Property Entitlements and Pricing Policies for a Maturing Water Economy

Abstract

The Australian water economy is entering a mature phase characterised by inelastic supply of 'new' water and the need for expensive rehabilitation of aging projects. Thus, the policy focus will turn increasingly toward ways of restraining water demand and reallocating existing supplies. A prima facie case is made that the efficiency loss from current water pricing and allocation policy is significant. After considering the relevant welfare economics theory, the theory of administered prices and marketable property rights and some American proposals for reform, a system of transferable water entitlements is proposed and developed.

Water Institutional Arrangements of FalajAl Daris in the Sultanate of Oman

“…It is not the aim this study to debate which is right or wrong, it is surface to say that the economical argument in considering water as an exchangeable commodity is the fact that price of water will reflect its true scarcity and its opportunity cost, in other words, the price that the marginal user is willing to pay (Perry, 2001;Randall, 1981).…”

“…However, in the past water used to be referred as a free good, by which this has been replaced by new perspective that water can be treated either as social good or economic commodity (Randall, 1981;Milliman, 1959;Saleth and Dinar, 2005). First those who hold the view that water is a social good have looked into several factors including its necessity to life and perquisite of society social development (Araral, 2009;Brajer and Martin, 1990) and its association with agrarian and industrial revolution (Rose, 1990).…”

The End of Abundance: Economic Solutions to Water Scarcity

“…The End of Abundance can be likened to a collation of global examples of water woes arising from the transition from the 'expansionary phase' (low social cost for expanded water use with few competing demands) into the 'mature phase' (high social costs with growing competing demands), using Randall's (1981) terminology. Zetland highlights the inefficiency of ad hoc policies used to address shortages arising from policies inherited from the expansionary phase (subsidised water to meet all demand).…”

Factors affecting water prices in a rural water market: A South Australian experience

“…With the control of water vested in the Crown, the Australian governments, like in the United States, initiated several large water projects and provided water for irrigation at no or very little cost in pursuit of their settlement objectives. In the late 1970s the Australian water economy entered its mature phase [Randall, 1981], and the emphasis changed from the provision of new infrastructure to better manage a scarce resource. Consequently, most states introduced new water laws in the late 1970s and 1980s.…”