Water Rationing

[abcdefg]

We have had a serious drought three years in a row. Water reservoir levels are extremely depleted and they are now only 59% of what they were even last year. Rural areas are suffering the most but Kunming city has also recently instituted water rationing. Here’s a link to a brief English language news report and to a more comprehensive one in Chinese.

This might impact you if you are planning to move here. High floors in modern high rise apartment buildings have it the worst. Luckily I live in an old six floor walk-up, and it hasn't been bad here so far.

http://www.gokunming...rway_in_kunming

http://news.kunming....ent_2850984.htm

[skylee]

In Hong Kong, the strategy to deal with drought was to stop water provision completely for part of the day. This measure is called 制水. In the worst situation, running water was available for a few hours only every four days. This happened a long time ago. And then other strategies were introduced including buying water from the Mainland and desalination of seawater (海水化淡). Desalination was stopped many years ago, and the desalination plant was demolished. But the HK government is studying the feasibility of re-introducing desalination. I guess one of the reasons is to reduce our dependence on the water from the Mainland (other reasons might include the advancement of technology making it more economical to turn seawater to drinking water than to buy it from the Mainland).

Sorry that this is not related to Kunming. But it is related to how to deal with water shortage.

[abcdefg]

This measure is called 制水.

As I understand it from local friends, the main thing that is being done here is just what you said above, except that they called it 限制水。I'm guessing that means the same thing.

I found a notice today posted by the apartment gate that had to do with water. My Chinese is not good enough to read it on the fly, but I will photograph it tomorrow and try to figure out what it means.

[studychinese]

This is what happens when price signals are not allowed to do their work. When there is a shortage, prices are supposed to go up. This sends a price signal to people to either consume less, or pay more.

Interestingly, water sources in western countries are organised along the same Marxist lines as China. Thus there are 'shortages', 'rationing', and other things that don't exist where the free market is allowed to work.

[abcdefg]

#4, We also need rain.

[Kenny同志]

It's probably 限水. When there's a shortage of power supply, power rationing is applied, and that is 限电.

[skylee]

But we are talking about water here. I guess when it is a necessity, you will need more than the market force to deal with it, if you don't want the poor people who can't afford high prices to live without water.

[yialanliu]

This is what happens when price signals are not allowed to do their work. When there is a shortage, prices are supposed to go up. This sends a price signal to people to either consume less, or pay more.

That is completely false.

You NEVER allow basic necessities to float on a market system without a price ceiling. This means food and water should ALWAYS be rationed rather than free floated in times of droughts and famine. This is because people will kill to make sure they have food or water for the simple reason that it is required to survive. Thus, a high price will lead to instability and that is why in these cases, rationing is the best way to deal with these situations. If you don't ration and the rich use it all up, the poor will revolt to get what is needed to survive.

[icebear]

This is because people will kill to make sure they have food or water for the simple reason that it is required to survive. Thus, a high price will lead to instability and that is why in these cases, rationing is the best way to deal with these situations. If you don't ration and the rich use it all up, the poor will revolt to get what is needed to survive.

I agree water is a necessity, but only a relatively small amount. I'd guess that most Chinese citizens (or anywhere) using a huge majority of their water on frivolous luxuries - watering decorative plants, excessive bathing, inefficient washing of clothes and dishes, etc. I don't think the "it's a necessity" argument should lead to essentially flat, near zero pricing on water for these kind of optional uses of water (or other types of necessities).

And while your argument about switching to a floating price during crisis leading to instability isn't that disagreeable, there is the strong possibility that extremely low, fixed prices are the reason that water shortages arise (in this case, as frequently as they do, etc); people end up wasting water on much of the luxury that I mentioned above. This completely ignores poor water management in agricultural and industrial sectors, where water is similarly a necessity and priced as such.

.

Edited February 24, 2012 at 03:17 PM by icebear

[jbradfor]

I agree with icebear, but want to point out that most water usage is likely from industrial and agricultural use. In this context is makes perfect sense to allow the price of water to, ummm, float. [ouch] When water gets more expensive, industrial and agricultural use should adapt and use less.

The amount of water people need to drink to survive is miniscule compared to total water consumption. In fact, if you boil water before you drink it (to make it potable), I bet the cost of the electricity is much much more than the cost of the water.

I grew up in California in the 70's and 80's, and we regularly had water shortages as well. There was no lack of water in the state, but agriculture used a large percent.

[Silent]

Thus there are 'shortages', 'rationing', and other things that don't exist where the free market is allowed to work.

This is a myth. It may be true for long term shortages, it surely is not for short term shortages. Actually shortterm shortages may be introduced by the free market. The free market is aimed at making money. Consequently they won't make any investments if they can't make enough money from it. Hence spare capacity remains limited and only a relatively small buffer is available. Then a small 'event' is enough to cause shortages.

