The Washington Post article entitled, “Rich Californians balk at limits: ‘We’re not all equal when it comes to water”, written by Rob Kuznia discusses the ongoing drought and the response of certain Californians to the drought. The article perfectly exemplifies economic issues such as scarcity, elasticity, maximizing behavior, and government regulations on goods.
California is in the midst of a historic drought, and many residents of the wealthy community of Rancho Santa Fe feel that if you can afford to pay for more water, you should be able to. This goes a fundamental question of economics; how a scarce good should be distributed. There are several ways to distribute a scarce resource, Ranch Santa Fe feels that residents in California are “not equals when it comes to water” (Kuznia), and if that water should be distributed based on ability to pay.
The state of California has taken a different approach to distributed water. The state regulates water usage by imposing heavy fines upon those who use more than their allocation of water. These regulations hope to create a relatively equal distribution of water among resident of Californian’s as water is a basic necessity. Because water is in fact a basic necessity, it is a highly inelastic commodity, people need water so increased prices of water, in the form of price increases of heavy fines, does not have a large effect on demand for that water. That is especially true in Rancho Santa Fe. Many residents have not been phased at all by the heavy fines, which they can easily afford, so they have no qualms about using more than their monthly allocation of water.
The residents have, up to this point, not been phased by the fines because the water is a net benefit to them, that is, the marginal benefit they receive from using more water outweighs the marginal cost of the fines imposed by the states. The residents of Rancho Santa Fe will continue to use more water until the marginal cost of the extra outweighs the marginal benefit of the extra water.
The state of California has taken steps to ensure that the marginal cost does in fact outweigh the marginal benefit by imposing harsher constraints on people who continuously use more than their allotment of water. Whereas before the fines imposed by California were $100 at most, new state regulations allow the state to triple the water bill of people who use more than their allotment.
If the Rancho Santa Fe residents are still undeterred by the potential trebling of their water bills, new state regulations also allow the state to install flow restrictors which made it difficult to use multiple water resources, such as a shower and an outdoor sprinkler, at the same time. In the most extreme cases, the state has the authority to stop the flow of water altogether.
The increased constraints placed on the residents of Rancho Santa Fe by the state of California is a fundamental issue of economics, government regulation of resources. People are often divided on the role the government should play in the distribution of resources, many people believe that the government should play a role in the distribution of resources and even have authority to regulate the distribution of a resources, that is what California is doing in regards the distribution of water. Other people feel the government should not have a role in the distribution of resources and that distribution should be guided by the market and allocated based on who can afford it. This is the view of many of the residents of Rancho Santa Fe.
We can see from the article in the Washington Post regarding how water is distributed in California how major ideas and theories of economics affects a current and critical issue in the nation. Many of the presumptions and underlying issues are exactly economic issues that have been discussed, in particular, the issues of scarcity, elasticity, maximizing behavior and the role of government in the regulation of resources.
References
Kuznia, Rob. (June 13, 2015). “Rich Californians balk at limits: ‘We’re not all equal when it comes to water.” Washington Post. Retrieved from http://www.washingtonpost.com/national/rich-californians-youll-have-to-pry-the-hoses-from-our-cold-dead-hands/2015/06/13/fac6f998-0e39-11e5-9726-49d6fa26a8c6_story.html
