Blue-State Economics

The City of San Francisco, always at or near the forefront of social engineering, offers its residents cash payments of $125 to $200 for installing “low-flow” toilets (1.28 gallons per flush as opposed to the federal standard of 1.6 gpf) in their homes. Alas, it has come to the attention of San Franciscans’ noses that insufficient flushing capacity has caused parts of their lovely city to smell like a high-school chemistry lab.

Having spent $100 million in sewer-system upgrades in a failed attempt to alleviate the stench, the city has decided to do what any of us does at home to deal with sludge: dump bleach into the gunk. A three-year supply of concentrated sodium hypochlorite will cost the city another $14 million. Needless to say, this direct action does not pass the sniff test of local environmentalists.

What, you may naturally be inclined to wonder, has the city accomplished in reduced water use in exchange for all this cost? The Pubic Utilities Commission boasts that annual water consumption in San Francisco has fallen by “about 20 million gallons.” And what is the value of 20 million gallons of water? Well, as of 2005 an acre-foot of water cost a single-family household in South San Francisco $835. Since there are about 325,851 gallons in an acre-foot, this means that in 2005 the cost of a gallon of water for residential use in the City by the Bay was just a bit over a quarter of a cent. This means that the 20-million-gallon reduction in water use has saved approximately $51, 250 (sic) in annual resource costs (let’s be generous and call the 2011 figure $60,000), all for the paltry expenditure of $100 million in capital costs, $14 million over three years in bleach purchases, who knows how much in plumbing costs to install the crappy new toilets, and whatever the environmental costs will turn out to be from dumping 8.5 million pounds of bleach into the bay every year.

One wonders if it ever occurred to any of the super-smart social engineers in Nancy Pelosi’s home town that they could have achieved the same reduction in water use through the simple expedient of raising prices. Based on the city’s residential water consumption of about 45 million gallons per day, all that’s required is a reduction of about .12 of one percent. Even if the price elasticity of demand were as low as -0.15 (which is a very low estimate), this reduction in water use would require a price increase of less than 1 percent.

Given the way San Franciscans vote and their elected representatives attempt to legislate–betraying no familiarity whatsoever with the most basic economic concepts–my guess is that it did not occur to anyone in authority that raising the price of water would offer a simple alternative to their convoluted and hideously costly scheme. This is the failure of government-mandated “solutions” to problems, or nonproblems, illustrated in miniature as precisely and beautifully as a Fabergé egg, at far greater cost.

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