[icebear]

The free market is aimed at making money.

False. The free market is aimed at allocating goods (material, time, environment etc) to agents who value them most. In the process some agents make money, but making money is not the goal of a free market - efficiency in allocation is.

The problems you describe regarding lack of long term investment are not unique to a free market system - obviously many politically managed systems also suffer from grave misallocations of capital and long-term investment, mostly due to decisions made for political rather than practical reasons. Thus a water shortage in Yunnan, a province in a country with heavy state-interventions, where policy caters towards a dominant agricultural sector.

[Silent]

False. The free market is aimed at allocating goods (material, time, environment etc) to agents who value them most. In the process some agents make money, but making money is not the goal of a free market - efficiency in allocation is.

Fair enough, but this doesn't alter the reasoning. Players in a free market are aimed at their own benefit, direct or indirect. There is no real incentive to make investments for rare, unpredictable occasions for the general public. The general public tends to chooose the lowest price and the lowest price does not allow for frivolities like calamity provisions. When it comes utilities that are distributed through a central grid there is no way to provide and guarantee for those willing to pay extra for those calamities as there is no way to differentiate between the 'visionaries' and the 'freeloaders' when it comes down to delivery. The endresult depends on the balance between 'visionaries' and 'freeloaders'.

I've not made any statement about politically managed systems. I know they're far from perfect too. Nontheless, in a politically managed system what happens depends largely on the decisions of the leaders. If the leaders are 'visionaries' they can 'just' issue a decree that more spare capacity has to be created. Sure, often the leaders have other (personal) interests.

In the end of course it's all the same. It's a balance between short term/personal interests and long term/collective interests. The people collectively choose their system and leaders be it directly or indirectly.

[icebear]

If the leaders are 'visionaries' they can 'just' issue a decree that more spare capacity has to be created. Sure, often the leaders have other (personal) interests.

They also may choose to waste precious resources on politically expedient projects that make them look like hot shots, with no regard for demands or needs. Water reservoirs are pretty boring, as far as public works projects go. Those that aren't [boring] tend to be more of an engineering showcase than a practical/cost effective water management system.

I don't disagree that there is the possibility of market failure with respect to long term investment in these kinds of projects. I am pretty skeptical of heavier-handed interventions (such as price controls).

[roddy]

I'd guess that most Chinese citizens (or anywhere) using a huge majority of their water on frivolous luxuries - watering decorative plants, excessive bathing, inefficient washing of clothes and dishes, etc.

Oops. You underestimate the frugality of the Chinese family . . .

The problem with water in China is that there isn't enough of it, and what there is tends to fall all at once in one place and cause floods. They're not spending megabillions on all those water transfer projects for nothing. You can market price it if you want, but I suspect you'll find yourself being outbid by industry and agriculture. Although if we ever reach that point we'll be collecting the drips from the chemical factory to help wash down our Soylent Green anyway.

[yonglin]

While icebear is right that in a perfectly competitive market, firms maximizing profits and consumers maximizing their "happiness" will give rise to allocative efficiency (everything is produced as efficiently as possible, those who values a good the most consumes it), it is important to note that this is a very idealized setting. In particular, the market must be so large that each seller and buyer takes market prices as given. Water provision is probably not perfectly competitive. In fact, if you think it would be most efficient to have only one water grid, it might even be a natural monopoly. If such a market is not regulated, consequences as those pictured by Silent are likely to ensue: an unfettered monopolist will charge prices that are too high and probably produce below capacity, and may even find it optimal to neglect infrastructure investment.

Different countries have dealt with the water market in different ways: a state-run water company, a regulated monopolist, a state-run organization leasing grid capacity to private firms, etc. Bringing the price of water up to the "market price" might be a non-sensical statement because a properly functioning market might not be able to exist at all.

However, this does not preclude charging customers a price for water that more accurately reflects its scarcity, i.e., reflecting the cost of providing water. This doesn't mean "liberating the market", but may just increasing the (directly or indirectly) regulated price. Such a measure might reduce or even eliminate the need to "ration" water: people would respond to higher water prices by reducing their consumption. As icebear suggests, many people / organizations use water wastefully when it is very cheap.

If we care about poor people and their access to necessities (grain, oil, water, fuel?), it has time and time again been shown that cash transfer program to the poor is just so much more efficient compared to messing with prices in functioning and not-so-functioning markets. (Of course, removing price subsidies or price ceilings may be a highly sensitive political issue: rental markets both in Stockholm and NYC come to mind...)

Sorry for being so technical, but I wasn't the one who started....

[Silent]

You can market price it if you want, but I suspect you'll find yourself being outbid by industry and agriculture.

