| Preface
 Sample Chapter - Download PDF (45 KB) | xiii |
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| Acknowledgments | xvii |
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| Water Unit Conversions | xix |
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| 1 | Introduction
Sample Chapter - Download PDF (75 KB) | 1 |
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| 1.1 | An Array of Decision Types | 1 |
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| 1.2 | Amid the Noise | 2 |
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| 1.3 | Supply Enhancement and Demand Management | 3 |
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| 1.4 | Future Forces | 5 |
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| 1.5 | Economics, Environment, and Equity | 7 |
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| 1.6 | Organization and Conventions | 8 |
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| 1.7 | Exercises | 9 |
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| 2 | Optimal Allocation and Development | 11 |
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| 2.1 | Establishment Goals | 11 |
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| Part I: The Fundamental Economic Theory | 13 |
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| 2.2 | The Costs of Water Supply | 13 |
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| 2.3 | Efficiency for a Single Water-Using Agent | 17 |
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| 2.4 | Aggregation and Acquisition of Marginal Net Benefit Functions | 29 |
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| 2.5 | (Aggregate) Economic Efficiency | 37 |
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| 2.6 | The Universal Advisory Term: Opportunity Costs | 41 |
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| Part II: Further Adjustments for the Idiosyncrasies of Water | 42 |
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| 2.7 | Economic Efficiency in the Presence of Return Flows | 42 |
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| 2.8 | Economic Efficiency with Nonrivalness | 44 |
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| 2.9 | Neutral Economic Efficiency | 46 |
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| 2.10 | Is Water Conservation an Additional Goal? | 53 |
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| 2.11 | Summary | 55 |
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| 2.12 | Exercises | 56 |
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| Appendix 2.A: Constrained Optimization Using the Lagrangian Method | 58 |
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| 2.A.1 | Necessary Conditions | 59 |
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| 2.A.2 | Interpretation of Lagrange Multipliers | 59 |
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| 2.A.3 | Sufficient Conditions | 60 |
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| 2.A.4 | Minimization and Multiple Constraints | 61 |
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| 3 | Efficiency in a Dynamic World | 63 |
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| 3.1 | Rates of Time Preference | 64 |
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| 3.2 | The Underlying Theory | 65 |
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| 3.3 | Time Values of Money | 66 |
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| 3.4 | What Is the Social Time Value of Money? | 69 |
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| 3.5 | Not Risk, Not Inflation | 73 |
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| 3.6 | Market Revelations of the Discount Rate | 75 |
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| 3.7 | Discounting: A Summary | 76 |
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| 3.8 | Dynamic Improvement and Dynamic Efficiency | 77 |
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| 3.9 | Other Metrics | 79 |
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| 3.10 | NPV versus the Others | 81 |
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| 3.11 | Is Dynamic Efficiency/Improvement Neutral or Aggregate? | 82 |
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| 3.12 | Dynamic Efficiency: A Two-Period Graphic Exposition | 83 |
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| 3.13 | Dynamic Efficiency: The Basic Calculus | 85 |
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| 3.14 | A Fundamental Example: Drawing from a Reservoir | 86 |
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| 3.15 | Extendable in Many Possible Directions | 89 |
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| 3.16 | How Fast Should Ground Water Be Depleted? | 90 |
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| 3.17 | Summary | 92 |
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| 3.18 | Exercises | 93 |
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| Appendix 3.A: Amortization | 95 |
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| Appendix 3.B: Advanced Methods of Dynamic Optimization | 96 |
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| 4 | Social Institutions | 99 |
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| Part I: The Economics of Institutions | 100 |
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| 4.1 | What If You Had to Choose? | 100 |
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| 4.2 | The Invisible Hand and the First Theorem of Welfare Economics | 105 |
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| 4.3 | Market Failure | 107 |
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| 4.4 | Consequently, . . . | 114 |
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| 4.5 | The Nature of Property | 115 |
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| 4.6 | The Assignment of Property: Who Should Get It? | 117 |
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| Part II: Legal Institutions | 120 |
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| 4.7 | Water Law | 120 |
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| 4.8 | Surface Water Law | 120 |
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| 4.9 | Ground Water Law | 131 |
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| 4.10 | Conjunctive Management | 137 |
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| 4.11 | Treaties and Compacts | 138 |
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| 4.12 | Summary | 140 |
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| 4.13 | Exercises | 142 |
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| 5 | Policy Analysis | 145 |
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| 5.1 | Two Policy Analysis Forms: Theoretical and Empirical | 146 |
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| 5.2 | Empirical Policy Analysis: The Ins and Outs of Compensation Tests | 147 |
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| 5.3 | Consumer and Producer Surplus Measurement | 149 |
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| 5.4 | Price-Rationing Policy | 150 |
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| 5.5 | Quantity-Rationing Policy | 154 |
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| 5.6 | Demand-Shifting Policy | 156 |
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| 5.7 | Supply-Shifting Policy | 158 |
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| 5.8 | Overview and Analysis of Other Policy Types | 162 |
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| 5.9 | Incorporating ΔNB into NPV for Dynamic Policies | 163 |
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| 5.10 | Secondary Economic Effects | 166 |
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| 5.11 | Incommensurables and Intangibles | 170 |
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| 5.12 | Summary | 172 |
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| 5.13 | Exercises | 172 |
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| 6 | Cost-Benefit Analysis | 175 |
