Pike Family Nurseries is the nations largest family-owned and operated retail nursery. Headquartered in Atlanta, Georgia, Pike Nurseries employs 700 people at more than 20 retail locations across the southeast. It is one of the more recognizable businesses in the state and a shining example of what one man and his family can accomplish with vision and hard work.
Oh, and two days ago, it filed for chapter 11 bankruptcy.
According to Pike’s CEO, the severe drought and its water restrictions have severely damaged Pike’s business:
“Our core Atlanta area market is currently suffering from the worst drought in over 100 years,” said Scott Schnell, chairman and CEO of Pike.” This extended drought and resulting water use restrictions have had a material detrimental effect on our business[…]” (emphasis mine)
While the Governor is busy holding public spectacles and accusing the State of Alabama and the Army Corps of Engineers of being in cahoots to “dry up” the State of Georgia, it’s easy to forget that some people are severely affected by the water shortage.
The drought, however, is not Sonny Perdue’s fault. It is not the Republican-controlled State Legislature’s fault. And even though most of this 100 year drought occurred during Democratic rule of the state, it’s not their fault either. And although we cannot control nature, be it through science or religion and even though we lack the ability to prevent severe water shortages (we can’t build an infinite number of reservoirs), we still have the ability to effectively manage those shortages without using price controls, punishment, or watering restrictions. We have the ability to prevent businesses like Pike (who employ 700 people) from filing for bankruptcy.
The answer is almost too simple. We need to market-price water. Treat water just like any other commodity. As Thomas Sowell writes, economics is simply the efficient allocation of scarce resources. I don’t think anyone would argue that water is a scarce resource at this point. Are we efficiently allocating it though? I still see sprinklers on in the mornings driving down Mansell Road. I personally take extremely long showers (sometimes more than one per day). And it doesn’t take a genius to point out who is and who isn’t watering their lawns in my neighborhood. I would say the answer is “no”. We’re not allocating the resource very efficiently.
The problem with water’s allocation is that its price is not established based on its scarcity. Its price is set by government bureaucracies, many of which are composed of people with no true ability to allocated much of anything. They keep the price low so “everyone can afford it”, and as a result, they’re getting us to the point where “no one can get it”. So, rather than allowing the market to price water based on scarcity, they just restrict use of it. And as a result, businesses who rely on it, like Pike Family Nurseries, file for chapter 11 bankruptcy, and the amount of water we have left continues to decrease.
Price controls do not work. Watering bans do not work. Building more reservoirs…eh, it’s a good idea, but it still doesn’t solve the problem of water restrictions. Market-pricing of water does solve that problem. By allowing the market to price water based on its scarcity, you can cut back on all of the wasteful uses of water. People could still choose to outdoor water, or take long showers, or run their sprinklers…but they do it at the peril of their own wallets. What will happen is that use of water will decrease and we won’t have to worry about holding prayer vigils or sending the Governor to Washington.
Moreover, businesses that rely on water, such as car washes and Pike Family Nurseries wouldn’t be restricted on their water usage. Pike could still water it plants. The price of the plants would necessarily reflect the rise in the price of water, but the plants could still be sold. Selling fewer quality plants at a higher price is definitely better than selling fewer dried-up plants at an anemic price.
Market pricing of water is a win-win scenario for everyone.