you jack the price too high, consumption will go down. This is the key to Lorenzo's argument, of course, and it initiates a form of feedback that (modulo price fixing) will keep the price down. If you've already built a purification plant and a pipeline to Melbourne, then you have massive sunk costs. You don't *want* to move small numbers of units at a large price, you want to move as much water as you can to spread your overheads over as many units as possible. The first litre of water you ship cost you the price of a plant and a pipeline. Each subsequent litre is very nearly free, to you. Provided, of course, there's "enough" water. If it's cheaper to purify and transport it by hand, then we're nto a different argument, and then, yes, absolutely, schmoes like us will die. But...
2) Unless you are a drought stricken farmer, it's still just not that rare. I could build a tank in the back yard to catch rainwater, and stop showering. At 87c per thousand litres, I can't be arsed. At $10,000 per litre, damn straight I can be arsed. Somewhere in the middle lies the tipping point. So long as it falls from the sky, the last thing water companies want is to price themselves out of the market. Because we're not, at the moment, in urban Melbourne, paying for "water" per se. What we're paying for is it arriving in our taps, and the convenience of having comeone else collect and purify it. As soon as it becomes cheaper to build a tank, people will.
IF it truly does become rare - if there's only enough to keep 200 people alive - then it will indeed become something only 200 people can afford. But at the moment, supply just ain't that bad.
It feels bad if you're a drought stricken farmer. But that's because schmoes like us, paying 87 cents per megalitre, leave our taps running.
SO yeah, in short, two seperate questions. IF it were charged at its "true monetary worth", then it's merely a supply/demand equation, and supply is still high enough for the answer to be "yes". If the monetary worth reflects value to life, then no-one could afford it, because no-one would be selling it.
sol.
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Capital financing costs, however ...
Which is what you are really talking about here I think.
That the first unit is really expensive, the next dirt cheap is about returns to scale and why monopolies are the natural outcomes of networks and why we grant monopoly patent rights (though the latter is a matter of lively debate among economists nowadays).
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