Water as an Economic Good: Old and New Concepts and Implications for Analysis and Implementation

This chapter addresses two areas where economic tools are critical if water is to serve as a platform for economic growth and human well-being. The first part of the chapter highlights the need for a new set of economic tools for the analysis of large water infrastructure and describes one promising avenue for the development of a method which can be credible and useful to policymakers. The second part of the chapter addresses the issue of economic tools for dealing with the gloomy arithmetic of water. It describes the complementary roles of pricing and water markets for both maintaining the right portfolio of infrastructure and ensuring that water is re-assigned to the highest value uses as values, and supply and demand for water evolve.