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Navigating Water Economics: Unraveling Price, Cost, and Value

Delve into the intricacies of water economics and understand the distinctions between price, cost, and value. Explore how fixed prices impact demand, how markets reconcile demands using prices, and why non-market values are invaluable. Learn why environmental water preservation is crucial, while economic water should be priced appropriately. Gain insights on reconciling values and the impacts of low prices on resources and the environment. Discover strategies like uniform tariffs and income supports for special cases.

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Navigating Water Economics: Unraveling Price, Cost, and Value

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Presentation Transcript

  1. Untangling the price, cost and value of water David Zetland Aguanomics

  2. The law of demand(shifts and slides!)

  3. There’s no diamond-water paradox

  4. I know price. Do you know value?

  5. Market vs. non-market values • Fixed prices affect quantity demanded, and • Markets use prices to reconcile demands, but • Non-market values cannot be priced, so • Environmental water should be set aside, and • Economic water should be priced!

  6. Prices, costs and value • Prices can be above or below cost (by fiat) • Costs include OpEx, CapEx and resource rents • Values cannot be known but can be reconciled • Low prices take resources from tomorrow or deplete the environment today • Advice: Uniform tariffs for all customers and income supports for special cases

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