CONCLUSION - The Ripple Effect: The Fate of Freshwater in the Twenty-First Century - page 308

THE LAW OF DEMAND
Another significant issue going forward will be the economics of water. “Water flows
towards money,” hydrologists such as Bob Moran say, implying that the rich control the
tap. While this is often true and can be abused, it is not always a bad thing.
In recent years, more H 2 O has been flowing from low-value crops (cotton and al-
falfa) to high-value ones (nuts and berries). Ailing farms are selling their water rights to
productive industry and burgeoning cities. Food grown in wet, green climes (the north-
eastern United States, Brazil) is increasingly being exported to dry, brown ones (Ari-
zona, India), allowing their water to be conserved for drinking supplies, for maintaining
aquifer levels, or for other high-priority uses.
Yet people have tended to dance around the question of pricing water in a way that
reflects scarcity.
Because water is an essential resource, it has no “market value,” as, say, oil does. But
with no price incentive to use it efficiently, people often squander water by flood-irrig-
ating farmland, using vast quantities for energy and mineral projects, and polluting it.
In many places water is free, or priced so low that the revenue it generates is not enough
to maintain, or upgrade, reservoirs, distribution pipes, and treatment plants. While cit-
izens have good reason to be wary of water privatizers, cheap water invites waste.
Many resource economists believe that in the twenty-first century the price of pot-
able water will have to better reflect its availability.
The law of demand states that people demand less of a good as it becomes more
expensive. This theory was validated in Santa Barbara, California, when, during the
drought of 1987-91, the city raised water prices to help reduce consumption. Before
the drought hit, Santa Barbara water was priced at a flat rate, meaning that the cost did
not change when people used more water. In 1990, after three years of extremely low
rainfall, prices shifted to a block rate: as water supplies dwindled, prices were raised
in price “blocks,” and consumption dropped by 50 percent. After the drought ended,
water use rose, but only to 62 percent of predrought levels. “These prices permanently
changed people's habits and attitudes,” UC Berkeley economist David Zetland wrote of
Santa Barbara. “People change their behavior when the price of water increases.”
To allay fears that wealthy interests will take unfair advantage of the poor by jacking
up water rates, the sensible compromise is to guarantee people enough free water to
ensure survival— experts recommend a minimum of thirteen gallons per person, per
day —and to charge for use beyond that, using tiered rates that put the cost burden on
the heaviest users.