[JoshTriplett]

Part of the issue is not systematically using a pricing structure that charges disproportionately more for usage above high thresholds.

The 101-level "solution" is to just raise the price to account for demand. The problem with that is that it treats all usage the same, whether it's a residence's first gallon or an alfalfa field's last gallon. But the former is something we need to protect.

It makes sense to price water, and electricity, in a fashion where the first X costs a certain amount, and the next X has a higher rate, and above some percentile of usage it has a much higher rate, and at some percentile of usage, customers should be very nearly paying for new required utility infrastructure themselves. That allows using pricing to solve supply problems, without penalizing normal levels of usage.

Some utilities already do this. But if there are actual issues with having enough supply for both datacenters/farms/smelters/etc and residential usage, then they're not doing this well enough, or don't have the pricing correct.

[Straw]

This causes major market distortions and worse outcomes than the econ 101 solution.

The problem is that water isn't traded on a normal market at all. Lots of people have historical water rights and pay nearly nothing for their water use. There's byzantine regulation and many have the right to use for some purpose on their land but not to resell, so the market cannot allocate to more efficient use.

If you just let the 101 level solution actually work, water prices will rise until inefficient uses like water-intensive agriculture (not even all crops!) are pushed out. Urban users easily outbid almost all agricultural use, even at what any person would consider dirt cheap prices. For example, desalinated water, which is considered expensive for agriculture, can be 40 cents per cubic meter of water. That's a lot of water! Usually the last mile of urban water delivery costs more than that.

The amount required to satisfy all urban use, including water hungry lawns etc, and datacenters, corresponds to a very minor reduction in agriculture. Perhaps even just changing which crop is grown or switching irrigation techniques.

Charging more to higher users, price discrimination, causes several problems. First, it creates an incentive to cheat. I'm not using all this water myself, its for this whole group of people who "live" here. Don't allow this kind of spreading (somehow...)? Now you actually screw any business or institution that serves a lot of people. A farm produces food for thousands- do they count as one user? A park uses much more water than a garden but serves many more people. Whatever framework you create will require another bureaucracy to run. Lobbyists will find or insert loopholes for their friends.

The heavy users actually improve the system robustness, in both electricity and water. Their higher demand pays for more supply infrastructure, which itself often benefits from economies of scale, and in a shortage they may even be more responsive to price increases due to their high use.

[eesmith]

The 101 level solution means that Native Americans who were granted water rights by the Spanish, and guaranteed those rights by US treaties, would have to outbid urban users in order to grow subsistence crops.

The heavy users have more influence over the laws which govern the infrastructure, as the history of water rights in the West clearly shows. We see it now when secretive organizations negotiate with water companies under NDA to get water for new data centers - something a smaller water user couldn't do.

The riparian doctrine of the East, with its high rainfall, don't work so well in the dry West, which is why it generally uses the prior appropriation doctrine. Water management was traditionally under a communal system. Some of these still exist as acequia associations, which include equity and fairness in their decisions, which doesn't follow the prior appropriation doctrine.

Econ 101 doesn't handle these issues.

[Straw]

These all seem fine in a normal market?

If the Native Americans have water rights, they can also sell them. They can choose to use it inefficiently on subsistence farming, or they could sell at the going rate. A normal market itself doesn't imply any particular allocation of water rights, just that they should be as fungible and transferable as possible.

Why are the laws that govern the infrastructure particularly important? It only matters now because its a tangle of regulation. Yes, big users can often get bulk discounts or other special arrangements by committing to use. This happens in many areas.

There's no law governing what products my grocery store must carry. Yet, I can still choose a store with many things I like, at affordable prices. My store may (and frequently does) exclude all products containing some chemical considered harmful even if it isn't banned. Of course, water has more of a natural monopoly problem, but that's more for last mile infrastructure and not broader supply.

I don't understand the details of the riparian vs prior appropriation doctrine. How does this create an issue? If the water rights are defined somehow, in a usage-independent way, only in terms of the net water removal, to account for runoff from local use, and the water from them can be traded, then a market can work regardless of the specific nature of the right.

Any association holding the rights could allocate its water internally as it sees fit. Just like any other asset? Or it could decide to sell it and distribute the money instead- perhaps even better for fairness to it's members!

