The U.S. Senate is starting to look harder at the nexus between energy and water. Tomorrow, the Senate Energy and Natural Resources Committee will hold a hearing on a bill introduced last week that would direct the Department of Energy to develop a roadmap for addressing the linkages between energy and water. The relationship between the two sources has been a growing concern among energy and water experts. Large amounts of water are needed to produce energy at power plants, and significant energy is used to treat and transport water to consumers. In other words, each is dependent on the other, but energy and water are rarely integrated in policy.

Bureaucrats, politicians and scientists are going to enjoy studying interrelations that are probably too complicated to understand, but that’s ok because they are spending OUR time and money (sound familiar?).

How about we have water prices that reflect scarcity and energy prices that reflect externalities and functioning markets to allocate them both? Less fun for the boffins, but faster, cheaper, more accurate and more efficient than a bureaucratic boondoggle.

Bottom Line: Markets work by aggregating individual knowledge into decisions that interact through prices and trades to maximize the value of the traded good [read Hayek]. We need MORE markets for water.