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CA Drought Fault of Capitalism, If We Ignore Economics and Math

CA Drought Fault of Capitalism, If We Ignore Economics and Math
Profile photo of Robert P. Murphy

Once again, the popularity of the Facebook page “US Uncut” should make everybody consider moving to Canada. Regarding Governor Jerry Brown’s mandatory water restrictions in the state of California, the US Uncut page posted the following graphic (and accompanying text) which currently has more than 52,000 shares:

US Uncut CA Water Restrictions

US Uncut ** California has ordered emergency water restrictions on residents while Nestle, fracking companies, and large farms have been granted an exemption even though they account for 82% of the state’s annual water consumption (residential accounts for 12%). At 1.1 trillion gallons per year, almond farms alone consume 10% of the state’s water, or as much as entire city of Los Angeles. SHARE if you agree corporations should be not be given a free pass!!

 

There’s so much wrong here it’s hard to know where to begin. (I note that some of the points I make in this post were brought up by my heroic readers on Facebook.)

First, let’s stipulate that the numbers reported in the graphic above are correct. Even so, do you notice any discrepancy in the magnitudes? The poster leads with “fracking,” since all good progressives hate the practice, but according to these numbers fracking uses 0.006% of the water that almond farms use. That’s not even a rounding error to include it on this poster, it’s an ideological error.

Second, notice how they conveniently expressed the flushing statistic in terms of gallons per flush. Hmm, that makes it hard to compare to the other figures, which are quoted in total gallons per year. Let’s make them apples to apples and see what happens:

There are about 39 million people in California. Let’s assume that on average, each person flushes the toilet twice per day. Per the US Uncut’s numbers, then, that means the total gallons per year devoted to flushing toilets in California is 39 million people  x 1.6 gallons per flush x 2 flushes per person per day x 365 days per year = 45.6 billion gallons per year.

So yes, since flushing toilets (per the poster’s numbers) uses about 650 times more water than fracking, it would make sense that command-and-control regulations from the governor would crack down on toilet flushing but not on fracking.

What’s really funny is that if you look at the US Uncut page comments, you’ll see the progressives arguing among themselves about priorities. I mean, normally you would think they’d be in favor of “local farming,” especially with something like organic almonds that Whole Foods proudly sells. And indeed, some of the commenters do take that tack, arguing that the real restrictions need to be imposed on residential lawns, golf courses, and showers.

Stepping back, the basic problem here is that you have millions of people who have different possible uses for a finite resource (water), and there’s not enough of the resource to satisfy all the potential uses. One way of dealing with this mismatch is to have political officials lay down rules for who is allowed to use water, and when.

If only there were another way… Wouldn’t it be nice if there were a social system that allowed humans to decide in a decentralized manner how much of a resource they wanted to use? But wait, because of the scarcity, there would need to be some type of information feedback mechanism, so that people only used the resource when it was really important to them, and they economized more stringently during a time of reduced availability. Furthermore, we couldn’t just survey people, because then they might lie. If only there were a way for them to signify their desire to consumer more of the resource, that would force them to be honest about it and would help foster social cooperation…

Of course I’m being facetious. I’m simply describing how a market economy based on private property operates. California is suffering from a shortage because the government foolishly sets limits on the price of water (and imposes all sorts of other restrictions on the distribution infrastructure). In a free market for water, the price would adjust to balance supply and demand, allowing people to ration it according to their own tastes. If someone really loved long showers, he could still take them, he would just pay a lot more.

Finally, the prospect of earning high returns would mean companies would be ready to ship in extra water during natural drought conditions. We would be spared the absurdity of Jerry Brown telling people they can’t water their lawns or wash their cars.

  • Wayne Lusvardi

    Murphy has very inadequate understanding of California water markets.

    California already has a large market for untreated, wholesale water. Anything that requires huge upfront costs, like building a house, a car, or a dam, necessitates paying for them by a long term contract, mortgage, or municipal bonds. Thus, there is only a small 5% spot market in water transfers and a 95% market in long-term wholesale water contracts in California.

    There is a huge market for water in California already, only it is a market in long term water contracts.

  • http://aguanomics.com/ David Zetland

    Great post! (Blogged)

  • http://aguanomics.com/ David Zetland

    Great post! (Blogged)

  • SaulOhio

    The version I saw talked about how Nestle was taking “the people’s water”. It reminded me of the communist guerrillas in the movie “Volunteers” with Tom Hanks and John Candy. “We will drive the people’s truck over the people’s bridge….until we run out of the people’s gas.”

  • SaulOhio

    The version I saw talked about how Nestle was taking “the people’s water”. It reminded me of the communist guerrillas in the movie “Volunteers” with Tom Hanks and John Candy. “We will drive the people’s truck over the people’s bridge….until we run out of the people’s gas.”

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Profile photo of Robert P. Murphy

Robert P. Murphy is the Senior Economist at the Institute for Energy Research, and a Senior Fellow with the Fraser Institute. He holds a PhD in economics from New York University. Murphy is the author of Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015) as well as numerous other books and hundreds of articles.

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