Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, September 13, 2005

Water Is Not a Necessity...
not even in Saudi Arabia

The Emirates Economist has a reference to a story about how the price will be raised for tankers of water in a region of Saudi Arabia. Currently, users pay roughly the price of one to six cans of pop for a tankerful of water. Mohammed Baghdadi, director general for water in the Makkah Region, says that while he cannot force people to conserve water, he can induce them to do by raising the price.

The EmEc's reaction:

People are not profligate. People prudently respond to the price signals they receive. You send them the message that 10 tons of water is worth one to six 330 ml cans of soft drinks and they will find lots of uses for the water, including very low value uses for the water.

Baghdadi is correct that he cannot force conservation on people and that he can cause people to conserve by raising the price and sending people a truer indication of what it is costing society to provide water.
For more my earlier piece on water rationing, see this. I concluded:
I can assure you, though, that using the market to allocate water is unlikely to happen in towns and jurisdictions where petty bureaucrats have an anal retentive fixation on such powers as water rationing.

This is especially true if they took courses in so-called "urban planning" which seem primarily to be intellectually arrogant justifications for bureaucratic meddling with the market mechanism.
Update Oops. I initially had my geography confused, but have corrected it, I hope. The EmEc writes from the UAE, but Makkah is in Saudi Arabia.
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