Vulnerable People, Vulnerable States by Bromley Daniel;Anderson Glen; & Glen D. Anderson

Author:Bromley, Daniel;Anderson, Glen; & Glen D. Anderson [Daniel W. Bromley]
Language: eng
Format: epub
ISBN: 1024605
Publisher: Taylor & Francis Group

individual then that individual need only consider his own preferences to decide on the rate at which water will be taken. Here we encounter the popular myth that a single owner of a renewable natural resource has an irresistible incentive to be a good steward of that resource. However, a single owner of a natural resource faces a decision problem that is driven by weighing income now versus income in the future. If the owner has a rate of time preference that is higher than the growth in the present value of future income from the natural resource then the dominant incentive will be to liquidate (take all of) the natural resource and use the revenue for immediate consumption, or invest that revenue in a higher-yield activity (Clark 1973). This problem is called the “iron law of the discount rate” (Page 1977).

However, a distinct management advantage emerges when there are a number of farmers pumping from an aquifer because individuals are situated over varying depths of the aquifer. Those with shallow drafts will be the first to notice excessive withdrawals and can alert others to potential water shortages. Each farmer, while obviously interested in pumping, also has an interest in making sure that he is not disadvantaged by the pumping of others. While individuals are inclined to ignore the costs of their behavior on others, they are not inclined to ignore the costs of others’ behavior on them. This is one of the management advantages of a regime of reciprocal externalities; a community of water extractors can actually become a community of water guardians. The policy challenge is to figure out how to instill that response.

Many economists will suggest a pricing scheme for irrigation water. The presumption is that pricing will insure that water is efficiently used in agriculture, and that its use in agriculture vis-à-vis other uses is optimal. That is, water pricing can be thought of as a means to assure that irrigation water is efficiently allocated across all possible uses, as well as across regions, irrigation systems, farmers, soil conditions, and crops. Indeed, most models of optimal pricing regimes tend to see water pricing as a critical factor in assuring that irrigation water, along with other inputs, is optimally utilized on individual farms as well as throughout an irrigation system. When that occurs, all inputs will be efficiently combined to grow the optimal crops in the optimal proportions given the managerial attributes of the system. This approach sees water management as an agricultural problem, and it seeks to make sure that the mix of water use in agriculture and competing demands is efficient. The argument will be advanced that because water is under-priced in agriculture — and it surely is in most settings — getting its price right would induce all-around efficiency in a nation’s (or at least a region’s) water sector.

But a more practical management idea should not be ruled out. That practical policy reform would seek to insure that water allocation within an irrigation system

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