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| 6.1 | Policy Background | 177 |
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| 6.2 | Required Economic Analyses: Principles and Guidelines | 179 |
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| 6.3 | Envisioning CBA as More Than NPV | 182 |
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| 6.4 | A Spreadsheet in Need of Entries | 183 |
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| 6.5 | Obtaining the Benefits and Costs | 184 |
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| 6.6 | A Project Analysis Example: Applewhite Reservoir | 187 |
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| 6.7 | Multipurpose Projects | 192 |
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| 6.8 | Using Alternative Costs as a Benefit Measure | 194 |
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| 6.9 | The Costs of Borrowed Funds | 196 |
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| 6.10 | Financing Projects: Implications for CBA | 197 |
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| 6.11 | Cost Allocation by Separable Costs-Remaining Benefits | 198 |
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| 6.12 | Summary | 200 |
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| 6.13 | Exercises | 201 |
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| 7 | Water Marketing | 203 |
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| 7.1 | The Instruments of Water Marketing | 204 |
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| 7.2 | The Upside: Unlocking the Resource from Low-Value Applications | 207 |
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| 7.3 | Basic Water Trade and Value Theory | 208 |
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| 7.4 | Modified Theory in the Presence of Transaction Costs (Optional Topic) | 211 |
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| 7.5 | A Typical Exchange Framework | 214 |
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| 7.6 | The Downside: Guarding against Market Failures | 216 |
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| 7.7 | Can the Downside be Fixed? | 220 |
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| 7.8 | The Worldwide Extent of Marketing | 221 |
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| 7.9 | Leading U.S. Markets | 222 |
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| 7.10 | The Grounds for Area-of-Origin Protectionism | 229 |
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| 7.11 | The Ground Water Challenge | 233 |
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| 7.12 | Summary | 240 |
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| 7.13 | Exercises | 241 |
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| 8 | Water Pricing | 243 |
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| 8.1 | The Terms of Pricing | 244 |
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| 8.2 | The Customary Objectives of Rate Setting | 251 |
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| 8.3 | Accounting Practice | 253 |
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| 8.4 | The Economic Theory of Pricing | 256 |
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| 8.5 | Specific Seasonal Volumetric Rates | 265 |
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| 8.6 | Wastewater Charges: A Complication | 267 |
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| 8.7 | Summary | 269 |
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| 8.8 | Exercises | 270 |
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| 9 | Demand Analysis | 273 |
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| 9.1 | Demand Is More Demanding Than Value | 274 |
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| 9.2 | The "Requirements" Approach | 275 |
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| Part I: Demand Methodology | 277 |
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| 9.3 | Point Expansion | 277 |
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| 9.4 | Residual Imputation | 279 |
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| 9.5 | Activity Analysis and Math Programming | 281 |
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| 9.6 | Production Functions | 289 |
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| 9.7 | Direct Statistical Regression | 292 |
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| 9.8 | Nonmarket Valuation Techniques | 297 |
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| 9.9 | Contingent Valuation | 298 |
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| 9.10 | Hedonic Pricing | 302 |
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| 9.11 | Travel Costs | 303 |
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| Part II: Empirical Demand Findings for Three Sectors | 305 |
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| 9.12 | When Considering Prior Example Studies. . . | 305 |
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| 9.13 | Residential Water Demand | 308 |
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| 9.14 | Industrial and Commerical Water Demand | 310 |
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| 9.15 | Agricultural Water Demand | 312 |
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| 9.16 | Summary | 317 |
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| 9.17 | Exercises | 318 |
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| Appendix 9.A: Joining Point Expansion and Residual Imputation Methods | |
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| 10 | Supply Analysis | 323 |
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| 10.1 | The Roles of Supply Information | 324 |
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| 10.2 | The Primary Feature of Supply Empiricism: Single Suppliers | 326 |
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| 10.3 | The Process of Processing Water | 326 |
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| 10.4 | Conceptualizing Costs | 328 |
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| 10.5 | Basic Methods of Supply Estimation | 330 |
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| 10.6 | The Privatization Question | 338 |
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| 10.7 | Summary | 347 |
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| 10.8 | Exercises | 348 |
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| 11 | Modeling with Demand and Supply | 349 |
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| 11.1 | Moving from Theory to Empiricism | 349 |
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| 11.2 | Features of More Advanced Models | 350 |
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| 11.3 | A First Model | 353 |
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| 11.4 | What Has Been Gained, Really? | 355 |
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| 11.5 | A Brief Survey of Studies | 357 |
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| 11.6 | A Second Model | 360 |
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| 11.7 | Summary | 365 |
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| 11.8 | Exercises | 366 |
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| Appendix 11.A: Converting Functions for Water Type | 366 |
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| 12 | The Water Challenge | 369 |
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| 12.1 | Economically Inspired Principles | 370 |
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| 12.2 | Making a Difference | 374 |
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| Glossary | 377 |
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| References
Sample Chapter - Download PDF (99 KB) | 383 |
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| Index
Sample Chapter - Download PDF (38 KB) | 399 |
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