Sustainable Water Management: Economics and Policies

Dear Colleagues:

Sustainable development requires that we do more with less, to make a change in the face of change, including population and climate change. This Special Issue will explore cases where change has been delivered, and what has been learned in the process, both from economics and for economics. 

For the economist, water management is entirely different from the examples in our textbooks: we do not make or grow water. Instead, we intervene in the hydrological cycle, that solar-powered pump which evaporates seawater from the oceans and deposits freshwater on land which gravity then recycles to the sea. Water is also a heavy, incompressible fluid so what Veblen (1921) termed friction, lags and leaks are central issues in water management.  Lifting water to any height rapidly results in high capital and operating costs.  Water is also necessarily a low unit value service; it takes about 1200 tonnes of water to grow 1 tonne of wheat in California, but the market price of durum wheat is only 193 USD/tonne. Coase (1991) pointed out that relative transaction costs determine what is the most efficient solution, particularly for a low unit value service.

The issues in water management are also different from those in textbooks.  Water management is capital intensive so that fixed costs generally comprise 50–70% of total costs and a requirement in pricing water services is that these costs can be reliably recovered. Hence, the scope for marginal cost pricing is limited; Ramsey (1927) pointed out that marginal cost pricing only generates sufficient revenue to recover costs when the marginal cost falls below the average cost.  There are general marked physical economies of scale, but organisational returns to scale are more problematic (Leibenstein 1987).  

Sustainable management is also about change: how to adapt to change and how to make a change and how to learn, invent and innovate, and how, in particular, organisations can learn (Argyris and Schon 1996). The changes we need to make are situated in complex systems, most obviously in catchments, ecosystems and economies (Arthur 2021). Consequently water management is always a transboundary problem; only the nature of those boundaries differ. Hence, it involves co-acting across those boundaries and between disciplines. Unfortunately, North (1993) pointed out that whilst economics has a theory of competition, it lacks one of co-operation.

This call for papers is directly and particularly for lessons learned. Possible topics include the following:

• What determines the demand for water?
• Why and how has household usage of water been progressively falling in a number of countries and cities? What can be learned from these countries?
• Similarly, in areas where sustainable urban drainage techniques have been widely implemented, how was this achieved? The same question can be asked about the adoption of Natural Flood Risk Management techniques.
• Some large firms have reduced their demand for water by 40–50% over a relativity short term. How was this achieved?  What were the incentives to do so?
• How can farmers, households or firms be induced to use water more efficiently? What are the barriers to be overcome?
• What enables water service providers to be successful from both consumer and supplier perspectives?
• How can a monopoly be regulated? How can a tariff be set that gives incentives to the service provider to promote the sustainable use of water?
• How can a tariff be set for a water service that recovers sufficient revenue to cover costs, especially in the face of droughts or declining demand?
• How should choices about the provision of public goods be made?
• How can transboundary co-action be achieved?
• How can the abstraction of groundwater be reduced to sustainable limits?
• How can agricultural pollution be reduced?
• How can scarce water be allocated between competing demands?
• Water management presents fascinating theoretical challenges to economists. What lessons about economic theory have been learned?

Dr. ‪Colin Green
Guest Editor

Manuscript Submission Information

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• change
• learning
• efficiency
• organizations
• economics
• cost recovery
• systems
• sustainability