One thing that economics helps us understand is that the cost of information matters. Consumers, on the whole, balance the costs of collecting and processing data against the savings they can achieve by acting on information they obtain. When savings are relatively small (as even in the most aggressive of scenarios would be the result of water conservation) information costs better be low.

If not, then many will throw up their hands in frustration.

Thinking about information costs helps bring into focus just how far we will still need to go before to maximize the potential for pricing to drive greater conservation.

1) Water meters need to be easier to read and understand.

Most readers probably have, at best, a vague understanding about the location of their water meter. In most instances, if you want to read it get ready to hunt for a flathead screwdriver, open up a heavy covering, wipe off the mud and grime while kneeling on the ground.

Most will find that they need to do at least a couple of mathematical calculations to figure how much water they have used since they got their last bill. Given these costs, I would bet that only a small number of consumers are going to frequently try to obtain and process information about how their level of consumption is being impacted by changes in behavior. They might look at the meter to try to figure out if their sprinkler system is leaking but not to find out how much they are conserving by not shaving in the shower.

2) Bills are not easy to understand

Ideally consumers would get a bill that clearly lays out the incremental unit cost in water so they could clearly understand how much they are paying for each incremental unit of water.

Fat chance.

My bill is relatively simple (we live just outside the city of San Diego). We get useful information about how our water consumption has changed from the previous billing cycle and how it compares to our use a year ago. Yet my bill is chalk full of confusing information which doesn’t really help me understand how much I would (or would not) save if we cut back.

The city of San Diego’s water bill makes the cost of obtaining information of value much harder.

3) Most consumers don’t have good information/experience in how to cut back on use.

I did an experiment last night. It takes our family members, on average, about 2 minutes to brush our teeth and our bathroom faucet puts out about 1.25 gallons a minute.

So by turning off the faucet in the a.m. and p.m. while we brush, our family is saving 300 gallons a month. But if we cut back our landscape irrigation by just 15 seconds for each station we save nearly twice that amount.

But figuring this out took close to 25 minutes, a calculator, and reading little tiny print on my sprinkler heads. I am sure better minds than mine could have done it faster. For this landscape-engineered challenged homeowner, however, the “information cost” of such an exercise was missing a new episode of the Daily Show.

Call me a barbarian but that is a sacrifice I am not prepared to make on a regular basis.

Aligning meters and bills in a way that helps consumers (as opposed to plumbers and meter readers) will be expensive and take time.

It is going to be an incremental effort as new meters and updated bill systems are deployed. However, if we want to use price to drive down consumption that has to be the goal so that it is relatively costless for people to know how much money they can save by taking specific actions. Economics helps us understand that incentives matter … but also helps us understand that this is only true if consumers have access to relatively cheap information on which to act.


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