We’re told of another environmental problem that we simply must do something about.
The world is facing an imminent water crisis, with demand expected to outstrip the supply of fresh water by 40% by the end of this decade, experts have said on the eve of a crucial UN water summit.
One of the joys here is that one part of the insistences about what must be done will actually solve the problem as defined:
Mariana Mazzucato, an economist and professor at University College London, also a lead author, added: “We need a much more proactive, and ambitious, common good approach. We have to put justice and equity at the centre of this, it’s not just a technological or finance problem.”
No, that’s not it. In fact that’s exactly wrong - such a surprise from that source. The answer in the actual report is entirely the opposite of a common good approach.
As with Garrett Hardin and the standard approach to commons tragedies, the answer is to stop treating the scarce resource as a commons. As The Guardian says:
…pricing water properly…
As the report says:
….We must cease underpricing water. Proper pricing…
That’s all that actually is required. As with those stories of California farmers using $300 worth of water to produce $200 worth of alfalfa proper pricing removes uneconomic uses of water entirely.
We must correct the misallocation of water via property rights
Proper pricing does exactly that. As we know, the initial allocation of property rights doesn’t matter as long as we have a subsequent free market. Assets will, through that market magic, end up in their highest value use. Job done.
They have a whole section:
We must cease underpricing water
Quite so.
That the report contains the answer is nice but of course that’s not what’s actually going to happen. Vide that blather about turning it into a common good.
The problem is that it is a common good. As Hardin pointed out, when Marxian access results in demand higher than possible supply then there will be shortages of that common good. The answer is to allocate property rights, institute a free market in the good and thereby make water a private, not a common, good. This is the answer to fishing problems (ITQs), copyrights and patents, to farmers and their fields. It is also the correct answer to water.
After all, when farmers can make more by supplying water to cities than by spraying it on fields then that’s what they’ll do. The problem is thus solved. For the entire analysis here is that farmers currently spray too much expensive water onto fields and not enough is left over to go to cities.
It is entirely true that not all commons problems are solved by private property rights and markets. Water is one of those that is.