I don't understand your problem with the thinking behind that statement; it demonstrates that even scarce, labor intensive commodities can be made available in sufficient quantity to satiate demand if there is a well-functioning market with "real prices". The pricing mechanism prevents waste in the BMW market as it does in the water market, and this same price encourages produces to create more supply when the consumers require it.
There is a discontinuity in demand for water that does not exist for BMWs.
Specifically, there is a certain amount of water that each human needs per day. Provide a human with less than that, and they will die.
BMWs do not have this property. The vast majority of humans have never owned and never will own a BMW, and they are still able to live rich, full lives.
When you say "satiate demand" for BMWs, what you're really saying is that the market finds the intersection of the supply and demand curves, and produces BMWs at that rate. When I see "satiate demand" for water, what I understand it to mean supplying every human with at least the minimum amount required to sustain life.
A free market for water will find the intersection of the supply and demand curves, just like it does for BMWs. However, the BMW example does not tell us anything about where that intersection lies, and whether it lies at a point where humans die of thirst or at a point where everyone gets what they need.
It is, ultimately, equivocation. Fulfilling demand for luxuries is different from fulfilling demand for necessities.
First off, there are a number of "discontinuities" (I must point out that this term you used is logically and technically incorrect,) in the demand for transportation; but I will leave that aside for now.
To sustain any given level of population, a corresponding (though not directly proportional) amount of transportation must exist, as not all necessities for life are available everywhere in sufficient quantity. Because of this, transportation is as much as requirement as is water (bough the latter undoubtedly serves a much more direct purpose). The capital goods which allow for transportation are provided in sufficient quantity to satisfy demand through a (mostly) well functioning market for boats, ships, trains, planes, and automobiles. BMW does not make up the whole of this market, but serves well as a synecdoche (this avoiding a tiresome list of all transportation capital good manufacturers), demonstrating the importance of the price as a signal, incentive, and motive for the fulfillment of human needs and wants.
If you must point out that "discontinuities" is incorrect, then you should explain why, because otherwise you're just blowing smoke.
I think it's perfectly reasonable. Let X be the amount of water a person needs to live. The amount a person is willing to pay for a unit of water when they already have X is finite. The amount a person is willing to pay when they don't have X is infinite. Thus, there is a discontinuity at X.
If you didn't mean BMWs specifically you could have said this earlier. How was I supposed to know you meant "all transportation" instead? It gets pretty tiresome when I reply to a comment and address something it says and then several comments later you come back and say, oh, I didn't actually mean what I said, I obviously meant something else.
"Discontinuities" is incorrect because supply and demand curves are often discrete and almost always non-smooth (due to quantization and many other reasons), but always continuous. This is partly because of how supply and demand curves are defined, but also because of the reasoning behind them. Economy-wide supply and demand can be understood as the result of the supply and demand of each participating person; because each person's supply and demand curves each have unique properties, they cannot all coincide in a manner so as to produce a discontinuity. Moreover, if you examine the supply and demand of each individual, there is no discontinuity, as, for example, no sane person would value water at $5/L for <=20L and $4 for >20L (though that may end up being how it is priced for a single person, it does not demonstrate any fundamental discontinuity in the supply or demand, as pricing scheme vary for an infinite number of reasons).
With respect to the BMW example, I still stand by it, and I did not originally mean that BMW represented the entire transportation industry; their fundamental similarity is what is important here. There is nothing special about he market for water, and using transportation capital goods as a bridge between the water market and the luxury automobile market demonstrates their fundamental similarities well (though I would not suggest flushing a bus down the toilet).
You are of course correct that there's nothing special about the market for water.
The problem, again, is equivocation. You say that we could end water shortages by accurately pricing water. The problem is that when you say "shortage" in that context, you're using the economic definition wherein a shortage is a situation where some external force prevents A from selling something to B for a price they're both willing and able to accept. Whereas when we think of water shortages, we normally think of whether or not people are able to obtain enough water to continue living.
Yes, market pricing for water ensures there would be no "shortage" in the economic sense, by definition. But it tells us nothing about whether people would be able to obtain enough water to survive within such a market. Maybe they would, maybe they wouldn't, but you haven't demonstrated that they would.
You are completely correct, in that I have in no way proven that a market in water will provide sufficient quantity for all the residents of any specific (or general) area to live off in the long-term. I have only said that there would be no water use restrictions, or problem of the wells and dams running dry, which are usually described as 'droughts' or 'shortages'.
A very strong case can be made that a market for water would provide enough water for all the individuals to use (in developed areas), as well as resolving the aforementioned issues, but it is impossible to prove on theory alone; we would have to test.
I agree that it's likely a market solution would be adequate in this case, and in developed areas in general. The market price for water in most places seems to be quite cheap. Thus why I was only criticizing the analogy, not the conclusion.