[eesmith]

> If the Native Americans have water rights, they can also sell them.

You've just described the standard practice for taking over Native American lands by economic coercion instead of direct force. Take away land and water using market forces, and a culture based on land and water shatters.

That's precisely why the Native Americans protected their rights by treaty, not market forces.

Econ 101 was created to justify British colonial expansionism. Econ 101 justifies indentured servitude. Econ 101 justifies vote selling. Econ 101 justifies rule by the rich.

We've collectively decided that some part of life are off-limits to Econ 101.

Water is not simply a commodity. Water is life. Water is culture.

> How does this create an issue?

Water rights in the West are at least a Econ 400 level course, if not graduate school.

[Straw]

The land and any associated rights was taken from the Native Americans by coercive force. Not a market. Not that they have any particular claim to it; states own land, not ethnicities. The particular state that controls land sometimes changes. This has little to do with any discussion of water rights.

I am suggesting expanding their water right- instead of only the right to do X, Y, Z with the water, take whatever right to the water they do have, in terms of amount of water, and say "you can do whatever you want with this much water". How to allocate resource rents doesn't have much effect on the market structure itself.

A lot of vitriol against supply and demand without any evidence.

Food is life. Food is culture. Just as much as water. Which countries have had famine, those that allocate via some system of food rights, or those that had a free market in food? The largest examples of famine I am aware of, in the USSR and Maoist China, were driven by some central allocation of food rather than a market. Not a good record.

One of the great features of markets is that things don't need to be decided collectively. Perhaps 90% of people want to wear blue T shirts, but I want a red one. If we collectively decide, I get a blue T shirt. In the market, I buy a red T shirt- perhaps at a very slightly higher price due to less economy of scale.

We certainly know of areas where vanilla markets can fail- externalities etc, but these do not apply to the situation here. The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.

[eesmith]

I can see you don't recognize native sovereignty. Tribal nations are domestic dependent nations, and count as a "state". The water rights were not taken by coercive force but remain with the nation, and at least nominally protected by treaty rights.

It's very odd that you talk about a decentralized market when water allocation in the US Southwest was decided by the Colorado River Compact in 1922. This is central allocation and, famously, based on over-estimated flow numbers.

Most large famines were caused by flooding or drought. More people died in the Chinese famine of 1906–1907 than the Russian famine of 1921–1922 and the Soviet famine of 1932–1933 combined.

> The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.

That is absolutely correct, and would covered in the first week of any water rights class. In the West, "water flows uphill toward money", as I learned from reading "Cadillac Desert".

Or if you want a novel, read "The Milagro Beanfield War." The small farmers (mostly Hispanic) were drafted for WWII and couldn't farm, so lost their water rights, while the large farmers (mostly Anglo) could hire help.

And who got to set up the water law? https://en.wikipedia.org/wiki/Santa_Fe_Ring

"The Santa Fe Ring was an informal group of powerful politicians, attorneys, and land speculators in territorial New Mexico from 1865 until 1912. The Ring was composed of newly-arrived Anglo Americans and opportunistic Hispanics from long-resident and prominent families in New Mexico. Acquiring wealth, both groups realized, lay in owning or controlling the millions of acres of land which the Spanish and Mexican governments of New Mexico had granted to individuals and communities. The acquisition of grant lands by members of the Santa Fe Ring was facilitated by U.S. courts who had no allegiance to Mexican claims and land practices which featured allocating most of the land in grants to the common ownership of the first settlers and their descendants vs. legal private ownership."

What exists is a patchwork of economic systems, there is no cohesive whole, and you clearly prefer the US one which prioritizes the private ownership model of Econ 101.

That's why you can't view it simply through an Econ 101 lens.

[jlebar]

> Part of the issue is not systematically using a pricing structure that charges disproportionately more for usage above high thresholds.

We don't do this for gasoline (in most countries), even though it is also vital for life. And yet people can still drive, afford to eat food grown with fertilizers, use plastic, and so on.

Turns out markets are pretty good when you leave them alone. But when they're not left alone (as is the case with water today!!) you get some weird shit.

