Water In Abundance, At A Price: Our Grandchildren’s Economy

We are not running out of water, as so many headlines proclaim. Certain areas, at certain times, are running out of water, but it’s a localized, economic problem, solvable by the usual economic solutions: property rights and institutions that enable transfers of assets.

Planet earth has approximately as much water today as it ever did. There’s a tiny little bit of water that gets converted into other molecules in chemical processes, and a tiny little bit created when hydrocarbons are burned. Relative to the world’s stock of water, these losses and additions are trivial.

Some of our water is not readily usable. Sailors have died of thirst upon the ocean. (“Water, water everywhere, nor any drop to drink,” wrote Samuel Taylor Coleridge.) Ice locked in mountain glaciers may be within sight of deserts. Or a running stream may be downriver from a community that dumps its waste into the water.

dry field

Dry corn field with young corn plants. Getty

“Shortage” is commonly used to describe the problem, but when an economist hears that word, the response is usually, “Shortage at what price?” Before going into economic solutions, let’s lay out the potential problems.

Water challenges arise from poverty in many cases. A webpage headed “The Water Crisis” says, “Today, 785 million people – 1 in 9 – lack access to safe water and 2 billion people – 1 in 3 – lack access to a toilet.” That’s an odd usage of “crisis” given that it describes the condition of most people throughout human history. It seems so bad to us because most people have escaped poverty. And as countries have become wealthier, their citizens have demanded environmental protection. In Europe and North America, rivers are much cleaner than they were a hundred years ago. Areas with high-income populations can also afford to treat water to make it potable.

People move to areas of opportunity, even if that area lacks water for all the newcomers. This is our second problem, illustrated by the rapid population growth of arid places like Los Angeles and Israel.

Drawing down aquifers constitutes the third problem. For example, the Ogallala Aquifer in the high plains beneath eight states, including Nebraska, Kansas and Texas, is being depleted by water wells. The first withdrawals were replenished by rainwater, but as irrigated agriculture expanded, water withdrawal exceeded additions to the aquifer. The current withdrawals are unsustainable, but the aquifer is so large that the crisis point is years away. But it will come unless some change is made to irrigation practices.

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