One of the many critics of this site emailed me about a news story he thought contradicted my claims but actually bolsters them. The story, Water outlook revised, from the Las Vegas Review-Journal describes how the Southern Nevada Water Authority announced it could run out of water by 2003 rather than 2026 as it had previously forecast. The forecast changed after Arizona took some water under a water banking plan that Nevada had apparently planned on using.
The gentleman who emailed me the story is convinced it proves that uncontrolled population growth causes all sorts of problems — in fact the story demonstrates that inadequate markets for water lead to inefficient use of water resources. The problem in Nevada, and in much of the American West, is that consumers don’t pay the full market price of the water they use. Rather than create a system whereby consumers would pay the market price, politicians insist on subsidizing wasteful water usage.
Consider, for example, that the same story says the water authority is going to raise $750 million in bonds to partially fund a $1.8 billion water delivery system. How are they going to pay for it? Not by passing the costs on to water consumers based on usage, but rather by raising the state sales tax by a quarter of a cent.