Wednesday, August 18, 2010

More Econ 101 for Reporters

Mark Gillispie over at The Plain Dealer writes:
big drop in water usage led to Cleveland's Division of Water collecting $18 million less in revenue last year than in 2008, a state audit shows.

That revenue loss, from $232 million to $214 million, occurred despite an increase in rates in 2009
This ranks right up there with the 'crime drops despite crowded prisons' bit that the New York Times runs once every couple of years. Now Mr. Gillispie, if you go to a grocery store and apples are $1 a pound, how many might you buy? If you go back a couple days later and they're $5 a pound would you buy more or fewer than you did earlier?

It's true that water is an essential purchase of sorts - people will have to buy a certain amount no matter what the price. However, there's also a level of discretion in it as well. At what price is not worth it to water your lawn any more? At what price is bottled water preferable? etc. I know at the current price level I'd be at about break even for installing rain water barrels to water the garden, so it stands to reason that if it the price of water increased then even more marginal water usage would be pushed off the water department's ledger.

I'd guess at that point the water department would increase rates again and again until Northeast Ohio turns to third world water usage patterns with everyone having their own water tank on top of their house.

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