WATER ECONOMICS
Arnaud Reynaud
20 August 2010
Water Resource Economics

Professor Reynaud commenced with an introduction to water economics, providing an overview of the water sector from an economist’s perspective.

Water was described as being an economic good, and more specifically that it can be a private, public and common good. Challenge associated with water management include: the tragedy of the commons; and problems with water rights allocations. It was shown that countries have widely varying systems of property rights for water access.

The economics of water demands and supplies were then discussed.

The difference sectors within the water industry were discussed, including the domestic sector, the industrial sector and the agricultural sector. Later in his lectures, Professor Arnaud also provided a detailed explanation for how economists estimate water demand.

The economics of water supply was then canvassed. Challenges in regulating and organizing the water sector include:

• Persistence of municipal or regional monopolies;
• Market failures and the need for regulation;
• That the water industry is also a “public health” industry, particularly when supplying domestic consumers.

The several difficulties with introducing competition into the water supply market were also discussed. Professor Arnaud also provided a detailed explanation of water pricing, including several case studies.