Question

You are participating on the board for Flint Michigan’s public water supply company. In

an effort to save money, the board decided to switch over from the Detroit water supply,

to their own water supply, the Flint River. Because the Flint River water had such high

levels of bacteria, it was treated by the water company with additional chlorine to make it

drinkable. However, the water company failed to note that chlorine also makes water

more acidic, which resulted in the corrosion of pipes within the city’s water

infrastructure. As a result, the lead from the pipes contaminated the Flint River, which

made the citizens become ill. Experts believe the situation could have been remedied by

adding an anti-corrosion aid to the water. However, the water supply is already tainted

and is unusable for at least the next year. The board must decide whether to continue to

treat and use Flint’s water supply (supplementing bottled water in the meantime), switch

back to the expensive water supply from Detroit, or put in new water lines that pull fresh

water from Lake Huron, to serve as a long-term solution. You understand that it will take

at least another year before the toxic levels of lead in the Flint river subside; You also

understand that the cost of redirecting the water supply over to the Lake Huron intake

will take a substantial capital investment, and the citizens of Flint are on average barely

above the poverty level in terms of household income.

Discuss which solution has the

greater social marginal benefit compared to the social marginal cost to the citizens

of Flint. Provide a list of all externalities associated with the water crisis and the

externalities associated with the three solutions offered below. Explain your

answers.

Option 1.

Downplay mitigation and focus on adaptation at an individual level.

1.1

Add the anti-corrosive aid to the water treatment to prevent further

breakdown of lead from the pipes and wait out the year until the water

levels have reached a safe drinking level once again. In the meantime,

citizens will be restricted to drinking bottled water, or filling jugs of water

from water buffalos supplied by neighboring cities. This transfers

adaptation costs to citizens, making them responsible for gathering their

own drinking water.

Option 2.

Short term solution focusing on adaptation at the municipal level.

2.1

Switch temporarily to the more expensive Detroit water supply until the

Flint water supply has settled. This solves the issue of the already tainted

water; however, the water will need to be treated with an anti-corrosive

aid as well to prevent further contamination. You know that the Detroit

water system is old and is frequently under boiled water advisory, you also

know that the water from the Detroit river contains large amount of

pollutants from the frequently used shipping channels in addition to traces

of lead found in the Detroit water supply from the infrastructure breaking

down due to age. This transfers adaptation costs to the municipality of

Flint, as well as to the city of Detroit by depleting their potential

resources.

Option 3.

Maximum mitigation and drastic measures on adaptation at the municipal

level.

3.1

The water company installs new water lines that pull fresh water from

Lake Huron acting as a long-term solution to the problem. The water

company will need to not only install a new water intake system in Lake

Huron but run a new pipeline to connect the intake to the main Flint water

supply system. This will cost a significant amount of capital upfront,

however, once the intake is complete, there will be a sustainable source of

clean water which will then reduce the variable costs of water moving

forward.

Answer 1

Option 3 is the best option because even though it cost a significant amount of capital in the initial stage,the long term benefit will be more and it will be a permanent solution.In the long run the cost of supplying water will reduce.The government can take step to help the public water supply by providing monetary aid as the people are poor.

Externalities mean the positive or negative impact of producing or consuming a good.The externalities associated with the water crisis are,lot of money was needed to treat the water with chlorine as it was infested with bacteria. Chlorin has a corrosive effect and the water pipes got effected.The lead from the pipes made people sick.As a result water cannot be used for a year.The toxic level will take a year to reduce.Redirecting the water supply will require a lot of investment and the people are poor.

The externalities of option 1 are the water treatment will require a long time and the citizens will be responsible for their own water supply which will have to be brought from neighbouring cities.This is only a temporary solution.

The externalities of option 2 are Switching to Detroit water supply is a temporary solution.Detroit water supply is old and the infrastructure is breaking and polluting the water.The water is contaminated and anti corrosive treatment is needed. The cost will be more to the municipality and the resources of the Detroit city  will be depleted.

The negative externalities with option 3 are less and positive externality is that is is a long term solution.