3 Private Market Solutions to California’s Public Drought Problems

With the case of the drought and California’s water restrictions, if the State had a “laissez-faire” mentality and let the people decide for themselves how best to solve the problem, the drought issue has the potential to be solved much better and more efficiently than just telling everyone to use less water. I posit 3 points to take into consideration.

1) Manoj Bhargava (the founder of 5-hour energy) and his team built desalination machines that can turn undrinkable sea water into fresh drinking water in a matter of minutes. Scaled up, this has the potential to supply fresh water to many towns throughout California, thus lessening the debilitating effects of the drought. Therefore, take the time, energy, and money that California is spending on enacting drought policy restrictions and dealing with the drought, and channel it into private market solutions like the desalination machines that his team is working on.

You can see the inspiring video for yourself by clicking this sentence, skip to 1min 🙂

If anything, if the towns that are severely hurt by the droughts really wanted fresh water that bad, they will pool together resources to implement these machines to bring fresh water to them. Or honestly, they can just move farther north to wetter climate if the opportunity cost is lower to move than to keep suffering in drought like conditions.

2) By removing the water restrictions, market prices for fresh water are able to move to their natural equilibrium price, which would most likely be higher. Companies that sell spring-water from northern states will move in to capitalize on the high demand for fresh water. Initially, they might be able to charge higher prices because of the high demand. But then overtime, you can expect more companies to bring fresh water to the market to try and capitalize as well which results in oversupplying. Thus the prices of fresh water drops, which is good for the consumers, but the supply is still higher than it was beforehand, which is even better for the consumers.

3) Fresh spring-water companies can also build pipes from their sources in northern states to their hubs in California, thus bypassing the need for fuel costs to transport water bottles or big plastic water containers and saving on waste. The people and towns can then connect municipal pipes from these hubs to their local towns and villages, etc. While it might take an initial sunk cost to implement, after development, the water companies can enjoy constant profits and the people of California can have fresh water with no restrictions!

If you allow the people of California to decide for themselves how best to deal with the drought, whatever they end up deciding will most likely be more efficient than what the state of California can decide on.

Jack the Dreamer, over and out!

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