Money warps perceptions

I was reading about saltwater desalination, and an article mentioned that it could now be done for a few dollars per thousand gallons. This is still more expensive than just taking it from rivers in most places, so it doesn't get done very much. But I thought it sounded pretty good as a price to pay for water if we had no choice.

Then I thought about it a bit more. You don't run a desalination plant with money. You run it with electricity, and manpower, and inputs of raw materials.

You need money to buy those things, but dollar costs are not a reliable indicator of long run feasibility if you expect the prices of any of the inputs to fluctuate. A more useful indicator would be how much energy is required to produce a given amount of water.

So if, as I expect, the price of electricity rises, then the costs of desalinated water also increase. It's not very useful to think of these costs in terms of their short-term dollar values.

Unfortunately, this error in perception (that money is actual value, as opposed to a medium of exchange for things of value) distorts much of our thinking. I'm quite aware of it, but I still fell for it here, and I imagine it still distorts other assumptions that I have about the world.

* I still think desalination could be a good idea in many places, but I wanted to make the larger point about our assumptions regarding money.