Wall Street's thirst for water: a market for water will drive up food prices

http://news.ycombinator.com/item?id=4701930

but because his comment is not a top-level comment, I had better chime in with agreement. The submitted article read like something out of the hard-left 1960s when I was growing up and a lot of people thought that countries with centrally planned economies were doing better than countries with free markets. They never have. Markets in water are crucial for figuring out how different users of water really value water, and how to monetize improving the quality and distribution of water. I live high upstream of most of the United States (near a continental divide), in the well watered state of Minnesota ("the land of 10,000 lakes"). This year is a drought year (although it was rainy the last two days), and even at that, we have adequate water. A controversial issue here is sale of water from the upper Midwest to arid places in the Great Plains or even the Southwest through pipelines. Banning the sale of water across state lines is not going to stop the Mississippi River or Red River (of the north) from flowing, and all the arid places in the United States have elaborately developed legal systems (unlike the riparian common law system in Minnesota and other states with abundant water) for allocating water rights. If big interstate trade in water through unit trains on railroads or through pipelines develops, the law will be able to keep up, and water will be better used in the United States.

If similar trade develops internationally, or domestically in formerly poor countries, again the crucial thing to do is to develop laws so that people can trade according to their needs. When people trade, they all become richer. Water is generally cleaner and more available today, serving a larger and healthier world population, than it was in my childhood. That came about BECAUSE of market economics, while the stifling poverty that resulted in famine in China in the 1960s came about from anti-market policies. I'll stick with the market when allocating important resources.

AFTER EDIT: The comments kindly made to my comment reminded me of life experience from living in Taiwan when Taiwan was still part of the Third World that I should relate here. For decades, the standards for water treatment of municipal water supplies in Taiwan have been up to world standards for piped water, ensuring that bacteria are reduced in the water before it leaves the water treatment plant. But in the 1980s, the dictatorial government of Taiwan at the time forced local governments to keep city water prices abnormally low, so none of the cities could afford to maintain the network of pipes that delivered water to homes. And that meant that the water flowing out of home taps could NOT be assumed to be safe. Instead, everyone all over urban Taiwan paid out of their own pockets to install filters (possibly ineffective against bacterial or protozoan contamination) on public building drinking fountains, and home dwellers paid for bottled propane gas to boil their home tap water before drinking it. (Boiling water to let it stand and cool was a big chore in those days. Some people bought special electric water-heating machines that automated the process of heating and storing tap water for drinking safety.) After three years in Taiwan, the first thing I did when I reached the home of a relative in Los Angeles upon my return to America was drink a big glass of tap water, a luxury I had been denied all that while. And my wife was HORRIFIED to see me do that. She had never seen anyone drink a glass of tap water straight out of the tap in her life.

As Taiwan democratized in the 1990s, the press began reporting on how ridiculously low the price of tap water was in Taiwan, and it was proposed simply to raise the price of city water, so that the city could maintain the pipe network properly and ensure clean water stayed clean all the way to home taps. I'm not sure how much progress has been made in this project to date in what parts of Taiwan, but my wife (who has been back there more recently than I have) reports that Taiwan in general is cleaner than ever, healthier than ever, and generally thriving well under democracy and a free-market economy. The bureaucrats in Taiwan were always mostly technocrats, rather smart people even in the worst times of dictatorship, but using prices to allocate resources makes more sense than using bureaucratic fiat to allocate resources. Two heads are better than one.

And no, your low-water appliances aren't helping much, as consumers only use 11% of water in the U.S.

As water prices are set by municipalities, there is little incentive to raise prices, the politicians who control them don't have any interest beyond their next election.

There is likely to develop a semblance of a "Market Price" for water in the U.S. which will inevitably be higher.

As far as selling water rights, the biggest danger here is that the governments that currently own them will sell them for less than they are actually worth, primarily because there isn't yet a true "Market Price" for water. Or, of course, corruption.

Thanks to horrific governance, you have water-rich places (like the Northeast of the US) with local governments that operate on the brink of bankruptcy. At the same time, you have fifty years of massive government-subsidized buildout of suburban sprawl and industry in the South and in the desert.

So instead of treating water resources as a public commons, we'll let some financiers borrow cheap money (courtesy of the Feds suppressing the interest rate market), buy up munipical water companies and rape the public for all time.