Determining the Economic Value of Water: Concepts and Methods
Water provides benefits as a commodity for agriculture, industry, and households--and as a public good for scenic values, waste assimilation, wildlife habitats, and recreational use. However, even as the nature and needs of economies change, water continues to be allocated to other than high priority uses, water quality continues to decline, environmental uses get inadequate attention, and floods and droughts take an unnecessarily severe toll. One reason for this is that price signals that reflect scarcities of goods and thereby guide investments and resource allocation in the private sector are usually distorted or absent in decision-making relating to water. To aid in cost-benefit analysis under conditions where appropriate price incentives are absent, economists have developed a range of alternative or 'non-market' methods for measuring economic benefits. Robert Young aims to provide the most comprehensive exposition to-date of the application of nonmarket economic valuation methods to proposed water resources investments and policies. He provides a conceptual framework for valuation of both commodity and public good uses of water, addressing valuation techniques appropriate to measuring public benefits--including water quality improvement, recreation and wildlife habitat enhancement, and flood risk reduction. However, in contrast to the existing environmental valuation literature, the emphasis here is on the commodity uses of water by agriculture, industries, and households. The book describes the various measurement methods, illustrates how they are applied in practice, and discusses their strengths, limitations, and appropriate roles.
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acre-foot agricultural allocation analysis annual applied approach assumed assumptions at-site value at-source values average behavior benefit transfer capital changes concept consumer surplus consumers consumption contingent valuation cost method cost–benefit damages demand function derived econometric economic rents economic value economists effects environmental equation estimate evaluation farm firm forgone hedonic property value hydropower income incremental industrial water input-output model inputs instream investment irrigation water land long-run measure meta-analysis nomic observations offstream opportunity costs output production function property value method quantity quasi-rents recreational reduced reflect regional rents represent residential water residual method responses returns revealed preference salinity sector shadow price short-run statistical survey tion travel cost travel cost method unit users value marginal product value of water value-added valuing water variable water demand water quality water resource water rights water supply water valuation welfare welfare economics willingness to pay yield