Water Prices and Drought

The New York Times' reporters  need to take a refresher course on supply and demand.   It publishes article after article about the drought taking place throughout the U.S but it manages to never discuss why we don't allow water prices to rise to reflect this scarcity?  How much would water prices rise by?  Would we stop flushing our toliets?  I don't think so.

Today, there are plenty of farmers growing water intensive crops and our suburbs are covered with green grass.  Rising water prices would nudge the farmers to substitute to less water intensive crops and some suburbanites would go the "Berkeley route" and pull out their grass. This would be incentive induced adaptation.  When you don't allow prices to reflect scarcity,  we misallocate scarce resources.  As climate change makes these resources more scarce, it is time to give free markets a chance!