The Big Thirst
The economics of cheap water and what happens when it stops being cheap.
Summary
Charles Fishman writes about water as an economic and infrastructural problem rather than as an environmental one. His argument is that the era of easy, abundant and effectively free water in developed countries is ending, and that the response requires pricing and investment rather than conservation appeals.
The reporting covers a wide range of cases: Las Vegas and its water authority's management of a declining Colorado River allocation; Atlanta's drought and the inadequacy of its supply planning; the Indian city of Delhi, where an intermittent municipal supply forces every household into private storage and pumping; Australia's response to the Millennium Drought, including desalination and water trading; and industrial users including IBM's semiconductor fabrication and Coca-Cola's bottling operations, both of which reduced consumption substantially once they measured it.
Fishman's analytical points are that water is priced far below its cost of supply in most developed countries, which prevents both conservation and investment; that American water infrastructure is old and under-maintained because the price does not fund replacement; that industrial users cut consumption dramatically once water becomes a managed input rather than an assumed free good; and that the problem is local rather than global, since water cannot be transported economically. The book is journalism and the arguments are made through cases rather than through data. Its treatment of pricing is the useful part for an investor.
Key takeaways 7
- Water is priced below its cost of supply in most developed countries, which prevents both conservation and infrastructure investment.
- American water infrastructure is under-maintained because rates do not fund replacement of assets laid a century ago.
- Industrial users cut water consumption substantially once they measure it and treat it as a managed input.
- Water problems are local rather than global, because transporting water long distances costs more than the water is worth.
- Australia's response to sustained drought combined desalination, trading and pricing rather than relying on restriction.
- Intermittent municipal supply forces households to build private storage and pumping, which costs far more in aggregate than reliable supply would.
- Fishman argues that the political impossibility of raising water prices is the binding constraint on every technical solution.
Who should read it
Investors in water infrastructure and utilities, and operators with significant water inputs, who want the economic framing of the problem.
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