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Reflections--Shaping Water Policy: What Does Economics Have to Offer?

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  • Frank J. Convery

Abstract

This article examines the extensive and evolving literature regarding the economics of water policy. It offers policymakers a way of thinking and a set of skills to (1) identify the least-cost way to reach a particular water quantity or quality objective or set of objectives (e.g., cost effectiveness); (2) assess the benefits--both market related and nonmarket--and costs to society of alternatives (i.e., benefit--cost analysis); (3) understand the role of water prices (providing incentives for conservation and innovation, giving consumers freedom of choice, generating revenues), the level at which they should be set (long-run marginal cost), and the levels at which they are actually set; and (4) create markets for water within and between sectors, recognizing many preconditions must be met if water markets are to work effectively. The article advises policymakers that they can use economics to support the case for those investments and policy initiatives that are likely to yield substantial net benefits and to argue against those that are not, and that prices can be used to manage water resources efficiently. (JEL: H2, H3, Q2, Q3) Copyright 2013, Oxford University Press.

Suggested Citation

  • Frank J. Convery, 2013. "Reflections--Shaping Water Policy: What Does Economics Have to Offer?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 156-174, January.
    • Handle: RePEc:oup:renvpo:v:7:y:2013:i:1:p:156-174
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    File URL: http://hdl.handle.net/10.1093/reep/res017
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    Citations

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    Cited by:

    1. Hongxiu Li & Horatiu Rus, 2018. "Water Innovation and Water Governance: Adaptive Responses to Regulatory Change and Extreme Weather Events," Working Papers 1801, University of Waterloo, Department of Economics, revised Jan 2018.
    2. Patrick J. Walsh & J. Walter Milon, 2016. "Nutrient Standards, Water Quality Indicators, and Economic Benefits from Water Quality Regulations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 643-661, August.
    3. Declan Conway & Antoine Dechezleprêtre & Ivan Haščič & Nick Johnstone, 2015. "Invention and Diffusion of Water Supply and Water Efficiency Technologies: Insights from a Global Patent Dataset," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(04), pages 1-34, December.
    4. R. Quentin Grafton, 2017. "Responding to the ‘Wicked Problem’ of Water Insecurity," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(10), pages 3023-3041, August.
    5. Edward B. Barbier & Joanne C. Burgess, 2024. "Economics of Water Scarcity and Efficiency," Sustainability, MDPI, vol. 16(19), pages 1-14, October.
    6. Wade, Christopher M. & Baker, Justin S. & Van Houtven, George & Cai, Yongxia & Lord, Benjamin & Castellanos, Edwin & Leiva, Benjamín & Fuentes, Gabriela & Alfaro, Gabriela & Kondash, AJ & Henry, Candi, 2022. "Opportunities and spatial hotspots for irrigation expansion in Guatemala to support development goals in the food-energy-water nexus," Agricultural Water Management, Elsevier, vol. 267(C).

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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