[thephyber]

Gasoline is absolutely rationed when it becomes scarce after having been plentiful.

When hurricanes come to South Florida, the well off migrate North to wait out the storm while the poor suffer the dangerous conditions. Part of this is due to the price spikes of gasoline in the local market as supplies dwindle due to fewer truck shipments and refineries shutting down for the storm.

Water is similar. Both water rights and water utilities are gamed by people who have resources. The people that are hurt are usually poor utilities bill payers, rural residents who are the first to lose service when wells dry up, and anyone who thinks they have water rights until an upstream user exhausts their expected supply.

The “markets work” heuristic is frequently wrong if you don’t glaze over the very many counterexamples.

[roenxi]

Yeah but that response is stupid, irrational, makes shortages more likely and discourages people from taking action when they need to do something different right now. In an emergency situation, people who can provide more of something that is in desperately short supply should be paid more. People consistently adopt a strategy of trying to not pay them more and it's one of those really annoying cases where people's instincts are primed to make them band together and do something predictably foolish.

Rationing is an inevitable response. But to say that is like saying witch hunts are inevitable - they are. They're still bad ideas. People who can maintain access to their higher reasoning should resist them.

[jlebar]

> Gasoline is absolutely rationed when it becomes scarce after having been plentiful.

Sure, but OP is advocating that we should "systematically [use] a pricing structure that charges disproportionately more for usage above high thresholds." They're not arguing that this is something to be applied only in emergencies.

Similarly in your post, you use the need to ration gas after a hurricane to argue that we should ration water all the time. This does not follow.

> Both water rights and water utilities are gamed by people who have resources. The people that are hurt are usually poor utilities bill payers, rural residents who are the first to lose service when wells dry up, and anyone who thinks they have water rights until an upstream user exhausts their expected supply.

The logical extension of your argument here is that the world would be better if we subsidized gasoline for "poor utilities bill payers" and "rural residents".

But why gasoline and water specifically? Why not also healthcare, food, childcare, and other necessities?

Then consider, if we have a budget of $X per family to subsidize necessities, surely the government is not best suited to decide how to split up those dollars between water, gas, healthcare, food, and childcare? There's no right answer universally, some people need food more than they need gas, and vice versa. Surely an individual family would be better equipped to decide for themselves?

We have now invented "giving money to poor people instead of subsidizing demand", which I wholeheartedly support.

[alex43578]

200 miles will easily get you out of the path of a hurricane. 200 back home. 400 miles at 20mpg is 20 gallons of gas. Even if gas doubles from $4 to $8, that’s only an extra $80, likely less than the cost of that one night of motel, and certainly less than the economic costs of actually being hit by a hurricane.

As with many things, markets do work, but people don’t make rational choices for their well-being.

[da_chicken]

> We don't do this for gasoline

No, but commercial trucks use diesel, which carries about 25% higher taxes per gallon. And vehicle registration on semi-trailer trucks is significantly higher as well. They pay, on average, between $25,000 and $30,000 in taxes and fees each year.

> Turns out markets are pretty good when you leave them alone.

No, they aren't. They're ridiculously bad when you leave them alone because someone captures the market, ramps up anti-competitive practices, and immediately begins rent-seeking as hard as possible.

Free markets are pretty good at finding good prices. Markets that are left alone do not remain free. That lauded "self-interest" encourages businesses that have reached nearly 100% market share to increase profit in other ways.

[cma]

Heavier commercial trucks that run on diesel tend to cause more damage. Scales with roughly 4th power of axle load.

[AnthonyMouse]

That's a bad argument. There are gasoline trucks with a GVWR of ~20,000 pounds and diesel cars that weigh less than a Honda Accord. If you actually wanted to do that then you'd instead do something like tax based on axle weight and miles traveled, e.g. by reading the odometer during inspections.

The better argument is that diesel is worse for air quality and then it's a pigouvian tax in proportion to how much you burn.

The realpolitik argument is that fewer people have diesel vehicles and democracy is two wolves and a sheep voting on what's for dinner. But taxing commercial trucks is also a pretty sneaky way of taxing ~everything while pretending to not, so it's also the principal/agent problem. Legislators want to spend money while pretending not to take it from you.

