I cannot help but let go a huge sigh when I read a headline entitled “Conserve or face rationing, public told” in The Star on February 8:
PETALING JAYA: Malaysians have been told to start conserving water now or brace themselves for water rationing if the expected hot and dry weather hits the country next month.
Selangor water concessionaire Syarikat Bekalan Air Selangor (Syabas) has sounded out to the state government that rationing was among the steps that would have to be taken if the situation takes a turn for the worse.
Right. Like people are going to listen; I doubt such warning could encourage people to conserve.
When I heard rationing as a possible solution, I rolled my eyes.
I have offered a better plan to survive water shortage, be it caused by El Niño or simple drought, long ago — prices should reflect water scarcity and be allowed to float according to water quantity. In short, with the anticipated water shortage, price must go up throughout the duration of the shortage. In a free market with no state intervention, price would have gone up by now, signally the possibility of shortage.
People will only conserve if something hits them in the head. A mere warning does not cut it but a price increase will do the trick.
I do not know about you but I prefer to pay more rather than not have water at all. Further, rationing is such a drag. Besides, for goodness’ sake, we are living in the 21st century and we are not in a war or something.
4 replies on “[1086] Of water shortage, ineffective threat and effective policy”
yeah. the opposition would get another brownie point, which make prices increase politically unpalatable.
Wanna bet some opposition parties will start harping on the price hikes and the “Barang Naik” administration if the water prices were raised? Sigh…
Hopefully they’ll soon realise that the problem is public monopolies rather than the government itself, because the price hikes would occur anyway under a free market. I think not too long ago they made a huge hullabaloo about the water privatisation bill, simply because they were afraid some nebulous foreign entities might end up controlling our water supply. And people wonder why I have as little faith in the opposition as in the government… :p
True but my suggestion is not about capacity increase. While monopoly is associated with productive inefficiency, I seek to achieve allocative efficiency instead, which, I do not think is related to the problem of monopoly.
As stated in the entry, price, not quantity so go up. I am taking quantity as a constant and with that constrain, look how to solve the allocative inefficiency in the short run.
Nevertheless, you are right. The long term solution is to break the monopoly.
The problem however comes down to the Enron effect – water companies in Selangor and other states are in effect monopolies. What incentive is there to boost up capacity knowing no other player can enter the market and they can increase the prices?