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Water management from an economics perspective

I like to think that I know a little bit about environmental economics, so it came to my surprise when I was stumped by a comment I heard a family member say recently.  He told me that the only problem with water supply and management in the United States and the rest of the world dealt with the issue of storage for water.  He argued that there was plenty of water available and that millions of gallons flowed into the ocean everyday which could have been used instead by humans.  At the time I could only think of adding that transportation of water is also an issue, such as cities that are located in arid and semi arid areas (think of desert cities such as Phoenix or Albuquerque).  However, there are also plenty of economic reasons that the "storage" of water is the only concern in management policy.

For example, there are huge costs associated with the storage and distribution of water.  It is not free to store water as vast amounts of money/resources are needed to build the facilities and maintain them.  In fact there are already plenty of areas around the world that do store water and most of these take the form of reservoirs are artificial lakes.  Also, if it costs money to store water, there could be another possible solution that may cost less money.  The easiest alternative that comes to mind is to simply use less water.  Through the use of low flow devices, or conservation campaigns, it is possible to vastly reduce the amount of water that is used by people in an area. 

Another way he approached the problem was that there was more than enough water in the world today to satisfy everyone's needs and desires, however the problem was the location of the water.  If we could only find a way to transport the water to areas where it was needed, then there would be no problem.  Again this makes sense on the surface.  Everyday when we watch the news we see that there are areas of the world that are suffering from floods, while simultaneously other areas are suffering from droughts.  The problem here again lies with the cost of moving the water.  Irrigation was a technique developed long ago to transport water for agricultural purposes but requires a large capital investment to create, and after this maintenance costs are required to keep it functioning.

Finally, when considering anything regarding water management, we need to take into account the costs to the environment.  Whenever water is used for human purposes, it probably had a purpose in the environment before we took it out.  We have to consider the damage, or changed caused to the environment by extracting the water.  Possible results include loss of an ecosystem, including ecosystem services, loss of bio-diversity, loss of recreation areas, desertification, and increased temperatures.  None of these are desirable consequences, and areas that have water to give, may not be willing to part with it because of the long run costs.

It is also helpful to think of water in the same way we think about money.  There is no doubt in my mind that there is enough money in the world for everyone to have their needs met (but not their wants).  However, is it fair to take money from those that have "too" much and give it to those that have "too" little.  This is essentially the same reasoning as before about water policy, and regardless of the external economic considerations that were left out, the idea itself may not be considered fair.