On The Price Of Urban Water Supply

The source of the urban water problems confronted by China is rooted in the unsuitable allocation mechanism of urban water. The solution lies in establishing proper water allocation mechanism, of which the key is to erect the appropriate price mechanism adapting to the socialistic market economy system.The basic properties of urban water can be classed into the natural and social ones. Urban water is not a common commodity for its special properties which is dissimilar to common goods. It is a combination of nature and commodity. These peculiar properties include scarcity, public-interests relating, and externalities in consumption and the natural monopoly in production. So, all the properties mentioned above determine the particular price mechanism of urban water.The complete urban water price can be divided into four parts, price of water resource, price of engineering of water utilization, price of urban water service and the of environmental price (cost of sewage disposal).The literatures have more discrepancies on the price of water resource and the environmental price than the other two. The discrepancies can be sorted into two basic schools, one is the Marxism, and the other is New-classical economics. The thesis will apply the method and principles of Marxist economics to the analysis of the properties and the price mechanism of urban water. On the other hands, it will draw the lessons from the new-classical literatures to strengthen the analysis.According to Marxism, the price in the market is the expression of the theoretical price, and the theoretical price is the base of actual price which be defined in this thesis the market price. The market price fluctuates around the theoretical price. The theoretical price of urban water can be regarded as the compound of invariable cost(C), labor cost (V) and average profit (p'). The conclusion can be deduced from the basic principled of Marxism, the labor theory of value and the theory of production price.The value of urban water before us can be dissolved into three parts: 1)the price of natural water resource, which is the discount of water rents; 2)the value of water utilization engineering, which is the new value added to natural water includes, C,V and P'; 3) the value of treatment and transport of city water, which is another valued -added process and also be constituted by C,V and P'. Therefore, putting them together, the price of urban water can be considered as the combination of the discount of water rent and the labor consumption(C and V). As the application to the theoretical price, the thesis introduces two prevailing models on the measurement of the price of water resource, the shadow price model and the marginal cost model. Then, one model based on the principles of Marxism is proposed, the price model of "natural-commodity combination". The discussion of the price of water utilization engineering and the price of South-to-North Water Diversion Project and the urban water price against cost and under regulation model are the additional applications.The thesis analyses the price mechanism of urban water from the basic market mechanism and the participations of the governments. The analysis bases on the special properties of urban water market. The market mechanism includes the market failure mechanism and the competitive mechanism. These are the basic mechanisms of water price. Relating public interests, and the technical and cost characteristic in production, and the exhibiting of externalities in consumption and strategic position in the country, and the aim of justice, etc, all the factors mentioned above make the government an important role in the price mechanism. Government can affect the mechanism in the two ways of regulation and macroeconomic policies. So the price mechanism of urban water in fact is a mixed mechanism in which markets and governments together take influential role.Theoretical price is the price before consumption. However, one of the special characteristics of water consumption is that the consumption will impose negative effects on other agents. According to the basic economic law, if the externalities can not be internalized, the social revenue(cost) will deviate from private revenue (cost) which induced the inefficiency resource allocation. So the externalities must be eliminated by imposing the cost on the consumers. There introduces the concept of complete consumption price which includes the cost (C, V and P') to eliminate or abstract the negative effect. The thesis discusses the nature of environmental price based on the efficiency allocation of pollution. Then, it proposes a model to measure the cost.The price system is another important issue of price. The dissertation discusses the function, standards and structures of city water price. The price system is observed from two spectacles, the price relation to other goods and the price difference. The discussion focuses on the price difference system which includes graduate price and seasonally floating price.Urban water industry is a public utility sector. The regulation from government is the essential part of this industry. The thesis analyses the content, the method and the reason of regulation. The emphasis lies in the method and measures of regulation. In the end, it puts forward the problems existing in the regulation system in China.In the last part of this thesis, first, the history of price reform of city water is reviewed. Then, the problems existing in the price are disclosed. Finally, the measurements to deepen and perfect the reforms are proposed, which includes, perfecting the market mechanism of water price, perfecting the market mechanism of urban water, establishing the scientific regulation system and the compensation of low income group in the price reform.