What is the economically sound argument for reducing one’s water footprint (e.g. by eating less meat)? The common sense explanation goes something like this:
“There is a limited amount of freshwater that is available to humanity every year. People waste a lot of that on unimportant things. If people used water less wastefully, more water would be available for more important things. Hence, water scarcity would be reduced.”
That is, roughly, the common sense argument. But I am sure that this is the sort of question where common sense could easily be wrong, and a more accurate view of economics could provide a lot of clarity. So I was interested in your opinion. How would you describe it in economic terms?
Luckily for AK, I just wrote a draft paper on “pricing water scarcity” that deals with these topics. (I’ll be posting a draft here in a month or so, for you all to comment on.)
The key ideas here are water scarcity and waste/important, which can be mapped to supply and demand. In terms of supply, “water scarcity” means that there is too much quantity demanded at current prices for the available quantity of water. When I teach, I give students the example of 20 $0.50 beers for 20 people. At those prices, it’s probable that the 20 beers will be gone before people “lose their thirst.” At $5 per beer, that probability falls. At $20/beer, I am pretty sure that there will be beer left at the end of the night. Note that people are just as thirsty with higher prices, but unwilling to spend money that can be used elsewhere (opportunity cost) on overpriced beers. On cheap beers… they’re all in.
Also note that some people don’t like beer, at any price. In the beer example, they may not play a role, except in the long run, which allows for people to change their tastes (stopping or starting beer drinking). This discussion of preferences and tastes is not as relevant with water (we all need to drink and bathe), but it can get interesting when it comes to “marginal water uses,” which brings us to demand.
It’s pretty easy to rank our preferences (or “demands”) for different water uses, beginning with “important” (drinking water) and moving to less important (in terms of your priorities but also in your willingness to pay) uses. Watering the lawn or filling a swimming pool might be seen as “wasteful” to some people, but pretty much everyone can agree that they are less important, or that people — when faced with water prices — will demand less water for their lawns without reducing their demand for drinking or bathing water.
We consume most of our water indirectly, via eating foods or using goods that require water to produce. A meat diet indirectly uses a huge amount of water because each animal needs to eat a lot of food (food that humans can eat) before they can be turned into meat. It’s this basic thermodynamics that explains why vegans have a much smaller “diet footprint” than meat-eaters. Overconsumption of clothes, electronics, vacation travel, you name it, also results in a heavy indirect footprint. Given that indirect water consumption is often a 100x multiple of direct consumption (a hamburger requires 660 gallons/2.500 liters vs a 5 minute shower, at 5 liters/minute) and that people around the world are getting richer, we have a lot to worry about here.
Scarce water can be rationed in a few ways. Price rationing (use as much as you want as long as you pay the price) is easy to understand. Per capita rationing (everyone gets x liters, no matter their wealth or willingness to pay) is considered fair by some people but it’s harder to manage (water taps must cut off when x is reached each day) and often results in an underground market (those who use less than x sell to those who use more). Perhaps the least efficient rationing method is bureaucratic (i.e., someone deciding that you can only use water in the evenings, cannot water your lawn, or must install a low flush toilet), but bureaucrats (for some reason) seem to like that method.
Thus, we have these facts:
- When water supply is limited, it’s necessary to forego some demands
- Everyone has their own ranking of demands, from most to least important
- The easiest way to limit consumption to “important” uses is to set a price that allows people to pay for high-value uses while encouraging them to forgo low-value uses.
- Low prices that ignore scarcity encourage consumption of water now (on the lawn) that we might need tomorrow (for drinking).
Turning to AK’s opening (What is the economically sound argument for reducing one’s water footprint, e.g. by eating less meat?), here’s my one-handed advice: Set water prices to reflect water scarcity, and people will prioritize important (to them) over wasteful (to them) water uses. This advice, given the vast quantities of water embedded in food, will mean that people who eat less meat will save far more money than people who stop taking showers.
So enjoy your shower, flush your toilet, kill your lawn and enjoy an Impossible Burger 😉