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Pareto‐Improving Water Management over Space and Time: The Honolulu Case
Author(s) -
Pitafi Basharat A.,
Roumasset James A.
Publication year - 2009
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2008.01186.x
Subject(s) - status quo , compensation (psychology) , pareto principle , economics , order (exchange) , capital (architecture) , welfare , space (punctuation) , finance , politics , public economics , microeconomics , market economy , operations management , computer science , political science , psychology , archaeology , psychoanalysis , law , history , operating system
We model welfare gains from efficient allocation of groundwater over space and time relative to the status quo policy of financial cost recovery. In order to promote political feasibility, an intertemporal compensation plan is devised that renders the reform Pareto‐improving. Gainers from the reform finance the compensation in proportion to their benefits through a block‐pricing scheme. For the Honolulu case, only 7% of the $441 million in gains to winners is needed to compensate losers from the reform. Future winners from the reform also repay the deficit created by the compensation package, much as state and local governments finance capital improvements.