The Economic Value of Water

The Economic Value of Water

The Economic Value of Water

The Economic Value of Water

Synopsis

Gibbons examines the water supply problem through five case studies. The problems faced by these regions and the methods suggested to overcome them provide excellent models for the entire United States. The case studies---typically, expanding supplies---but economic efficiency principles lead to emphasizing managing the demand. In many cases, this means reducing demand by raising prices.

Excerpt

Of all the natural resources necessary to ensure human health and civilization, water is one of the most important. The United States is fortunate to be able to call itself a water-rich nation, yet conflicts over water are growing. Taken for granted when supplies are plentiful, water is the focus of increasing controversy as supplies now appear to be inadequate to meet demands in many areas of the country. The growth of population and industry, resulting in increased water demand, is one aspect of the problem, but actual physical scarcity of water is not the key issue in most regions. Rather, conditions of economic scarcity seem to prevail: there is enough water to meet society's needs, but there are few incentives for wise and conservative use of the resource or for effecting an efficient allocation among competing demands.

The current conflicts over water are multifaceted, involving competition among alternative uses, among geographical regions with disparate water endowments, and between water resource development and other natural resources lost by that development. It is clear that plentiful water of good quality can no longer be free to all who desire to use it. The very difficult problem of water allocation under the new paradigm of economic scarcity looms as a major political issue in the coming years, not only in areas with long-standing water concerns such as southern California, but in all regions of the country.

Historically, the East has had ample rainfall; it also has many rivers. Since there was more than enough water to go around, the customs and laws developed to define water rights and mete out water supplies treated it like a free good. This approach to water management continued to be taken even as population and industrial and commercial enterprises . . .

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