[cma]

> diesel cars that weigh less than a Honda Accord.

It is taxed less than gas in lots of Europe where that is more common. You also need to factor in mpg vs gas, where it is higher, so more road-wear pCO2 was part of the debate in Europe, even though it is longer carbon chain so worse co2 ratio per calorie, the engines are more efficient. Diesel is worse for local air, better for long term co2.

There are a mixture of factors and lobbying behind the differencs, road wear is one. Farm fuel with no road wear isn't taxed much at all in lots of places and is more often diesel.

[AnthonyMouse]

> It is taxed less than gas in lots of Europe where that is more common.

But then it's even worse at recovering the cost of road maintenance from heavy trucks.

> You also need to factor in mpg vs gas, where it is higher

Passat TDI (diesel), ~3500 pounds, ~45MPG. Toyota Camry Hybrid (gas), ~3500 pounds, ~50MPG.

In theory diesel hybrids would be even more efficient but diesel engines and hybrid transmissions both add up-front cost and further efficiency improvements have diminishing returns because reducing a $100 fuel cost by 30% isn't as much money as reducing a $70 fuel cost by 30%.

> There are a mixture of factors and lobbying behind the differencs, road wear is one.

Road wear is the irrelevant one in terms of fuel. Because of the fourth power law, essentially all road wear is from full-size buses and semi trucks. The contribution from passenger cars and even the likes of diesel pickup trucks rounds to zero. Meanwhile the largest vehicles use a minority of the fuel because there are several times more passenger cars than semi trucks.

[AnthonyMouse]

"Someone captures the market" is the thing that happens when the government micromanages them. Laws that charge more per unit to high users aren't anti-trust laws. A farm doesn't have higher market share in food than Google has in a tech market just because it uses more water.

[jlebar]

> Free markets are pretty good at finding good prices. Markets that are left alone do not remain free.

OK but the market intervention being discussed here does not create a free(er) market. Its intent and effect is the literal opposite.

[thrance]

Gasoline is heavily regulated and subsidized. Leaving the oil market alone resulted in Standard Oil, and we obviously don't want that again.

[jlebar]

I am not saying that there should be no regulations on monopolies. We are discussing a very specific market intervention, namely the proposal to

> systematically [use] a pricing structure that charges disproportionately more for usage above high thresholds.

This is what I'm arguing is a bad idea, by using gasoline as an example.

If you want to argue that imposing this pricing structure systematically is good because it would help prevent a bad monopoly like Standard Oil, you'd need to explain (a) how this market intervention would prevent monopolies and (b) how it's a "better" way (according to however we decide to measure "better") to prevent monopolies than the alternatives. I don't see how this is true, though.

[thrance]

Your claim was:

> Turns out markets are pretty good when you leave them alone. But when they're not left alone (as is the case with water today!!) you get some weird shit.

https://en.wikipedia.org/wiki/Motte-and-bailey_fallacy

[Straw]

Standard oil not only reduced consumer prices for gasoline, but was already losing its monopoly to competitors during the antitrust trial.

[cybercatgurrl]

excuse me? leave the markets alone? to do what? continue screwing people over with the cost of living? at some point the government needs to step in when greed outstrips the ability of the consumer to meet the demand. capitalism on it’s own will demand ever increasing profits and that is simply unsustainable for any civilisation

[anubistheta]

I disagree. A large part of the cost of a utility is fixed per customer. Or any product really. That's how bulk purchasing makes sense. I can get 4x the product at a bulk store for 2x the price. Instead of being prejudicial about the use case, let's just charge what the utility actually costs. Include capital, operation, and decommissioning costs. That way, if you get a sudden spike in demand, you have the cash flow to issue a bond a scale up.

[XorNot]

This would be an extremely regressive pricing structure that still has the same punchline: somehow residential users pay more to still not have any water.

[atoav]

I think it makes sense to have a continuum of:

1. You're thirsty and need a sip of water? That should be free

2. You're an household and use water? That should cost progressively more the more you use if you use more than typically needed

3. Your business model requires you to evaporate every last drop of water in a desert region? That should be so prohibitively expensive that your business model does not work

This is basically just a low amount threshold and a exponential function. You just need to select the exponent.