A wet argument for expensive water

My friend Chris James, a regular spokesman for the Victorian Employers’ Chamber of Commerce and Industry, drew the short straw today when he had to defend customers in cafes being charged for tap water.

One person who called 3AW claimed to have had to pay 40c for water, which on the water prices quoted in The Age article is at least 500 times the cost even for large glass. Extreme capitalism!

According to Chris, it is a voluntary charge and the money is to be used for water-saving measures. But when interviewed on radio he could not explain how we could be sure that the money would be spent this way, or why if water-saving measures are necessary they should be be paid for via a levy on water. Indeed, a shift in relative prices against water would lead to more consumption of other drinks that use far more water in their production than tap water does.

Personally, I dislike ‘voluntary’ charges. They complicate commercial relationships with other judgments – in this case, about the issue of water (do I not care about water because I don’t want to pay a voluntary” charge, or is my level of caring measured by how much I am prepared to pay?). This is worse than the other voluntary charge in cafes and restaurants, the tip, where at least there is an incentive effect. Water will be the same quality no matter how much you pay for it.

Of course cafes and restaurants are entitled to make commercial decisions about to what extent they bundle the goods and services they provide. But generally in going to a cafe or restuarant rather than a fast food outlet you are paying more for the food and non-water drinks in exchange for better service and facilities. As the marginal cost of water is very low, it has traditionally been bundled, and I doubt lame excuses about water savings will persuade customers that a separate charge is a better system.

6 thoughts on “A wet argument for expensive water

  1. Let me see how this works: When you voluntarily go into a cafe you join the cafe community who choose to charge for water – as a member of that community you have to pay for the water. At least in this community you don’t have to pay for water even if you don’t consume any. Unlike other communities set up in legislation with high government mandated barriers to entry etc.


  2. Personally I would argue the charge is for delivery and cleanup. The tap price is the bulk charge, when it’s in the cup its a packaged unit charge. Packaging costs, get over it.


  3. I’m more than happy for the cafe to pass on the costs of their water to me. At home I pay $1.69 for a thousand litres of water, so I’ll gladly pay an additional $0.00169 for a bottle ;-). Of course this indicates that the price signal for water is vastly too low to reduce domestic water consumption.

    But more to your point, I was at a restaurant last night which asked whether we wanted to add two dollars to our bill to give to a particular charity. As no one wanted to seem too cheap to give a couple of dollars, they shamed us into agreeing with this voluntary charge, even though I much prefer to research charities I support to ensure that the money is spent effectively.

    I personally resent this approach of such “voluntary” charges being requested in a way that makes it difficult to refuse, and it does affect my opinion of the restaurant. I would much less annoyed if it was truly voluntary, such as a tick-the-box option on the bill.


  4. How is it, by the way, that a bunch of businesses getting together by themselves and colluding to raise prices is seen as an example of monopolies exploiting customers, but when the government encourages them to get together and raise prices, it is presented as an example of nobility and virtue?


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