As everyone knows, the West, and especially northern California, has been suffering from a year-long drought, leading numerous statists and busybodies to leap in to control, ration, and ordain. The water “shortage” may not be exactly blamed on the private sector, but it is there, supposedly, and surely government must leap in to combat it—not, of course, by creating more water, but by mucking up the distribution of the greater scarcity.
The first thing to be said about this is that on the free market, regardless of the stringency of supply, there is never any “shortage”, that is, there is never a condition where a purchaser cannot find supplies available at the market price. On the free market, there is always enough supply available to satisfy demand. The clearing mechanism is fluctuations in price. If, for example, there is an orange blight, and the supply of oranges declines, there is then an increasing scarcity of oranges, and the scarcity, is “rationed” voluntarily to the purchasers by the uncoerced rise in price, a rise sufficient to equalize supply and demand. If, on the other hand, there is an improvement in the orange crop, the supply increases, oranges are relatively less scarce, and the price of oranges falls consumers are induced to purchase the increased supply.