Sometimes the market solution is the right solution to public goods and utilities like water provision. While privatizing water, which had been a free good and then a regulated public utility, would not be a good solution, putting a higher price on water for bulk users and subsidizing other users would increase efficient use.
For example, households could be allocated a free or very low cost monthly water allowance and this could be varied by household size. This is in place in some areas already. There could also be a differential cost between residential use and commercial use and also an incremental cost for commercial use.
This would probably be more successful in a water-deprived state like California than the across the board 25% reduction in use just imposed.
The advantage of the 25% cut is that it is universal and so no one can say that their ox is being selected politically to be gored. All oxen just get less of a ration to drink. But as critics have noted it's difficult to enforce and avoidance is likely. Price is much more difficult to avoid, but water is a necessity of life, so a purely market solution with a single price is too regressive.
Some may worry about the distributional effects of a higher price of a necessity. But the revenue from a higher price could be rebated to consumers on a lump-sum basis, making the whole system progressive. We would end up with more efficiency and more equality.
This involves political decisions in addition to economic factors, so implementing anything in California will be difficult, given a divisive political climate and the political strength of commercial interests.
This is an increasingly pressing that the whole world is facing and we had better get on it instead of imposing ad hoc solution, i.e., shooting from the hip, after facing an imminent crisis and not having prepared for it. The alternative is lose the use of a lot of land, which will displace a lot of people, which will then result in migration to more resource-rich areas, causing problems there.
This is a supply issue that can't be fixed by just throwing public money at it. Moreover, this is a problem that faces only certain states, and states are budget-constrained since they are currency users. The low hanging fruit in supply problems is efficiency, and with respect to natural resources, conservation and recycling. The opportunity here is private investment in solutions to inefficiencies and public investment and regulation to address relevant externalities.
