How Would A Free Market Deal With A Severe Drought?

[Lennon]

One of the problems we have is that when the utilities were privatised, the government of the day listened to merchant bankers and not engineers.

Instead of selling off each local utility as a single unit, they should have separated the delivery network (for water that means the pipes) from the supply/treatment works and billing organisation. The local network should then have been passed the local authorities to be run as a non-profit organisation (think roads, street lights etc).

This arrangement would have enabled multiple providers to set up and to genuinely compete on price and quality. The customer would also be able to move seamlessly between suppliers and a real free market would automaticly develop.

Isn't that exactly what happened with the Electric and Gas Supplies - National Grid run the distribution, and everyone else competes to generate and send the same stuff. The only problem is that they don't compete on price - they compete on obfuscation instead.

[KingBingo]

Poor people would die of thirst. There can be no free market in water in a civilised society. Water in the US is less privatised than here IIRC.

That's not actually true. In a free market the 99% would be shot to satisfy the whim of an evil banking billionaire. Those that remained would be ranked according to wealth, and the bottom 99% would be culled in some way. This would continue until only Ben Bennake was left.

Thanks God we don't live in anything like a free market, oh the unimaginable horror of it, thank God we live under such enlightened fascism.

[bomberbrown]

I'm one of the poor buggers with a garden affected by the hosepipe ban. The whole things a farce.

Ironically, my two watering cans release more water than my hosepipe can deliver which means I continuously fill a dustbin (save the water over filling the watering can and wasting it down the drain) of water and fill the watering cans from that and have a glass of wine etc between waterings.

It's a minor inconvenience but worth it to keep the back garden looking nice.

[EUBanana]

It would tend to monopoly and then charge as much as people are willing to pay (to live).

Difficult, when it falls from the sky.

[the shaping machine]

Isn't that exactly what happened with the Electric and Gas Supplies - National Grid run the distribution, and everyone else competes to generate and send the same stuff. The only problem is that they don't compete on price - they compete on obfuscation instead.

It's partly what happened, and despite the flaws in implementation there is at least some competition in both sectors.

[ChumpusRex]

Isn't that exactly what happened with the Electric and Gas Supplies - National Grid run the distribution, and everyone else competes to generate and send the same stuff. The only problem is that they don't compete on price - they compete on obfuscation instead.

Sort of. It's a bit more complex than you make out with electricity.

The energy retailers buy energy from the electricity generators (who may, or may not be the same company). The electricity is then delivered via national grid (bulk long-haul transport) and the various regional distribution network operators (the local grids).

This has resulted in a bit of competition between energy retailers, and also electricity generators. There isn't that much difference in price between the different retailers, after all, they all buy the same product from the same producers. But there is some competition and freedom of choice (e.g. I can choose a retailer who promises to buy only renewable electricity). But, as you do point out, there certainly is some obfuscation of cost, especially for domestic customers. Interestingly, their business tariffs are often much simpler - presumably because businesses tend not to put up with the BS.

However, the price I pay, is not only determined by the cost of the energy supplied, but also by the overheads of the retailer I buy from, and also the costs of delivery (as charged by national grid and my local distribution network operator).

For a home customer, a breakdown of the bill will typically have more than 50% of the bill covering metering costs, account management costs, and "last-mile" delivery costs.

In the case of water, there are a number of barriers to competition - the biggest is that there is no national water grid. The water infrastructure is regionalised, without significant interconnection. So, given that you can only buy water produced in the local region, there is no way for competition to work.

[Traktion]

Just wondering how a proper free market would deal with a severe drought?

Supply would drop, leading to a relative increase in demand. Prices would increase, encouraging more entrants and investment in the market to bring water to people. This would include new desalination plants, water shipped from other countries, pipes fixed to minimise losses and so forth. In time, prices would fall again.

How would the public sector cope? Prices would remain the same while ministers made promises they couldn't keep, shortages would ensue, water would be rationed, people would suffer.

Ofc, this doesn't even explore the options of mutual/cooperative ownership of wells and reservoirs. Common ownership != state ownership.

edit: grammar

Edited April 5, 2012 by Traktion

[Lewis Gordon Pugh]

I was reading an article that claimed UK water authorities are currently spending far more on fixing leaks than the value of the saved water.

It's actually uneconomic, but the regulator insists on it because the media is so fixated on water leaks! The water companies themselves want to invest the money in aditional supply and purification, with a certain level of leaks as being simply the cost of operation, but the regulators (non-engineers to a man and disabled minority lesbian) are driven by PR and moralising rather than facts.

