The Economics of Bottled Water

Last year American's spent over $15 billion on bottled water. I've often heard how stupid this is that we are spending so much money on the most plentiful natural resource on the planet. In fact, the article related to above states, "It acknowledges our demand for instant gratification, our vanity, our token concern for health. Its packaging and transport depend entirely on cheap fossil fuel."

Perhaps true but perhaps it's much more simple than that. Perhaps we just dislike risk. Every purchase is a case of risk vs. reward. As a kid no one wanted a huffy bike, so we were willing to pay a premium (by we, I of course mean my parents) for a different, "higher quality" brand. There was less risk in this. They were both made of the same metal, both had the same components, but one could have made us look "uncool" or, as I undoubtedly attempted to persuade my parents, the one was of greater quality than the other. You see, we didn't want to risk lower quality or personal gratification just to save a few bucks. How does this apply to a bottle of water? Well, I buy water for 1 of 3 reasons and I suspect most other people do as well.

1.) It is cold if I buy it from the gas station. I am paying a premium to always have access to a luxury. (Think of how many jobs this is creating, right?!?! J/k btw, isn't this an all too common defense for any type of spending? Well, it's creating jobs. It's ok when the gov't spends because it's "creating jobs" but when someone with money wants to buy something deemed unnecessary by the public it's that they are being greedy. Can't have it both ways, libs). So what is the premium for having my water cold? I don't know, it doesn't matter. In fact, it's probably a floating number dependent upon other variables (which leads me onto another political tangent. This is a prime example of why price fixing by the gov't doesn't work, because variables change. Some days it might be warmer outside so I want that cold water, some days I might be feeling more frugal. My point? economic engineering cannot work in the long run.)

2.) Prestige. That's right, I admit it, I buy bottled water sometimes because it is positively accepted among society. Sometimes I have even splurged on Fiji water just for my own vanity.

3.) Quality. We know what we are getting in bottled water. Some of us even know the different tastes of the different brands. Do you know what the water out of the drinking fountain at the SA down the street tastes like or the water out of the sink at your place of employment? Neither do I. In fact, I don't want to know because I can limit the risk of tasting bad water for a small fee (the purchase price).

All three of these reasons have to do with limiting risk. I have a near risk-less source of water available to me for a small premium. Not sure what information that gives us but it doesn't make it less true.