Detroit's Vulnerable Financial Position forces Shutdown of Water for Overdue Residents
URL: http://www.economist.com/news/united-states/21615614-what-shutting-running-water-detroiters-reveals-about-city-finances-owe-town

Detroit residents have lost access to running water. This is the case for a significant number of Detroit citizens as the financially vulnerable City of Detroit is desperate to emerge from its recent bankruptcy and rebuild. As a result of its debt restructuring, the local government is being forced to abandon its formerly lenient utilities collections policies and crackdown on residents whom have failed to sufficiently service their utilities bills. The article "Owe Town" published in the Economist this past Saturday discusses the dilemma facing the government and citizens of Detroit as bankruptcy has sapped vital resources from destitute citizens, exacerbating already tense conditions of civil unrest.

The extreme nature of cutting off vital resources to citizens without readily accessible alternatives demonstrates the extreme financial position the City of Detroit is in. The act of withholding water from citizens is not one that any individual would take lightly and was without certainty the result of much deliberation on the part of local officials. Their decision to pursue this particular policy measure in an attempt to rectify this division of the city's financials does however raise some important questions.

While it is clear that such a policy 'pay or be cut off' embodies a dramatically better incentive system than the former 'pay or don't, we will provide you with service', it is uncertain whether it was implemented in a manner that is appropriate to the current circumstances of residents. The short term effects of this policy are dramatic given the fact that these sweeping new measures have been implemented in a manner that is relatively unprecedented. In economics, two critical components to understanding what effect an action will have relate to understanding expectations and time. The less time individuals have to react to a change in an incentives the more dramatic the reaction. Combine this phenomenon with a significant reduction in income and a good/service that is vital, meaning demand is highly inelastic and you are laying the foundation for significant civil unrest.

It is uncertain whether the policy decisions pursued were without alternative. While the state of financial distress is more than clear for the City of Detroit, I am curious whether local officials might have found a better way to implement these policies and rectify its financials. Could other less essential goods or services been reduced first? How much advanced notice did the City of Detroit provide to local residents and could have it provided more? Could the measures implemented been integrated in a less extreme fashion (over time)? Can the City of Detroit provide exceptions to individuals who may be considered to be significantly at risk (families, low-income individuals)?