Just saying...

Its uneconomic to fix tens of years of neglect. That's not our problem, no one forced them to bid for the contract to run the water supply, If they could not make it economical, they should have stood aside.

[KingBingo]

Supply would drop, leading to a relative increase in demand. Prices would increase, encouraging more entrants and investment in the market to bring water to people. This would include new desalination plants, water shipped from other countries, pipes fixed to minimise losses and so forth. In time, prices would fall again.

How would the public sector cope? Prices would remain the same while ministers made promises they couldn't keep, shortages would ensue, water would be rationed, people would suffer.

Ofc, this doesn't even explore the options of mutual/cooperative ownership of wells and reservoirs. Common ownership != state ownership.

edit: grammar

Yes but you forgot that water is too important to be left to the free market. Look at money or healthcare for example, works really well under statism, where as services like mobile phones or restaurants are basket cases under the so called 'free market'.

[Quicken]

Yes but you forgot that water is too important to be left to the free market. Look at money or healthcare for example, works really well under statism, where as services like mobile phones or restaurants are basket cases under the so called 'free market'.

Without central planning, a free market system would not provide nearly universal mains water and sewage services. Look at rural broadband for a much easier infrastructure problem the free market does not want to solve. Or, to follow your mobile phone example, look at rural 3g coverage (an even easier problem). It is uneconomical to provide network infrastructure to low density populations, whether communications or utilities. That's what the so called 'free market' has repeatedly told us in the uk.

[Saving For a Space Ship]

How Would A Free Market Deal With A Severe Drought?

I think there will be a revolution like in the Middle East.

.......a 'Highland Spring'

[MarkG]

Without central planning, a free market system would not provide nearly universal mains water and sewage services.

And?

The whole concept of centrally planned water supply is a 19th century solution to 18th century problems. Why is it supposed to be such a good idea when 21st century technology could make people independent of the central planners?

BTW, water and sewer is government-run where I live in Canada, but rural properties typically have a well and a cesspit, not water and sewer pipes. Connecting them up would make so little sense that even the government can't justify wasting that much money.

[MrPin]

I'm watering all my neighbours today, since I have paid for it, and I am not metered!

Then I will wash my car, and flush the toilet all afternoon!

I want value for money and that is how a "free market" works!

[KingBingo]

Without central planning, a free market system would not provide nearly universal mains water and sewage services. Look at rural broadband for a much easier infrastructure problem the free market does not want to solve. Or, to follow your mobile phone example, look at rural 3g coverage (an even easier problem). It is uneconomical to provide network infrastructure to low density populations, whether communications or utilities. That's what the so called 'free market' has repeatedly told us in the uk.

Absolutely right sir. What we need is a bloke in central London deciding a one-size-fits-all system and then pushing it out across the whole country regardless of cost or efficiency.

Its utter madness to think that thousands of highly motivated profit seeking entrepreneurs could possibly devise a system that is much more cost effective and suitable to rural communities.

I suppose one of these lunatic 'free marketeers' might try and argue that if people were not paying excessively high taxation, and obscene fuel/housing/food costs brought about by such wonderful enlightened central planning then they would have excess resource to innovate. But as we all know having a disposable income which is often negative after paying for extremely high levels of government/regulation and central planning is the best way to build a sense of community.

[Quicken]

And?

The whole concept of centrally planned water supply is a 19th century solution to 18th century problems. Why is it supposed to be such a good idea when 21st century technology could make people independent of the central planners?

BTW, water and sewer is government-run where I live in Canada, but rural properties typically have a well and a cesspit, not water and sewer pipes. Connecting them up would make so little sense that even the government can't justify wasting that much money.

Fair enough, but we were talking in the context of severe drought, while Canada has the greatest fresh water suppies in the world. I'm not a rabid central planning fan (although my quick posts in this thread may sound that way). I just think that when we are talking about scarce water resources, profit should not be the driving concern. With the level of wealth disparity we have, the 1 percent would take the lion's share (for swimming pools, grounds etc) unless force of some sort was used to stop them and that wouldn't be a free market.

[KingBingo]

I just think that when we are talking about scarce water resources, profit should not be the driving concern.

Quite, adherence to 50 year old political dogma should be the driving concern, because it works so much better than each individual maximizing their own utility.

