On September 8, Scott Sumner posted about how Californians cut electricity usage in response to a request from California’s Office of Emergency Services. I commented that I thought this was wonderful.
In response, my former Hoover colleague Alvin Rabushka sent the following email to Scott and me:
I moved into my Stanford Campus Residence on July 3, 1976 (still there). At that time, there were 604 single family residences and 82 small condos built for retirees on campus.
Homes were not metered. Homeowners paid a monthly water fee with no restrictions on consumption. Homeowners with pools typically drained and refilled them annually.
1975-76 was a dry year. The drought continued into the following year. Stanford’s water reserves from the Hetch Hetchy Reservoir were falling dangerously low.
In autumn 1976, Stanford requested all homeowners to reduce their water consumption, advising those with pools not to drain and refill them.
What happened? Water consumption fell 50% over the next academic year. Monthly water charges remained unchanged.
The rains return in 1977/78. Also, Stanford installed water meters and charged for amount consumed.
I recall discussing this reduced consumption with Sam Peltzman, Sherwin Rosen, and other visiting economists at Hoover that year and the next. They were stunned that such a large reduction in consumption took place with no increase in price.
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