Ed_online,

A big thank you for bringing some rationality into this discussion. Your very first statement sums things up nicely:

"Open almost any economics text book and within the first few pages you will read that we live in a world of finite resources but humans have unlimited wants. Consequently, competition is a natural part of existence and attempts to remove it from society are doomed to fail."

Exactly.

This forum tends to get caught up in the rants of those who don't like free markets and who want protection from the real world. It's nice to see someone coming at the topic from a rational perspective.

Ed, yes water is a scarce resource and a natural monopoly also for blindingly obvious reasons previously stated and personally experienced. Am I to take it that you are arguing that monopolies and oligopolies exist only becuase of government regulation aimed at preventing them?

I think you are blindly following the Freidman doctrine - that there exists a "pure" free market that operates in glorious self-balance and perfection and is constrained only by attempts to regulate it and if such constraints were lifted, we would all enter an economic garden of Eden. You know Ed, I was once enthralled in much the same manner by the hammer and sycle but eventually came to realise that a lot of it was crap. The two theories share a striking similarity - unquestioning belief that following certain steps will lead to a perfect, utopian world. There is no room for compromise and when things go pear shaped and people get hurt along the way, it is always the fault of anything but the ideaology. Much purist free market theory is dangerous crap Ed.

I don't share your confident willingness to experiment on my community. Trucking water in is a silly idea. Getting it here would consume millions of barrels of oil - seen the price of oil lately? As people have already found out, you can install all the tanks you like but if it doesn't rain.......And I grew up living on tanks, even with carefull rationing the water often doesn't last. In a no-holds-barred environment, I doubt a behemoth like Rio Tinto would compete - they would simply dominate, buy up all water infrastructure in the area and give themselves the cheap water and sell expensive water to everyone else.They already part own the power station.

"Note that there is a shortage of water in Australia yet not a shortage of food. This is no coincindence"

Of course it's no coincidence!! Food can be readily transported all over the country and the world. Water supply for whole cities cannot. Only a moron would insist it can.

Ideaological zealotry Ed.

fozz and miacat,

l still dont understand.

This closed mind is well below such lofty and expansive conceptualisations. Or more appropriately... rationalisations.

ps. it takes a helleva lot of of critical thinking and effort to empty one's mind of nonensical applications of logic in pursuit of rationalising a priori postions. And much more effort to keep it out.

"Am I to take it that you are arguing that monopolies and oligopolies exist only becuase of government regulation aimed at preventing them?"

Not exactly. I'm distinguishing between two types of monopolies/oligopolies, (1) those that arise in a contestable (free) market and (2) those that are protected from competition by Govt regulation (i.e. non-contestable).

In a constestable market, inefficient firms are replaced by efficient ones. In a non-constestable market, firms tend to remain inefficient and indeed are likely to become even less efficient over time.

I have read Friedman and I don't recall him ever suggesting that a free market is utopian. Humans are imperfect and consequently their institutions are also imperfect. I would rather live in a free imperfect society than to live in a totalitarian imperfect society.

I don't deny there are practical difficulties in obtaining reliable and cheap water, but a free market will supply the incentives for people to solve these problems. If Govts are allowed to block competitors and fix prices, this will discourage research, innovation, and investment into better methods of storage, distribution, recycling, conservation, etc.

Ed, the very reason that some monopolies are controlled by governments is that competition is unlikely to occur due to their particular nature. Many areas have only a single source of water. It is not yet possible to make huge quantities of water cheaply and reliably. You do understand the concept don't you Ed? - there can be no competition when there is but a single source of supply. Someone will invariably control the whole thing, de-regulation will not make a whit of difference. I would rather have it controlled by the (to qoute Col Rogue here) "vested interests" of government than the vested interests of the private sector. For the vested interests of democratically elected government are to be re-elected by trying to make sure that the majority believe that they are doing a good job. The vested interests of the private sector by contrast, are to ensure maximum returns to shareholders. These shareholders may not even reside in the country and may have little or no interest in any negative effects on local communities as long as the returns keep rolling in.

Why should they? Their jobs are not up for reveiw by the public.

Shoving utilities into the marketplace has brought no consistent pattern of success becuase in many cases there is no market in what they deliver. They are chunks of the public good, the foundation stones of a modern, first world country. Water in my area, Telstra (line rental up, regional services scaled back, CEO's paypacket 100 times that of the highest payed executive when it was in public hands) the crumbling S.E QLD powerline network (not cost effective to do proper maintainence).

Just as we need a healthy private sector, we also need a strong, healthy public sector to keep control of the essential things that corporations - to put it bluntly - just can't be trusted with. Or at the very least, iron clad regulations in these vital areas.

If you want to see the effect of heavy de-regulation, visit the U.S. I did last year and there were some appalling sights.

You say that there is "only a single source of water". This is clearly untrue because you have stated that Rio Tinto found an alternative. There may be lots of alternatives, but these will never be explored if the Govt locks them out. If the water company (who is it btw) was allowed to increase prices by 1200% (to what exactly?) this would have created lots of incentive for innovation. Assuming the Govt allowed it.

But even if I were to concede a lack of alternatives, it is still better to have a contestable monopoly. As already stated, in a contestable market inefficient monopolists are replaced by efficient ones. The same is not true for non-contestable monopolists (your preferred model).

You believe that Govts are better at serving the interests of consumers than privately-run corporations. It is well known that Govt enterprises are less efficient than private enterprises, for a range of reasons, including that they are less responsive to consumer demand. Govts frequently have conflicting priorities and are captive to special interest groups. There is an entire field of economics that has catalogued govt failures, including: regulatory capture, pork barrelling, feather-nesting, corruption, inertia and rent-seeking.