Here’s why we should be worried about running out of fresh water—in most places around the world it’s free—priced at zero. Any resource priced at zero will be wasted. Environmental and social problems follow. Here’s one example.

The Ogallala Aquifer underlies 225,000 square miles in Texas, New Mexico, Oklahoma, Kansas, Colorado, and Nebraska. Use of the aquifer began a century ago. After World War II, the withdrawal of groundwater surpassed the aquifer’s rate of natural recharge. Some places have already exhausted their underground supply. Aside from pumping costs, water is free. Most of it irrigates corn, which is used for livestock feed.

A water-intensive crop, corn is generally not well suited to the ecology of the High Plains. But huge subsidies to growers, combined with cheap water, create little incentive to transition to more drought-tolerant crops, such as sorghum. (The same pathology allows rice, a monsoon crop, to be grown in California, a desert state.)

There is a water crisis. It’s not an absolute scarcity of water, but rather a crisis of managing water so badly that billions of people—and the environment—suffer.

The challenge is two fold. First, creating institutions that generate incentives for conservation. (This will help avoid pathologies like those in the Ogallala.) Second, is to make sure the nearly three billion people living on less than two dollars a day have affordable access to water. Fixing the first is relatively easy. Here’s how to begin.

How about pricing water and treating it like any other tradable commodity? This approach surely makes sense, especially in the U.S., where we already have robust and transparent commodity markets. Gasoline is just one example. At over $3 a gallon for gas we have all that we can afford to consume. Successful water markets exist in several states. Pricing water allows these markets to evolve to include a focus on environmental protection, e.g., assuring instream flows and creating “water banks.”

In a market economy, prices transmit information about relative scarcity. Increasing the price of agricultural water gives agricultural growers an incentive to use water more efficiently. Only when water is priced will we treat it as dearly as other necessary commodities.

The second challenge, to make sure the world’s poorest have access to water, is harder. Getting water to rural areas, far from urban infrastructure, is the greatest challenge. Here, small (i.e., individual wells), publicly funded projects seem to be working. Ideally, locals are trained to maintain the wells. Since rural towns are often off the grid, pumps designed to double as children’s playground equipment, allow children to pump water as they play.

This task is made more difficult when governments declare that access to water is a “right” and hence should be “free.” While this practice is often justified as a measure to protect the poor, the flipside, i.e., that when any good is free, no one has an incentive to provide it, is often ignored. Despite rhetoric to the contrary, the poor suffer most.

Access to clean water is essential for improving public health. To help address this problem, in the 1990s Argentina privatized water services covering 30 percent of the country’s municipalities. What happened to the poor? A report in the Journal of Political Economy found that child mortality from water born diseases fell 8 percent in the areas that privatized their water services and that the effect was largest (26 percent) in the poorest areas.

Privatizing the water supply will not bring progress everywhere, overnight. But it can play a huge role in bringing safe, clean drinking water to the hundreds of millions of people who still lack it. In his book, Water For Sale: How Business and the Market Can Resolve the World’s Water Crisis, Fredrik Segerfeldt offers an overview of the success and challenges that remain.

He wonders: “{W}hy anti-privatization activists do not expend as much energy on accusing governments of violating the rights of 1.1 billion people who do not have access to water as they do on trying to stop its commercialization.” The burden is on ideological opponents of privatization to answer this charge.