I don't think so. If the price of water rises demand for other products will drop as water is a primary need and people will buy it no matter what the price is. If they need 100% of their income for primary needs like there will be no money left to buy (luxery) products from water wasting factories.

Bringing the price of water up to the "market price" might be a non-sensical statement because a properly functioning market might not be able to exist at all.

I don't really see why a functioning water market might not be able to exist. Sure, the grid is an issue, but there is no fundemental reason why you couldn't build two or three. Or for that matter make the grid communal and leave only the water supply to the market. Actually there might be good reason to have more than one grid, differentiate in waterquality. There is no need to wash the car or water the plants with water of potable quality. We might even decided to stop distributing potable water through the grid and use bottled water for consumption.

It's absolutely not the water that's scarce. About 2/3 of the earth surface is water. It's the quality of the water that is an issue.

[Silent]

I am pretty skeptical of heavier-handed interventions (such as price controls).

Traditionally I tended to agree that it's best to leave it to the market. In many cases I still believe the market is most efficient. By now I'm also convinced that a real free market is a bad choice too. I agree however wholeheartedly that price controls are some of the worse type of interventions possible. I guess a far better solution are smartly designed taxes e.g based on quality measures. For utilities such quality measures might be spare capacity and service interruptions.

[icebear]

I largely agree with what's said the previous few posts, which generally add nuance to the advantages and shortcomings of markets that I didn't invest much time in elaborating. Incentives matter.

The problem with water in China is that there isn't enough of it, and what there is tends to fall all at once in one place and cause floods. They're not spending megabillions on all those water transfer projects for nothing. You can market price it if you want, but I suspect you'll find yourself being outbid by industry and agriculture. Although if we ever reach that point we'll be collecting the drips from the chemical factory to help wash down our Soylent Green anyway.

I think a big issue here is that the Hukou system (which has existed for a good while) and other implementations of migration restrictions, coupled with flat pricing, exacerbate water scarcity in some regions; there just shouldn't be that many people living in places with so little water. If prices reflected the relative scarcity of water by region, both people and business would find it unattractive to live there. There would be a gradual migration towards other parts of the country where there is a relative wealth of water. While letting some regions die a slow death, I don't think one needs to imagine it in such melodramatic terms - it could happen over the course of decades, and has happened before (if for other reasons) - see the many ghost towns in the American West.

[yialanliu]

Some of the ideas that are being brought forth should be localized to china.

First of all, water is EXPENSIVE for the poor. It's not priced incorrectly. That's the reason why the poor in China use a drip method to get water. In old homes, dripped water was off the meter beause the meter is so old that they don't record drips. That shows that water is something that is already scarce in nondrought conditions for the poor.

I'd guess that most Chinese citizens (or anywhere) using a huge majority of their water on frivolous luxuries - watering decorative plants, excessive bathing, inefficient washing of clothes and dishes, etc.

Second, China is frugal. For the person who thinks they are not really should go outside of their foreign bubble they probably live in and speak from the Chinese perspective rather than from your rich perspective where everyone drives an S600 with a chaueffeur. One easy method is look at AVERAGE income and hopefully you'll see that 2k a month isn't enough to drive an S600(2million RMB starting price, also known as 1000 months of salary).

Next, from the economic point of view, water, electricity, telecommunications lead to natural monopolies. The economies of scale means that 1 big is many times mroe efficient than 2-3 smaller resevoirs. Because of this, when there is 1 huge resevoir, it doesn't make sense to create a 2nd resevoir because it can't compete unless it's just as big.

Because of the natural monopoly, there is the problem where like mentioned already, regular situation is okay, but when drought hits, there will be scarcity.

Scarcity typically effects the poor when prices go up. However, as a fixed price mechanism, the government will not allow the price of \water to go up due to instability it may cause. A Rolex watch going up 10X in price isn't going to cause riots but water and food will. That is why Rolex isn't a necessity but water is.

False. The free market is aimed at allocating goods (material, time, environment etc) to agents who value them most. In the process some agents make money, but making money is not the goal of a free market - efficiency in allocation is.

You are the one who is wrong. Free markets also assume that people will use the free market price and be price takers and givers. However, when there is a scarcity of a necessity, the free market doesn't work because if you try to sell it at a high price, people will kill you rather than pay. Because of this, necessities are not traded on a free market price. The Arab Spring in part is attributed to the rise of commodities and that's why the Egypt goverment tried to stem it by buying large amount of grains over the summer.

Lastly, water infrastructure is a long term investment. Short term shortages does not mean people will build a new water infrastructure. This is because these small periods of time would not be profitable enough for the investment of billions of dollars to turn into a profit. In addition to this, when a short term shortage occur, building a new resevoir and filling it requires time as well. This means that building more is not viable for the short term.