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Institutions for Managing Ground and Surface Water and the Theory of the Second-Best

Author

Listed:
  • Karl Jandoc

    (Department of Economics, University of Hawai`i at Manoa, Honolulu, Hawai`i, USA)

  • Richard Howitt

    (Department of Agricultural and Resource Economics, University of California at Davis, Davis, California, USA)

  • James Roumasset

    (University of Hawai‘i at Manoa & University of Hawai’i Economic Research Organization)

  • Christopher Wada

    (University of Hawai’i Economic Research Organization)

Abstract

We review the theory of optimal conjunctive-use management absent transaction costs as a point of departure for a second-best theory of management. We first explore the problem of optimal pricing of surface water when groundwater remains unregulated. We then move to consideration of institutional mechanisms for managing groundwater. The last section discusses the transaction cost difficulties with water markets and how these can be mitigated with remote sensing technology, much as barbed wire facilitated private property in the American West.

Suggested Citation

  • Karl Jandoc & Richard Howitt & James Roumasset & Christopher Wada, 2014. "Institutions for Managing Ground and Surface Water and the Theory of the Second-Best," Working Papers 201415, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201415
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_14-15.pdf
    File Function: First version, 2014
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    References listed on IDEAS

    as
    1. Richard Hornbeck, 2010. "Barbed Wire: Property Rights and Agricultural Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 767-810.
    2. Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
    3. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    4. Richard E. Howitt, 1995. "Malleable Property Rights and Smooth-Pasting Conditions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1192-1198.
    5. W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 21-30.
    6. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    7. James Roumasset & Nori Tarui, 2010. "Governing the Resource: Scarcity-Induced Institutional Change," Working Papers 201015, University of Hawaii at Manoa, Department of Economics.
    8. Chakravorty, Ujjayant & Umetsu, Chieko, 2003. "Basinwide water management: a spatial model," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 1-23, January.
    9. Roumasset, James, 1978. "The new institutional economics and agricultural organization," MPRA Paper 13175, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. James Roumasset & Christopher Wada, 2014. "Groundwater Economics without Equations," Working Papers 2014-8, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.

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    More about this item

    Keywords

    Groundwater management; Second-best policy; Conjunctive use; Water institutions; Institutional change.;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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