Saturday, May 15, 2010

Rate Reaction

The Journal Sentinel believes, "Some increase in the City of Milwaukee's water rate is warranted, but not this much." They claim, "Raise the cost of that water - even if it is still cheaper than in other places - and the region becomes less attractive."

Why is that? It's great to make proclamations. But it is also necessary to share the reasoning and maybe some data to back up the claim. The idea that a place must give away resources, cut taxes, provide cheap yet educated labor, provide subsidies, and on and on - with no guarantees or expected returns - is ridiculous. We should just have a blind faith in the 'built it and they will come' dogma. Locations have inherent advantages, encouraging business to locate in less than optimal places is inefficient and ultimately decreases overall growth.

Hence, allowing desert cities to charge minuscule water rates (due to heavy Federal subsidization of their water infrastructure) skews the true price of water, while allowing an inefficient (and unnatural and unsustainable) advantage to these locations.

Even after the proposed increase, "Milwaukee would have the 59th cheapest water out of the 78 water utilities in the seven counties that make up Southeastern Wisconsin. Among the country's 50 biggest cities, Milwaukee's water would still only rank 37th in cost."

The price of a product should reflect all costs involved in bringing that product to market, including the negative externalities. True capitalist and market proponents should understand that availability and location play a role in pricing. Supply and demand are always at the core of true value. Supply is a critical variable, especially with finite resources - like water and oil - in determining the correct price.

Milwaukee's water rate, even with the proposed increase, along with the quality of the water we produce, seems to be competitive and justified, despite dubious and business-pandering warnings from the Journal Sentinel.

For Further Reading:
Draining The Blue Planet
Drought Turns Off Subsidized Federal Tap
Large Subsidies to Corporate Farms in the West
The Price of Water
Water Subsidies Now Under Fire

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