Issues in Water Resource Economics: Discussion

The authors have made courageous efforts to accomplish rather ambitious objectives with varying degrees of success. Both the water quantity and quality issues are addressed, and the differing approaches provide useful insights into alternative policy options for solving a variety of water problems. Although quite a diverse set of water issues is covered in the papers, a number of common themes do emerge. First, the potentially important role of water markets and synthetic market information in addressing both water quality and quantity issues is addressed by Howe and Saliba. Given the usefulness of markets and market information in economic decisions, greater consideration of and experimentation with such alternatives is needed in the water policy arena. Second, two of the papers illustrate the growing recognition of the importance of the groundwater contamination problem. Anderson, Opaluch, and Sullivan (AOS) treat groundwater quality as a potential constraint under which producers may have to operate. In a less traditional approach, Saliba suggests that quality should be treated as a policy variable with different quality goals for different sources. Such quality goals would be dictated by the expected marginal benefits and costs involved. Third, there is explicit emphasis on the more static issues in water allocation. Yet, the intertemporal issues may be more critical, and market information may be less accurate in resolving them. As Schultz has indicated, short-run crises may receive primary attention but the long-run shifts in supply and demand are usually the critical factors to society. AOS do develop a dynamic model which is solved subject to a regulatory constraint. The more important policy problem may be establishing regulatory constraints in a dynamic economic context. Issues