Profit is a dirty evil thing, and must be stamped out. Do we really think that someone making money out of a thing is really going to do that thing better, cheaper and more efficient than a bureaucracy with zero stake in the outcome?

With the level of wealth disparity we have, the 1 percent would take the lion's share (for swimming pools, grounds etc) unless force of some sort was used to stop them and that wouldn't be a free market.

Exactly, Its not like the world is 70% covered in water or anything What we need is a central plan, heavy regulation to discourage investment, leaky pipes and disparate ownership of the network, that should do it.

[happy_renting]

Water leaks are a myth. The water merely returns to the water table from whence it was pumped in the first place. There is no loss.

Yes I know it's simplistic - the leaking water has been expensively pumped and purified.

In a free market landowners would be allowed to keep and sell the rain that falls on their land. Landowners would be begging the government to ban rain during bad weather to prop prices up.

[mfs1959]

Water leaks are a myth. The water merely returns to the water table from whence it was pumped in the first place. There is no loss.

Yes I know it's simplistic - the leaking water has been expensively pumped and purified.

In a free market landowners would be allowed to keep and sell the rain that falls on their land. Landowners would be begging the government to ban rain during bad weather to prop prices up.

Spot on - the water doesn't disappear it just replenishes the ground supplies.

It would be interesting to speculate on the additional economic and insurance costs that would arise in London if the leaks were all sealed. The ground would dry far more in a drought leading to further subsidence costs.

[shipbuilder]

A truly free market in purified water would look the same as a free market in any other natural resource. Obviously nobody owns the raw resource itself, so it could be freely accessed by everyone, who could then use it or charge for a purification/improvement/extraction service.

How this might look or whether it might be more efficient or widely beneficial than centrally planned or more recent arrangements is speculation, really.

[Redcellar]

In a truly free market supply and demand would decide the price. Therefore the SE of England would see massive hikes since water supply is limited but population there is incredibly dense.

I find it interesting that our basic needs are food, water and shelter. Yet only the price of water is controlled and outrage would ensue if a free market were allowed to occur for water. It would balance out the SE's perceived wealth if all services reflected the demand, availability and actual costs in the regions concerned.

[Liquid Goldfish]

They allow thousands of gallons to be lost in broken pipes

I heard someone on the news refer to thousands of gallons being lost.

We're actually talking billions - well, it's a billion gallons a day that are lost

Edited April 6, 2012 by oldsport

[RufflesTheGuineaPig]

Just wondering how a proper free market would deal with a severe drought?

In a true free market, anyone would be able to dig a well in their garden.

So several people would dig deep wells, pump out all the groundwater and pump it on the market, crashing prices, meaning cheap water for all.

Then after a week all the water would be gone and people would charge extortionate prices to ship water in, and anyone without access to significant funds would be dead in 2 weeks.

This is how the free market works, and why it isn't always a good idea.

Sometimes you need regulation because profit isn't always compatible with human life.

[MarkG]

Fair enough, but we were talking in the context of severe drought

Severe drought? In a country where sunny days lead to stunned newspaper headlines?

The average house in the UK receives more than enough rain in a year to meet all its water needs, particularly if some of it was recycled internally (e.g. using water drained from the shower to flush toilets, or whatever). But why bother developing that kind of technology when you'll be forced to compete with centrally planned monopolies pushing water through decaying pipes? Much better to just wait until they all fall apart and no-one has any water.

Edited April 6, 2012 by MarkG

[Traktion]

In a true free market, anyone would be able to dig a well in their garden.

So several people would dig deep wells, pump out all the groundwater and pump it on the market, crashing prices, meaning cheap water for all.

Then after a week all the water would be gone and people would charge extortionate prices to ship water in, and anyone without access to significant funds would be dead in 2 weeks.

This is how the free market works, and why it isn't always a good idea.

Sometimes you need regulation because profit isn't always compatible with human life.

I suppose the same people will have prevented rain from falling and drained the oceans too?

When you suggest that free markets aren't always a good idea, you're suggesting that violence is sometimes a good idea. I would suggest that the latter is never a solution.

[MarkG]

When you suggest that free markets aren't always a good idea, you're suggesting that violence is sometimes a good idea. I would suggest that the latter is never a solution.

He's suggesting that in a free market, my neighbour would be allowed to steal the water that exists under my land.

You need a government to pass laws allowing theft like that, and they would never, ever drain an aquifer after they've stolen the water from its rightful owners, oh no, not in a million years. Of course preventing them from stealing it might be tricky.