Phoenix Figures Out How to Reduce Water Demand During Ongoing Drought

The New York Times reports that Phoenix is figuring out how to reduce the demand for water during a time when it isn’t raining.   For economists who read the RBC, note that the words “water prices” are not mentioned in the article.  Instead, conservation is achieved through rebates and on the supply side water is recycled.    While Phoenix is often predicted to become a hell hole thanks to ongoing climate change, millions of people have chosen to live there.  They have the right incentives to search for solutions to emerging challenges.  I know that you are tired of hearing this but this is the optimistic message of my 2010 Climatopolis book.   When Federal and global policy fails to deliver first best solutions (carbon taxes), people and local governments have the right incentives to step up to protect their day to day quality of life and to preserve home values.  After all, if Phoenix’s quality of life deteriorates then the land owners in the city are the big losers. The renters can get up and go without suffering an asset loss.    Green grass in Phoenix will vanish and this will sharply reduce the city’s aggregate water demand.  Will the people of Phoenix suffer greatly from this single adaptation step?  I don’t think so.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

17 thoughts on “Phoenix Figures Out How to Reduce Water Demand During Ongoing Drought”

  1. Incentives?

    I thought that Public Choice 101 held that the aggregate of individual incentives often has very little relation to the collective action undertaken. Also, Mancur Olson.

  2. Price is only one tool, and alone has limitations.
    A homeowner with 100x the median wealth will not notice a water price increase that would harm a poor person.

    Regulations, social pressure, education are important too.

  3. There’s only one problem with this post. Phoenix does not now, nor will it have, for at least the next half century, including projected growth, a water supply shortage:

    There’s this basically unpopulated geographical feature off to the east (not North, as the NYT wrote it) called the “White Mountains”, that are 10000′ high for about 200 miles, running N-S, and the drainage runs right smack through the center of Phoenix. There’s also an interaction between suburban development replacing farmland. You can support a lot of people with the amount of water it takes to grow cotton in the desert.

    Tucson, 100 miles south and 1000′ ft higher, doesn’t have natural access to the White Mt runoff, and it has a water supply problem, that it is managing very aggressively and intelligently. Kahn and the NYT should have had a look there.

    Disgustingly humid Atlanta has got a genuine water supply problem, with something more than 5x the annual precipitation of Phoenix.

    And I’m not sure what “drought” is supposed to mean in an authentic desert where average rainfall is only 9″.

    As for the heat, it’s already too hot. People are basically morlocks already most of the year. They seem to like it, a lot. I don’t, but that’s why I moved to an elevation of 5500′.

      1. “Western water” != Phoenix water, which is the gist of my comment, pointing out yet another erroneous Kahn generalization.

        As for your other comment, I have no doubt that extreme drought in OK is a multifaceted comprehensive ecological and economic disaster. In the low elevation AZ deserts, where Phoenix is firmly located, it is not. It certainly IS a much worse situation for the higher elevations with 2-4X annual (in good years) precipitation.

  4. I’m more than a little interested in the idea of a rebate that apparently doesn’t change the price of something for which rebates are given.

  5. This would be the same Phoenix which hopes to grow its population by 2 million people over the next fifteen years (basically a growth of 50%), and which has grown its population by 4% pa for the last 40 years?
    There seems to be something of an extreme disconnect between Matthew’s claims (water shortage, being handled well) and the vision of the city planners (exacerbate things so that the shortages can no longer be handled well).

  6. Just wondering how this fits in with the experience of, say, Santa Barbara where during a recent drought the well-to-do in Montecito etc. just kept watering their big lawns and paid what were supposed to be punitive rates and fines?

  7. people and local governments have the right incentives to step up to protect their day to day quality of life and to preserve home values
    Oh, for fuck’s sake. Do you seriously think this is what global warming is about? That people are worried the residents of Phoenix will be unable to cope with unwatered lawns? Try applying your theory of incentives and good local governance to, say, East Africa during their recent drought. Ask yourself what actions should the residencts of Kiribati take to preserve their home values. And then, if you manage to honestly get through that, perhaps you’ll realize why everyone who’s read you considers you, your book, your career, and your entire mode of thought completely worthless.

    1. Lars,
      Many of us here think that Matthew is a bit too enamored of Econ 101, and your first five sentences are all valid criticisms. But your last sentence is way over the top. It’s too far a stretch to say that Matthew’s book, career, and mode of thought are completely worthless. And it is completely over the line to use the word “you” in conjunction with “worthless.”

      1. I second the motion. Mr Kahn is often frustrating in his bloggidy chitchat, but his work can be useful to get folks thinking.

        1. I deny the motion. For a fellow that makes $250K on the public dole, he really needs to up his game. The kind of stupid mistakes he makes on this blog (what about everywhere else?) really should be an embarrassment.

          1. An embarrassment to the blog, the people who hired him to teach, and the entire economic profession.

      2. Until he shows the slightest willingness to grapple with the same basic, fatal critiques that have been repeated for literally years on this blog, I’m sticking with worthless. And to what line are you referring? If it has Kahn bringing his trivializing message of sunny optimism to the most important humanitarian problem we are likely to face, I’m happy on the other side. This is a man who thinks he can point to geese migrating north for the winter as reason to ignore the histories of human mass migration.

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