Emerging Water Markets Help Reduce Shortages

Emerging Water Markets Help Reduce Shortages
June 1, 1997

One of the most pervasive fears on the minds of millions of people throughout the world is the fear of an imminent water shortage. Some see this as proof that the world is running out of water.

Not so! is the emphatic reassurance from Terry L. Anderson and Pamela S. Snyder of the Political Economy Research Center (PERC). Water shortages loom, they argue, because people fail to embrace the marketing of water.

That may soon change, say Anderson and Snyder in "Priming the Invisible Pump," a new paper in the PERC Policy Series. Putting the water debate into perspective, Anderson and Snyder point out that despite predictions that we will run out of everything from copper to tungsten, and that we will have shortages of everything from energy to food, "markets--imperfect as they may be--have worked well to avert crises." Higher prices induce suppliers to find new sources of supply, they note, and users to conserve and search for substitutes.

"Water allocation is no exception," they point out. "If governments send the wrong signal to suppliers and users by subsidizing water storage and delivery, exponential growth in consumption will inevitably run into environmental and fiscal restraints. But if progress on greater reliance on markets continues, water supplies and efficiency will increase as users trade with one another, and consumption will be tamed by higher prices."

The paper, based on their book, In Pursuit of Water Markets: Priming the Pump, forthcoming from the Cato Institute, points out that:

  • Water markets helped ease the drought in California in 1991.
  • The Oregon Water Trust is leasing water rights and leaving the water in the stream to protect fish against drought.
  • In places as far-flung as Chile and Australia, trading in water is giving farmers flexibility and protection against shortages, while providing more water for growing urban populations.



PF: "Priming the Invisible Pump" is available from PolicyFax. Call 847-202-4888 and request document #????????