Economic theory has the concept of price setting through the use of markets.

Market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. (Wikipedia)

Markets require many buyers and sellers all acting independently to establish a price. In monopoly markets, there is only one seller so it is hard to use markets to set prices. Typically for natural monopoly services, like water, pricing regulators set prices. Regulators often set prices by assuming there is a market and working out the market price. Doing this emphasises price, consumption, opportunities to on-sell water, government need for taxation and profits. Sustainability, demand management, environmental factors, and end customer value have little influence on prices.

Instead of a fictitious market we can establish prices through consensus between buyers and the monopoly seller. The monopoly seller can set the price, as they see fit, to maintain a safe, sustainable supply of water. They know how much it costs to provide the water supply, and they know how much they need to charge to regulate demand.

In most cases, the cost of providing water is lower than the prices required to control usage, and the water monopoly generates profits. In most cases the cost of funds to build infrastructure dominates costs. What tends to happen is the owner of the water authority is a government. They share the profits between the providers of funds by paying interest and themselves through taxes and charges.

A consensus approach between the monopoly supplier and consumers can reduce the total cost by removing the cost of interest and inflation.

Rewarding buyers of water for pre-paying their future invoices with substantial discounts helps achieve consensus. Rewarding small per head consumers of water with the right to buy at lower prices helps reach an agreement by being a fair use of a common resource.

Removing the cost of interest and inflation typically halves the cost to a community of providing water services. It results in sustainable supplies of high-quality water and provides governments with funding for other community projects. It pays for the discounts and rewards.

The Money Monopoly

Most of the savings for using Water Rewards come because of funding without using debt. The supply of money through debt is a regulated monopoly. Money markets are a market mechanism built because of the money monopoly. Without debt and the associated interest, there is no money market because interest makes money a store of value.

With Water Rewards, there is no need to charge interest because investors get a return on investment with discounts on pre-payments. It is the replacement of debt with pre-payments with discounts that reduce costs.

We can replace any debt in any system with pre-payments. Doing this saves the cost of interest and saves the effort of maintaining debt (money) markets. Debt markets and other financial markets cost a lot to operate. Pre-payments remove those costs.

Pre-payments are different to a futures market. A futures market is a market in an unknown value of a commodity. Pre-payments are unrelated to the value of the goods or service at the time of use. Pre-payments retain their value. There are markets in pre-payments, but the pre-payment has a known fixed value. The market does not set the price. It is set by the fixed discount rate and other rules established through political consensus.

Examples of debt replacement

Each system will vary in the best way to operate.  Typically markets are used to establish prices but where there is no market prices are established by consensus on what is “fair”.  What is fair is a political decision to which there is no definitive answer.  What is certain is that the removal of interest by replacing debt reduces the cost of any service.


Instead of medical insurance people buy Health Rewards. Health Rewards entitle the buyer to a discount on future health invoices. The government covers the cost of the discount.

Governments supply the population with an amount of Rewards each year. The amount received each year is a political decision based on the circumstances of the person. Individuals receive Health Rewards if they are involved in accidents or events beyond their control. Health Rewards only expire when used. Health Rewards are only transferable to an immediate family member or back to the government.

MEDISAVE enhances the market in health services. It provides enough funds for citizens to participate and buy services while rewarding those who put few demands on the system. At the same time, it supports those who need the services.


Consumers of energy receive the right to purchase Energy Rewards based on their circumstances. For example, low users of energy receive more rights to Energy Rewards than high users of energy. Energy Rewards holders receive a discount when they use Energy Rewards to pay for energy.  The money raised by the sale of Energy Rewards pays for Energy Infrastructure.  Long-term low operating cost and high capital cost renewable energy systems produce greater profits than high operating costs energy systems with low capital costs.

Energy Rewards are freely transferable.


Citizens can receive the right to purchase Tax Vouchers. The lower the income, the more rights they receive. Purchasers of Tax Vouchers receive a discount when the vouchers are used to pay taxes. Governments invest the money received from vouchers in infrastructure or government services and remove the need for governments to borrow money. The government saves paying interest on the debt. Tax Vouchers remove government debt.

Tax Vouchers are freely transferable.


Savers and buyers purchase Rent and Buy Mortgage Vouchers and use the money to buy a house. The occupant of the house pays rent by buying Vouchers from Savers. Vouchers attract discounts which mean they cost more to purchase the longer they are held. When a person leaves a house, they become a Saver, and the occupying of the house becomes the Buyer. Rent and Buy Mortgage Vouchers are freely transferable.

Rent and Buy Mortgage Vouchers remove the cost of interest and the cost of inflation. They typically reduce the cost of home ownership by 50% while providing Savers with a secure regular income. They can work with a single house but work better when there are many Rent and Buy Houses with the same buyers and sellers.

The existing housing market stays the same.

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