Water: It’s Valuable, So If You Don’t Price It You Get Waste

I know this is a controversial view, but today I wade back into the case for using market prices for water to promote conservation with the authority of Grist, the internet’s premiere source for environmental news, behind me. Robert Stavins, professor at Harvard’s Kennedy School of Government and Chairman of their Environment & Natural Resources Faculty group writes at Grist:

In a white paper, “Managing Water Demand: Price vs. Non-Price Conservation Programs,” [PDF] published by the Pioneer Institute for Public Policy Research, Professor Sheila Olmstead of Yale University and I analyzed the relative merits of price and non-price approaches to water conservation. We reviewed well over a hundred studies, and found strong and consistent empirical evidence that using prices to manage water demand is more cost-effective than implementing non-price conservation programs.


In general, when you take something that’s valuable — fresh water, space on an arterial highway at rush hour, the right to put carbon dioxide into the atmosphere — and give it a sub-market price, the result is overconsumption. Wasted water, polluted air, crowded highways, etc.