4 ms·

The price doesn’t need to match the cost though. Government can set a price to maximize social benefit, and then cover the difference in cost with taxation.

culturestate 7y ago
This is how it works where I live; after subsidies (which are automatically deducted from the bill) I pay about US$20 per year to the water supplies department.
rayiner 7y ago
That begs the question. The government has no idea what price "maximizes the social benefit." The government is incentivized to set prices artificially low, not to maximize the social benefit accounting for externalities and long-term requirements.[1] For example, the government has a strong incentive to make connection charges artificially low, which lowers the price of new houses. But that also encourages sprawl--making it artificially cheap to expand into new land that isn't already part of the water/sewer grid. [1] You see similar problems in governments determining public pension contributions. That's effectively the government setting a price required to buy into a pension system that guarantees certain benefits. Governments universally set that price too low, resulting in the public pension disaster we have today.
- Jweb_Guru 7y ago
  There is a significant difference between water pipes and the pension system, which is that water pipes are easily affordable by the federal government and pensions for everyone are not. Getting the pricing "right" is a stupid game; people need water and are willing to pay the current rates, and the federal government can afford to fund necessary improvements to infrastructure. What exactly is the benefit of getting pricing "right" here? Avoiding water wastage? Environmental benefits? I'd wager that a group of environmental scientists could find a "correct" price that addresses these concerns much more accurately than could market forces. (Actually, I see no reason why market forces would get the price "right" here, but even if they did it misses the point--there is no reason to allocate water to people based on how much money they can pay for it. If you cared about this sort of thing a rationing system would make much more sense. The idea that the infrastructure has to be funded directly and primarily by water usage is just baffling to me, especially when--as numerous commentators have already pointed out--it doesn't really work that way in a lot of cities).
  - rayiner 7y ago
    > There is a significant difference between water pipes and the pension system, which is that water pipes are easily affordable by the federal government and pensions for everyone are not. The water/sewer infrastructure crisis is on the same order of magnitude as the public pension crisis (into the single-digit trillions of dollars). > What exactly is the benefit of getting pricing "right" here? Avoiding water wastage? Environmental benefits? All of the above. For example, when connection charges are too low, people are incentivized to engage in greenfield development rather than infill development. Having the federal government further subsidize things only exacerbates that problem. > I'd wager that a group of environmental scientists could find a "correct" price that addresses these concerns much more accurately than could market forces. They have. And elected municipal entities uniformly ignore those results.
    - maxerickson 7y ago
      It's kind of funny how calling it a trillion dollar problem is real scary, but also identifies it as easily managed, given the will to address it. (0.5% of the US economy over 10 years is a massive amount of resources but would have ~0 negative impact if diverted from other economic activity to water infrastructure)
core-questions 7y ago
This only works if you actually have people paying reasonable amounts of municipal tax, and if the muni itself is allocating the money properly. Plenty of opportunity for failure here, especially when you end up in a trap like in Flint where people weren't paying water bills or property taxes and expected to continue to get service on par with any other first world city.

culturestate 7y ago

This is how it works where I live; after subsidies (which are automatically deducted from the bill) I pay about US$20 per year to the water supplies department.

rayiner 7y ago

That begs the question. The government has no idea what price "maximizes the social benefit." The government is incentivized to set prices artificially low, not to maximize the social benefit accounting for externalities and long-term requirements.[1] For example, the government has a strong incentive to make connection charges artificially low, which lowers the price of new houses. But that also encourages sprawl--making it artificially cheap to expand into new land that isn't already part of the water/sewer grid. [1] You see similar problems in governments determining public pension contributions. That's effectively the government setting a price required to buy into a pension system that guarantees certain benefits. Governments universally set that price too low, resulting in the public pension disaster we have today.

Jweb_Guru 7y ago
There is a significant difference between water pipes and the pension system, which is that water pipes are easily affordable by the federal government and pensions for everyone are not. Getting the pricing "right" is a stupid game; people need water and are willing to pay the current rates, and the federal government can afford to fund necessary improvements to infrastructure. What exactly is the benefit of getting pricing "right" here? Avoiding water wastage? Environmental benefits? I'd wager that a group of environmental scientists could find a "correct" price that addresses these concerns much more accurately than could market forces. (Actually, I see no reason why market forces would get the price "right" here, but even if they did it misses the point--there is no reason to allocate water to people based on how much money they can pay for it. If you cared about this sort of thing a rationing system would make much more sense. The idea that the infrastructure has to be funded directly and primarily by water usage is just baffling to me, especially when--as numerous commentators have already pointed out--it doesn't really work that way in a lot of cities).
- rayiner 7y ago
  > There is a significant difference between water pipes and the pension system, which is that water pipes are easily affordable by the federal government and pensions for everyone are not. The water/sewer infrastructure crisis is on the same order of magnitude as the public pension crisis (into the single-digit trillions of dollars). > What exactly is the benefit of getting pricing "right" here? Avoiding water wastage? Environmental benefits? All of the above. For example, when connection charges are too low, people are incentivized to engage in greenfield development rather than infill development. Having the federal government further subsidize things only exacerbates that problem. > I'd wager that a group of environmental scientists could find a "correct" price that addresses these concerns much more accurately than could market forces. They have. And elected municipal entities uniformly ignore those results.
  - maxerickson 7y ago
    It's kind of funny how calling it a trillion dollar problem is real scary, but also identifies it as easily managed, given the will to address it. (0.5% of the US economy over 10 years is a massive amount of resources but would have ~0 negative impact if diverted from other economic activity to water infrastructure)

core-questions 7y ago

This only works if you actually have people paying reasonable amounts of municipal tax, and if the muni itself is allocating the money properly. Plenty of opportunity for failure here, especially when you end up in a trap like in Flint where people weren't paying water bills or property taxes and expected to continue to get service on par with any other first world city.