Handbook of Water Economics: Principles and Practice

Description. The Handbook of Water Economics is presented in three sections: theory, methods and applications, providing the latest information in the growing .
Table of contents

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5 editions of this work

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Understanding water markets: Public vs. private goods – Global Water Forum

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Chapter 1: Introduction

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Description

Amazon Restaurants Food delivery from local restaurants. In a market economy the allocation of scarce natural resources such as coal, oil, fish, crops, and timber is typically determined by trade in markets. However, water resources have a number of unique characteristics which mean that traditional market mechanisms can lead to inefficient and inequitable allocations.


  • Colin H. Green (Author of Handbook of Water Economics).
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This creates questions over whether water should be considered a public or a private good. Private goods and human rights One of the most familiar uses of water is at the household level for drinking, gardening, and showering etc. Such goods are described as private goods and include clothes, food, cars, books etc. However, what makes water unique is that it exists both as a private, marketable good and a basic human right.

However, after basic water needs have been satisfied, additional water use is no longer a basic human right. Households, for example, may use water to fill a swimming pool, water their lawns, or take long showers. As such, when water use exceeds around litres per person per day, it becomes a private good and so is best allocated, like other private goods, through markets.

The dual aspects of water as a human right and a private good can be illustrated using indifference curves. Indifference curves show bundles of goods that a consumer values equally. For most goods it is assumed that different goods can be substituted for one another. However, up until the basic needs for survival are covered, water cannot be substituted for any other good so the slope of the indifference curve is vertical i. As soon as the basic needs have been met, however, water can be substituted for other goods and so the indifference curve becomes a downward sloping curve, similar to other private goods point B in Figure 1.

Common-pool resources and negative externalities In order for a good to be traded there needs to be exclusive property rights which allow it, or access to it, to be transferred from one person to another.


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