Two new papers on water scarcity

After several months of delay, I now have first drafts of two papers for you to read and — hopefully — help me improve!

Using prices to manage water scarcity

Abstract: Water scarcity reflects an excess of demand over supply and risks turning into shortage if that supply should fall below daily minimum needs for drinking, washing, irrigation and so on. This paper explores the factors affecting the supply and demand for water as an economic good and explains how to price retail water for municipal and industrial users or market water among irrigators. The key to successfully managing water scarcity is a price that constrains aggregate demand while covering the costs of reliable supply. Public acceptance of water pricing depends on policies that protect the poor and environmental flows, i.e., policies that set aside “social water” before allocating water among economic uses.

Keywords: water scarcity, price incentives, elasticity, climate change

JEL Classification: Q25, Q54, Q56, Q57

Living in a post-water world

Abstract: Multiple factors are increasing fresh water scarcity, and few societies are prepared to cope. Although some assume that solutions will come from technology, profit motives or better planning, I argue that outdated and mismatched institutions are making scarcity worse and blocking efforts to manage water according to its economic and social uses. In this paper, I use a simple framework to explain how water’s economic and collective value should be managed, explain how mismatched incentives can destroy value, and use examples to show how current quality of life will fall as scarcity worsens in the presence of inappropriate institutions. This combination of theory and speculative examples should help readers think about how we might adapt to increasing water scarcity — or not.

Keywords: climate change, food security, virtual water, agricultural trade

JEL Classification: F51, H42, Q17, Q25

Feel free to read, forward and comment on either. These drafts are already targeted at specific journals, so the most helpful comments would be on improving their clarity and completeness 🙂

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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