Water, Water Everywhere nor Any Drop to Drink?

The article, “Water, Water Everywhere Nor Any Drop to Drink?” takes a look at the effect of water meters on water usage. At the beginning of the article Miller documents that the supply of water is not keeping pace with the demand. He states that conservationists fear that continued demand at this rate of water usage will increase toxins in the water supply and deplete water sources.

On the other hand, the economic analysis of this concern is not as pessimistic. The analysis of water is looked at the same way other scarce resources are viewed. This “requirement approach” assumes that regardless of the price charged for water, the quantity demanded of water will remain the same. Therefore, it is assumed that the demand for water in the short run and the long run is zero; the quantity demanded will remain the same regardless of price. (Figure 1)

Economists believe that water meters would help solve the problem of water shortages. They provide evidence that with meters in place, the quantity of water demanded would decrease. A study performed in Boulder Colorado compared water usage with a flat rate system (figure 2) which charges consumers a flat rate for water no matter how much is consumed versus a water metered system (figure 3) which charges consumers additional money for using more than a minimum quantity. This means that there is