Water has an economic value in all its competing uses and should be recognized as an economic good
The Dublin Statement on Water and Economic Development
In a warming world, will people fight over dwindling water supplies? Will there be water wars? What has economics to teach us about this? As glaciers recede, as lakes and rivers dry up, what then of the laws of supply and demand? What then of property rights and the free ride principle*?
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The War Of The Wells
Once upon a time there was a well outside of a village. It was so old that nobody could remember who dug it, or when. In fact, nobody cared enough to want to know. It was just the village well. Every villager would spend an hour every day drawing water.
One day, a very bright villager designed a pump based on the wind-driven corn mill. He persuaded some of the villagers to lend him the money to build a wind-driven pump, a storage tank and a supply pipe.
Once the project was finished, most villagers were happy to pay the man a small fee every time they saved an hour's labor by drawing water from his tap. A very few people, the poorest in the village, continued to draw their water from the well.
Many years passed. The loans were long since paid off. The fees were more than enough to pay for the maintenance of the system. The man grew rich. He built a mansion. He had a stable of ten horses and a fine carriage.
Many years later, the man's sons took over the family business, the man having died at a ripe old age. They decided to raise the fees, since they wanted to raise the capital to buy a fine house, ten horses and a fine carriage for each of them.
Many villagers protested the rise and started drawing their water straight from the well. The brothers very wisely invested some of their capital in the building of a of a fence around the well; also the purchase of four vicious guard dogs and the hire of a couple of ruffians.
Some of the villagers got together and dug a new well. The brothers used that well for scientific experiments with a new substance called black powder. I shall spare my reader's sensitivities by stating only that the substantial damage to the well was accompanied by collateral damage, but not, alas, to the brothers.
The brothers' actions were based on the scientific 'supply and demand' model. The brothers demanded that only they were permitted to supply water to the villagers.
As a result of the essential extra investments, the price of water had to be raised yet again. The brothers set up a variable tariff scheme for pricing the water. Based on the very sensible notion that the primary use of water is for drinking, they charged only 2 groats per pipkin for personal consumption. The consumption had to be on the spot, and was the first ever instance of a spot market. Water carried away was presumed to be for other purposes and was charged at 6 groats per pipkin.
Within a month of the introduction of the new tariff scheme the villagers rejoiced in their newfound right: the right of all villagers to enjoy free access to water. This came about, not because of elections or ethical debate. No. It came about from the scientific discovery that black powder confined within the bounds of a strong container economised on the amount needed to destroy a mansion house, with the added bonus of targeted collateral damage.
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* The free ride principle: some economic resources will be used by some people without the possibility of low-cost enforcement of payment. A modern 'liberal' interpretation of this fact proceeds to the conclusion, not that some things should be free, but that economic goods subject to the free ride possibility should be supplied via communal taxation. A modern 'free trade' interpretation is that these criminals who refuse to pay for valuable goods such as water should be hunted down and thrown in prison.
Things to think about:
http://www.crdi.ca/fr/Actualising the Right to Water
http://greeninc.blogs.nytimes.com/2009/12/29/hong-kongs-water-security-d...
Blue Gold : World Water Wars
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