Mental Accounts and Water Prices

Abstract

Raising the price of municipal water services is highly fraught in many countries due to the political pressures to keep water bills affordable. As a result, most countries fail to recover the full costs of water provision, a problem made worse by an underestimation of the real cost of providing water. The case of Singapore illustrates that this problem is in part due to “mental accounting,” which is consistent with Lasswell’s concept of an “intelligence function.” Situating an understanding of this intelligence function within the Singapore water case gives a better understanding of the reluctance to raise water prices.