For the water quality problem, Karen Fisher-Vanden and Sheila Olmstead survey the state of water pollution trading in the U.S. The clean water allocation problem -- treating water as the scarce resource that it obviously is and enlisting markets to fulfill the dual functions of rationing demand and eliciting supply -- is treated in just about any principles textbook. But instead many countries' national governments guarantee "The rights to water and sanitation in national law." In most cases, this has amounted to a tragic case of simply posturing. Many millions die every year. The problems of rationing and eliciting are not easily addressed via political and administrative means.
At the same time, the simple economic rationale for market provision has not made a lot of headway either. I recently (July 31) blogged about water policy and waste in my own neighborhood. This morning's LA Times reports on the "water cops" that are now on the case:
It's a daunting task — just four people, full time, policing an area of about 460 square miles. For that reason, they mostly respond to calls or emails from people who report their neighbors watering lawns on the wrong days, spraying down sidewalks or allowing street runoff. The agency does not reveal the identity of the tipsters.Laugh or cry? Pricing water and deputizing every consumer as his or her own water cop is beyond the pale. Instead, we get silliness piled on silliness.