Low-Energy Fridays: What’s the deal with showerheads?
The Trump administration recently released an executive order (EO) rescinding regulations pertaining to showerheads, which had mandated water efficiency improvements. Originated under the Obama administration, these regulations were rescinded by the first Trump administration before being reinstated by the Biden administration. Despite being very minor, the issue of showerhead regulation has elicited some hyperbolic headlines. For policy wonks, this moment shows how seemingly simple regulations can seriously miss the mark by underestimating the value of consumer preferences.
When hearing about this latest regulatory debacle, a classic Seinfeld episode, “The Shower Head,” immediately came to mind. Originally aired in 1996, the episode follows the plight of Jerry Seinfeld and his neighbors after their landlord installs “low-flow” showerheads to improve the building’s water conservation. Plagued with bad hair days, the characters resort to a showerhead black market à la Taxi Driver. The scene is comical, but it illustrates an important point: Consumers don’t value energy or water savings alone—they value quality, too.
The potential benefits of energy and water conservation regulations for showerheads or appliances seem obvious on the surface. From a public policy perspective, if relatively modest modification to an appliance would result in considerable savings of water, it could be seen as a low-cost method of achieving water-conservation goals. But, as illustrated in Seinfeld, what regulators can’t appreciate is the unquantifiable benefit consumers derive from their enjoyment of higher water pressure and less-water-efficient showerheads.
This leads to one of the problems with regulations. Benefits and costs need to be “monetized,” meaning they need to have a dollar figure attached to them. But the non-monetizable—but still very real—costs and benefits factor little into these equations. These benefits, which economists call “utility” or quantify as “utils,” are still very real. To understand this, consider the question, “How much would I be willing to pay to have a higher quality shower?” Whether that figure is a penny or $100, there is an economic value attached to it. But because this value is largely intrinsic to individuals and varies greatly from person to person, it is not easily discerned. After all, people are not surveyed on such a point as to accurately gauge the economic value of things people just prefer.
Conveniently, the free market already provides a tool to accurately determine the quantifiable, monetizable benefit from something being of higher quality: the price consumers are willing to pay for something better. People use their dollars to assert their preferences in the market. Producers then respond to those dollars by making more high-pressure showerheads (in this case) to satisfy the expressed demand.
Regulations like the ones on showerheads can undercut this dynamic in the market. As an alternative example, a McDonald’s meal may have as many calories as a meal from a Michelin-starred restaurant, so a regulator could reason that people should only eat at McDonald’s and not from any high-end restaurants in order to “save” money and thus be net-beneficial economically. This is obviously hogwash though, because the utility derived from the lower-cost product is below the higher-cost one. So, by preventing consumers from voting with their dollars, the regulation has in fact weakened the economy by allocating resources in such a way that less utility is derived from production overall.
Consequently, regulators’ logic only works when one assumes consumers don’t really know what they want. But that’s obviously not true—people do know what they want, and they prefer to make their own choices rather than have someone else do so on their behalf.
From a policy outcome perspective though, the recent EO will likely have little impact. After all, showerhead producers would need to invest new capital to change manufacturing processes and would only adjust practices if they expect both an absence of future regulation and higher consumer demand for higher-pressure showerheads. Another issue is that water consumption is often subsidized, which undercuts the market dynamic in making efficient choices. Generally, though, moving the market toward consumer choice rather than central planning is preferable.
The relevant insight for policymakers is that, as we’ve pointed out in past Low-Energy Fridays, trying to micromanage consumer choice via regulation can’t grow the economy. Even if it seems wise on paper, we know it is generally more economically efficient for consumers close to the effects of a decision (and thus the consequences) to make such choices rather than far-removed regulators. Regulations are most effective when they remedy genuine market failure or provide public health benefits and least effective when they rely on the idea that Washington bureaucrats know what people want more than they themselves do.