Pricing Water Consumption and Appendectomies

My residential water rate for the block volume that I typically consume is $3.33 per 1,000 gallons.  This is $0.0033 per gallon of water purchased at my house.  I have a Starbucks roughly three miles from my house (don't we all).  I purchased a liter of Fiji water yesterday.  The cost per gallon with tax is roughly $11.25 per gallon.  So water over a three mile radius varies by a factor of roughly 3,400 (assuming Fiji is the upper end and I am not going to drink out of my bar ditch)..

According to the November 2012 issue of Wired (Sticker Shock by Andy Grove of Intel fame), the removal of an appendix in California ranges from $1,529 to $189,955.  So appendectomies vary by a factor of over 100.

Water is water and the procedures for appendectomies are identical yet we struggle mightily with how to price a somewhat basic commodity.  One of the supreme challenges we face, with broad implications to engineers and engineering, is the proper pricing in the context of value for our critical resources.  This includes water, public infrastructure, air, health care services, etc.